Your ultimate guide to adopting a circular business model

Circular business models are a practical implementation of circularity principles at an organizational level, focusing on design for longevity, reuse and repair, recycling, and resource efficiency. They align with the urgent need for sustainable practices in response to increased supply chain risks and regulatory compliance pressures.

As material demand continues to rise, and natural reserves get scarcer, companies face the challenge of securing the supply of critical components for their solutions. Meanwhile, the advance of regulations toward stricter sustainability requirements poses the need for companies to rethink their operations and business models.

Embracing circular business models not only offers corporate benefits like risk reduction, customer loyalty, and economic resilience but also contributes significantly to achieving sustainability goals.

In this article, we show you how this transformative approach can be your new reality.

What is a circular business model?

Circular business models are based on the principles of a circular economy, which advocates for a restorative system designed to conserve resources within closed-loop material cycles, minimize waste, and lessen environmental impacts.

The term 'closed loops' is commonly seen in the jargon of circular economy and stands for actions (e.g., reuse, remanufacturing, and recycling) that prevent resources from being wasted in landfills, maximizing the value embedded along the life cycle.

Circular business model is the application of circular economy PRINCIPLES into the corporate logic of CREATING, DELIVERING , and CAPTURING customer value.

With this statement in mind, let's break it down into smaller parts for comprehensible understanding.

Firstly, we examine the 'principles of the circular economy.' These establish a framework for the implementation of circular economy practices. Additionally, these principles direct our decision-making, informing the strategic actions we take to foster circularity.

Research has yielded numerous principles, granting companies a broad spectrum of options to enhance their circularity efforts. To acquaint you further with this area, we have compiled a comprehensive, although non-exhaustive, list of principles.

• Design out-of-waste: Design products eliminating or minimizing waste during their life cycle.
• System-thinking approach: Acknowledge how elements interconnect in an ecosystem. In a circular economy, products should be designed, for instance, considering environmental and social impacts.
• Close the system: Ensure extracted resources are kept within multiple use cycles. Waste serves as input in new processes.
• Rely on renewable energies: Base energy use on renewable sources instead of non-renewable, high-impact sources (e.g., fossil fuels).
• Collaboration: Collaborate with actors within and outside your value chain for full-scale implementation of circularity and acquire the capabilities necessary to transition from linear to circular.

Secondly, we face 'value creation,' which represents the process of translating the needs of a customer segment into a value proposition. In a circular business model, a value proposition is designed to match a need while maximizing the value of resources towards multiple loops. For instance, it considers renewable, non-scarce, and non-hazardous raw materials in product design, cleaner product methods, and adequate end-of-life strategies.

Third is the 'value delivery,' i.e., how the solution reaches the customer segment. Delivery channels aim to minimize transportation so greenhouse gas (GHG) emissions are reduced. From another perspective, products are designed to be transported in a way that minimizes waste packaging.

Fourth, 'value capturing' (how organizations retain value from customers) is planned to enable business models economically while positive environmental and social impacts are created. Some percentages of revenue streams are dedicated to promoting initiatives that are good for people and the planet.

Linear vs circular business models: What is the difference?

Circular business models markedly contrast linear ones, anchored in the traditional 'take-make-dispose' approach. Companies entrenched in a linear paradigm engage in excessive raw material extraction and mass production. Typically, this results in short-lived product use and the inevitable discarding of defunct items into landfills.

A report from the Internal Resource Panel (IRP) shows that the global extraction of materials has tripled in the past 50 years, mainly driven by the built environment and mobility system. The report yet argues that material resources demand will increase further by 60% in the current consumption patterns, reaching 160 billion tons by 2060.

Waste management research from the World Bank indicates that waste generation is projected to rise by around 70% by the year 2050. This escalating trend poses a significant risk to the planet's capability to fulfill the needs of humanity without depleting its resources.

Therefore, the modus operandi of a linear business model does not consider resource scarcity but focuses on high production volumes to maximize sales. The consequences are already known and proved by the scientific community and filled by corporations.

• Resource Depletion: Linear models contribute to resource depletion, relying on a continuous influx of finite raw materials. This leads to potential shortages and supply chain disruption.
• Environmental Degradation: Through linear progression, ecosystems are degraded due to increased waste and pollution. For instance, this manifests as a loss of biodiversity and negative climate implications.
• Economic Vulnerability: Linear models may lead to economic vulnerability by relying on a linear supply chain susceptible to disruptions. This vulnerability arises from a lack of adaptability and diversification in suitable alternatives for current finite raw materials, as well as a lack of feasible recycling technologies.

Unlike the linear model, circular business models prioritize the concept of a closed loop, where products and materials are continually cycled back into the system.

A few key components that can compose a circular business model are:

• Design for Longevity: Circular business models begin with the design phase. Products are created with durability in mind, i.e., a longer lifespan and reduced need for frequent replacements.
• Reuse and Repair: Instead of discarding products at their end-of-life, circular models encourage reuse and repair. This involves refurbishing, remanufacturing, or repurposing items to extend their functional life.
• Recycling and Upcycling: Recycling is a crucial element of circularity, involving converting waste materials into new products. Within the broader concept of recycling lies upcycling, which transforms discarded items into products of higher value.
• Resource Efficiency: Circular business models prioritize resource efficiency by optimizing the use of materials throughout the production process. This involves minimizing waste and making the most of available resources.

What are examples of circular business models?

After establishing an understanding of circular business models, it's insightful to observe them in action. The application of this concept is diverse, allowing organizations various strategies for incorporation.

Below are five notable examples illustrating this approach. Each represents a facet of the product lifecycle, encompassing design, manufacturing, use, and eventual disposal or reuse. It's essential to recognize the fluidity among these paradigms, as characteristics from one may interweave with another.

Circular Inputs

Circular inputs focus on creating a closed-loop system by incorporating recycled, non-toxic, and renewable materials into manufacturing while using renewable energies. Therefore, a diversified supply chain is crucial for this type of circular business model.

Companies adopting this model seek alternatives to traditional, linear supply chains. They prioritize using materials that can be reused, remanufactured, recycled (preferably upcycled), and sourced sustainably. This involves designing products with disassembly and recycling in mind, ensuring that materials can be easily recovered and reused to produce new items.

Product-as-a-Service

This model shifts the emphasis from product ownership to providing products as a service. Instead of only selling products, organizations are offering solutions that are completed with services that are needed by the customers. A product-as-a-service can be manifested in three ways, from lower levels of maturity up to high maturity, that are intended to bring better circularity benefits:

• Product-Oriented: Selling the ownership to the customers while offering services necessary to maximize the use and extend the life cycle.
• Use-Oriented: Keeping the ownership of the product, also offering complementary services as customers pay in a defined frequency. Well-known examples are renting and leasing business models.
• Result-Oriented: Selling result in which the product is not the central part of the offering. Instead, the customer is paying for an outcome, disregarding how the result is achieved.

Businesses adopting this model design products with durability and ease of maintenance in mind as they retain ownership throughout the product's life cycle. This encourages a longer product life, as organizations are incentivized to ensure products remain functional and can be easily upgraded or repaired. This model can reduce waste and encourage a more sustainable consumption pattern.

Tips from iimpcoll

You can find out the best service model for you by interviewing customers and asking about their struggles with using your product.

Resource Recovery

Resource recovery aims to generate secondary raw materials from waste. In other words, the idea is to minimize the extraction of virgin raw materials and maximize the reuse of valuable, already-extracted materials from products at the end of their life.

Companies adopting this model focus on creating products that are easy to disassemble and recover materials from. By establishing efficient recycling processes, they can extract valuable components and raw materials, minimizing waste. Resource recovery contributes to a more circular approach by reducing the demand for virgin materials and decreasing the environmental impact of production.

Tips from iimpcoll

To make recycling more efficient, you can design your product so that different materials are easily detached from each other. When this is not the case, using materials that can be recycled together is recommended. This facilitates the recycler's work.

Sharing Platform

Sharing platforms facilitate the shared use of resources, allowing multiple users to access a product or service, simultaneously or not, without owning it individually.

Organizations in this model often operate digital platforms that connect users looking to share resources, such as transportation, accommodation, or tools. By optimizing the use of existing resources, sharing platforms can lead to reduced consumption and increased efficiency in resource utilization.

Product Lifecycle Extension

This model focuses on extending the lifespan of products through repair, refurbishment, or upgrading.

Companies that adopt this forward-thinking model engineer products emphasize modularity and ease of repair. They may provide repair services, make spare parts readily available, or offer incentives for customers to opt for upgrades over outright replacements.

By protracting the product life cycle, businesses significantly reduce the need for frequent purchases. This strategy not only curtails waste generation but also champions a more sustainable pattern of consumer behavior.

Why should I implement a circular business model?

Organizations have to adapt to a circular economy if they wish to secure their business continuity. This transition is driven by a heterogeneous group of challenges that are perceived differently according to the needs of a company. Despite the heterogeneities of these challenges, we have listed below two reasons why companies should consider a circular business model.

Supply Chain Risk: Why should I have a circular business model?

As we introduced before, the demand for material resources has increased and will radically continue in the following decades. To put it in figures, the IRP report states that extraction and processing of material resources (for instance, biomass, fossil fuel, and metallic and non-metallic minerals) account for 55% of global GHG emissions.

The Joint Research Center of the European Commission found that some materials are expected to have an enormous increase in demand in the following years. Global lithium demand, widely applied in batteries for electric vehicles, is expected to boost 90 times by 2050, overcoming the current supplying capacity by 19 times. For the EU specifically, the demand for lithium is expected to increase by 21 until 2050.

The European Commission has been releasing a list of Critical Raw Materials (CRM) that identifies vital raw materials that have high importance for industries and technologies while having significant supply vulnerability. CRMs are indispensable elements within products for areas such as renewable energies, digital technology, aerospace, and defense.

The last CRM list was published in 2023 and revealed 34 raw materials falling into the criticality classification. Many of these materials are sourced from countries outside Europe and mostly come from a single country. Without such materials, the EU industry would be threatened to keep its production rate, product quality, and market competitiveness. Geopolitical issues (e.g., military conflicts, threats in maritime routes), environmental accidents, and natural disasters, among others, pose a risk in many supply chains.

In 2023, the European Commission approved the new Critical Raw Materials Act, which aims to strengthen all the stages of critical raw material value chains, diversify imports, and improve circularity. The act will help the EU secure the supply of raw materials for its industries and support the achievement of climate objectives. Not solely, the act fosters diversification of supply chains through viable alternatives, increasing resource recovery, and mechanisms to facilitate the exploration of resources within the EU.

Compliance Risk: What regulations are driving circular business models?

Concern about environmental and social issues is pushing countries to strict regulations. The EU deserves a highlight in this topic, as it assumes a leading position within the international community in promoting new policies for sustainable development. New regulations mean that companies are forced to adapt to new requirements, sometimes manifested by significant changes that call for the reformulation of business models. In the scope of this article, we have listed some of these regulations.

Corporate Sustainability Due Diligence Directive (CS3D)

In an attempt to prevent the violation of human rights and environmental impacts within companies' operations and corporate governance, the EU adopted in February 2022 the proposal of the Corporate Sustainability Due Diligence Directive (CS3D). The final text was approved in March 2024 after long negotiations, which results in several alterations of the proposal.

The CS3D determines that companies must conduct due diligence to identify, prevent, and account for human rights and environmental impacts, as well as to mitigate existing ones. This is valid for their operations and value chain, i.e., for the suppliers and other contractors involved in any stage. The CS3D scope is set as follows:

• In 3 years: EU-based companies with over 5,000 employees and at least 1.5 billion euros in revenue worldwide; and non-EU companies with a turnover in the EU higher than 1.5 billion euros.
• In 4 years: EU-based companies with over 3,000 employees and at least 900 million euros in revenue worldwide; and non-EU companies with a turnover in the EU higher than 900 million euros.
• In 5 years: EU-based companies with over 1,000 employees and at least 450 million euros in revenue worldwide; non-EU companies with a turnover in the EU higher than 450 million euros.; and companies with at least 80 million euros turnover (worldwide for EU-based, and within the EU for non-EU companies) who have entered into franchising or licensing agreements with independent third-parties in the EU in return for royalties of at least EUR 22,5 million in the EU.

SMEs do not fall under the CS3D umbrella; however, when in the value chain of a company subjected to CS3D, SMEs are indirectly affected. SMEs might need to provide data, enable audits, and/or make their operations and corporate governance adequate.

In support of avoiding greenwashing cases, the EU has also adopted in March 2023 the proposal for the Green Claims Directive, aiming to address this issue and protect consumers from misleading sustainability claims of products and services. The expectations from the directive are mainly two:

• Increase the competitiveness of organizations that take action for the sustainability of products and services.
• Support consumer to make more informed decisions regarding their choices.

The directive sets minimum criteria for organizations to prove their environmental claim (for instance, rely on scientific evidence, and have impacts demonstrated in a life cycle perspective), requires them to be audited by an independent and credited verifier, and creates new rules for environmental labeling.

Tips from iimpcoll

If you claim your product as circular/sustainable, you will be required to motivate your impact-free operation through reliable data and information. It is worth looking into your suppliers and contractors' data regarding negative impacts. Double-check if they meet your standards and the EU regulatory requirements.

You will also need to carefully select your contractors and plan actions with real circularity gains, e.g., by selecting and sourcing adequate raw materials, maximizing product lifecycle, or enabling resource recovery. Furthermore, keep an eye open on the last CS3D updates.

Circular Economy Action Plan (CEAP)

The EU's commitment to fostering a circular economy is not new. Through the Circular Economy Action Plan (CEAP), the first version was adopted in 2015 and further advanced in March 2020, the EU is making it a reality. Targeting all the stages of a product life cycle, the plan discloses regulatory and non-regulatory measures to make products more circular, reduce waste, and ensure that resources are kept in continuous use cycles within the EU economy.

Defining 35 action points, the CEAP is delivering new regulations to ensure that the transition from linear to circular is enforced by law. Examples are already coming up, such as the following:

• Binding targets for materials use and consumption will come into force by 2030.
• New Regulation on Packaging aims to reduce waste, improve design, and drive the use of bio-based materials.
• Right-to-repair Directive empowers consumers to request manufacturers to repair a product already in use, reducing the need for a new one.

A non-regulatory initiative foreseen in the CEAP is the creation of the Global Alliance on Circular Economy and Resource Efficiency (GACERE). The goal is to drive global initiatives related to the circular economy transition and resource efficiency, opening doors for collaboration and the creation of new ecosystems of organizations.

A couple of industry sectors are identified as strategic in terms of circularity and, for this reason, are set as the focus areas. Examples are electronics, textiles, batteries and vehicles, plastics, food, and construction.

Tips from iimpcoll

The CEAP is driving new regulations to make products more circular. By establishing, for instance, new consumer rights, criteria over the use of certain materials and chemicals, and changing regulations regarding waste, your company will have to adapt your current business model. Thus, conduct an assessment to identify what are the best opportunities for you based on your current situation.

Also, ensure you have trustable sustainability intelligence to update yourself on the latest news and trends. Don't stay behind. Start your circularity transition now.

Ecodesign for Sustainable Products Regulation (ESPR)

Reformulating the former Ecodesign Directive from 2009, which only covered energy-related products, the EU adopted a proposal in March 2022 for a new directive called Ecodesign for Sustainable Products Regulation (ESPR). The new proposal expands the scope to cover circularity and environmental aspects to improve product sustainability. It applies to all products sold within the EU, either manufactured or not within the EU.

Together with the Ecodesign and Energy Labeling Work Plan 2022-2024, the ESPR will first target a range of 31 product groups identified as high energy and material intense, such as textile, furniture, iron and steel, and chemicals. These groups are expected to be under the umbrella of ESPR by 2030.

The ESPR is a great advance towards circular economy by setting requirements for

• Circular materials.
• Lifecycle extension toward durability, reusability, and reparability.
• Resource recovery by recycling.
• Energy and Resource Efficiency.
• Carbon footprint.

The ESPR is also the regulation that introduces the Digital Product Passport (DPP), which makes it easily accessible for consumers information regarding the environmental sustainability of products. For more information about the topic, please look at our comprehensible guide about DPP.

Tips from iimpcoll

The ESPR implies that circular economy has to be considered from the design and the selection of materials until the end of a product's life.

As this will first apply to specific product groups by 2030, check if your product falls under one of these groups, as you will need a well-defined circularity strategy and technologies to collect and share data with stakeholders.

Corporate Sustainability Reporting Directive (CSRD)

Corporate Sustainability Reporting Directive (CSRD) is the EU regulation requiring companies to report their environmental, social, and governance performance. The CSRD came into force in January 2023 replacing the former Non-Financial Reporting Directive (NFRD), aiming to guide stakeholders such as consumers and investors to make more informed decisions, as well as to foster transparency about sustainability impacts. It applies to EU and non-EU companies with subsidiaries within the EU.

Companies are required to report according to the European Sustainability Reporting Standards (ESRS), a set of standards that indicate how companies can report their performance according to numerous environmental, social, and governance topics. One standard (ESRS E5) is entirely dedicated to resource use and circular economy, defining disclosures about how the company:

• Effects in resource use, i.e., depletion of non-renewable resources and regeneration of renewable resources.
• Measures to material negative impacts.
• Plans to adopt strategies and business models in line with the circular economy principles.
• Material risks.
• Short to long-term financial effects of material risks.

The CSRD is going to be implemented in steps:

• By 2024: Large, listed companies (at least 500 employees) already subjected to the NFRD. First reports are to be published in 2025.
• By 2025: Companies not subjected to NFRD and with 250 employees, more than 40 million euros in turnover, and/or more than 20 million euros in total assets; the first report will be published in 2026.
• By 2026: Small and Medium-sized companies with at least ten employees, more than 700 thousand in net revenue, and/or more than 350 thousand euros in total assets. The first report is to be published in 2027.

To know more about CSRD and related topics, check out our two articles explaining ESG reporting and presenting a step-by-step on how to write an ESG report.

Tips from iimpcoll

If your organization falls under the CSRD, it is time to think about how to collect and report data related to circularity initiatives. Not only setting adequate actions to fulfill the disclosures required by the ESRS E5, e.g., adopting a circular business model, monitoring the use of non-renewable resources, calculating material risk, etc., you should also mind:

• Which technologies will be necessary to streamline the circular economy data reporting process, aligned with your overall sustainability report?
• Which data are relevant for a circular business model?

Waste Shipment Regulation

In November 2021, the EU adopted a proposal for a Waste Shipment Regulation prohibiting hazardous waste shipment and waste destined for disposal in non-OECD countries outside the EU. The new rules aim to promote environmental protection, given the numerous cases in which EU waste was disposed of within developing countries – which usually lack the infrastructure to manage them properly.

Another benefit of the new regulation is the incentive to keep waste that contains valuable resources within the EU boards or other countries where such resources can be extracted and reinserted in the value chain.

The new regulation will set new requirements for EU waste exports, new rules for waste shipment between EU member states, and measures to track illegal waste shipment.

Industrial Emissions Directive

The Industrial Emissions Directive (IED), 2010, is a core asset in preventing harmful impacts on human health and the environment due to pollution. A proposal to revise IED was adopted in April 2022.

Among the initiatives foreseen in the proposal, there will be stricter criteria regarding energy, waste, and material use, as well as the promotion of safer and non-toxic chemicals. It also extends the scope of industries covered under the IED and requirements for a toxic-free environment based on cleaner materials and technologies.

Tips from iimpcoll

These two regulations focus primarily on the environmental impacts of emissions and waste disposal. When designing your new circular business models, take into consideration the following:

• Technologies used along the product life cycle include minding efficiency, emission, and energy consumption.
• The strategies for waste disposal consider what is being disposed of and where.

What are the benefits of a circular business model?

We have named a couple of benefits generated by circular business models, both from a sustainable and corporate perspective. The idea here is to trigger even more your curiosity to consider it the new reality for your business.

Corporate benefits

• Explore new customer segments: Awareness of social and environmental impacts pushes society towards a more sustainable development. Customers are, therefore, demanding more circular-based products, sometimes willing to pay more for these solutions.
• Reduce risk: The regulatory landscape poses new business requirements, while resource scarcity threatens supply chains. Circular business models can help you to mitigate both risks.
• Collaboration and customer loyalty: Circular business models require cooperation between different organizations. This helps you to diversify your markets, acquire new capabilities, and try new businesses. It also supports you to create stronger relationships with your customers.
• Step forward in ESG reporting: Your portfolio of ESG initiatives can be powered up with a circular business model. Circularity data contributes to building up your sustainability reporting and increasing stakeholder transparency.
• Economic Resilience: Circular business models enhance economic resilience by establishing revenue streams through services and repairing, for instance. Also, having control of your material flow can help you to identify opportunities for increasing efficiency and reducing costs.

Sustainability benefits

• Resource conservation: Circular business models enhance resource conservation by keeping materials within closed, continuous-use loops. This reduces pressure on raw materials (mainly the scar ones) and fosters sustainable resource utilization.
• Waste reduction: Circular business models minimize waste generation by incorporating principles such as reuse, repair, and recycling, as well as designing products to eliminate waste during manufacturing.
• Environmental protection: By keeping resources in use, circular business models lead to a reduction in the extraction of virgin raw materials. Virgin resources are usually associated with the degradation of ecosystems and environmental pollution.

How can I implement a circular business model?

There is not only one way of adopting a circular business model. Different methodologies and frameworks exist to guide you in this journey. However, it is crucial to make it as efficient as possible and maximize the value created, delivered, and captured.

In this article, we present two ways you can make it your reality: by creating a new business model and by adapting your current business model. The difference? Although both situations have similar outcomes, creating a new business model is entirely based on your customer segment and its needs while adapting it to enhance existing practices.

How do I create a new circular business model?

Creating a new business model is a process that involves iterative rounds of collecting and validating information with stakeholders and coming up with creative outcomes. Your new circular business model needs to be customer-centric and be designed considering the principles of circular economy.

Several design thinking frameworks can help find customer needs and propose a suitable solution. Here, we suggest the Double Diamond framework proposed by the Design Council in 2005 and further evolved in 2015.

1. Discover

The Discover stage focuses on understanding the problem, identifying opportunities, and gaining insights into user needs. When developing a circular business model, this stage involves researching and understanding linear business models, finding inefficiencies, and recognizing potential areas for circular improvements.

Stakeholder engagement and mapping the entire value chain are crucial to comprehensively understanding the business's ecosystem. Therefore, you will need a series of interviews and workshops with potential customers to map pain points from your customer segment. Analyzing market trends and the regulatory landscape will also help you visualize which direction to take in the following stages.

To give you some more information about your current operations, the Discover stage may include:

• Life cycle assessments to understand the environmental impact of the current model.
• Material flow analysis to identify circularity opportunities.

The outcome of the Discover stage is a bunch of market information, customer needs, and opportunities that your organization can explore.

2. Define

While the Discover stage focuses on collecting information and gaining insight, the Define stage aims to analyze and translate them into a specific problem or opportunity to be targeted. As you will be facing different possibilities, in this stage, you and your team will have to narrow down your options until you select the best opportunity. In developing a circular business model, this stage involves clarifying the objectives of transitioning from a linear to a circular approach and setting measurable goals for circularity.

Activities during the Define phase may include:

• Developing personas representing key stakeholders within the circular economy.
• Creating a problem statement that encapsulates the challenges and opportunities.
• Establishing Key Performance Indicators (KPIs) for measuring circularity and sustainability goals.
• Deep diving into problem statements and gathering further information if needed.

The outcome of the Define stage is a clear and actionable Point-of-View (PoV) of the problem that your circular business model will target.

3. Develop

The Develop stage is where ideation and prototyping occur. For your clearly defined problem, you now focus on proposing alternatives to solve this problem. It involves brainstorming innovative solutions, experimenting with different circular strategies, and developing prototypes that align with the defined objectives. Collaboration with cross-functional teams and continuous feedback loops are essential during this stage.

Activities during the Develop stage may include:

• Ideation workshops to generate creative circular business models.
• Rapid prototyping of your defined circular strategies.
• Testing and validating prototypes with relevant stakeholders.
• Conducting feasibility assessments and impact analyses for each prototype.

The outcome of this Develop stage is your new circular business model, selected based on promising results in the prototyping, as well as in the feasibility and impact analyses.

4. Deliver

The final part, the Deliver stage, is where the refined and tested solutions are implemented. This includes transitioning from linear to circular practices, integrating circularity into the core business strategy, and ensuring scalability and long-term viability. Communication and engagement with stakeholders become crucial for a successful implementation.

Activities during the Delivery stage may include:

• Developing a roadmap for the phased implementation of the circular business model.
• Collaborating with suppliers, partners, and customers to ensure a smooth transition.
• Establishing monitoring and evaluation mechanisms to track progress against defined KPIs.

How can I make my business model more circular?

Instead of researching and creating a new business model from scratch, your company can have a circular business model by enhancing circularity into your current model and operation. In the following subsections, we created a step-by-step showing how you can do it.

1. Set up a working team and comprehend the concept

It is crucial that your company first understand what a circular economy is and why it should be considered. This clarifies the concepts, enabling all stakeholders to speak the same language and making setting the pathway towards circularity easier.

Ways of achieving it are reading through the two first sections of this article, making web searches, reading scientific publications, or reaching out to our experts, who are here to support you in this endeavor. Ensure that the leadership is involved in this education, which may help you get top commitment.

In the first moments, you also create a multidisciplinary working team. The working team will handle the workload and arrange resources for the circularity transition, such as conducting assessments, doing internal interviews, getting data, allocating budget, etc.

Tips from iimpcoll

Consider people from different business areas to compose your team. In this way, your initiatives will have a holistic view of the organization, helping you to have a smoother adaptation. For example, people from Operations know the processes and can give tangible inputs on adapting them. People from Human Resources can manage hiring processes to bring in necessary expertise. People from IT can indicate what digital technologies will be required.

2. Assess your current situation and set goals

The next step is to determine your current situation in terms of circularity. Knowing your capabilities and current circular practices helps state what your organization is currently unable to perform. Therefore, your working team will be entitled to determine:

• What internal capabilities does your organization possess, i.e., what can help you to be more circular?
• What are the circular practices already implemented?
• What are the circular hotspots, i.e., the areas that lack circularity and need more attention?

The circularity gap is revealed by comparing your current situation with your circularity goals. If you already have pre-set goals towards circularity, you can stick to them. This usually comes from decision-makers based on market trends and/or new regulations. If this is not the case, the working team and decision-makers can have rounds of discussions to set new goals.

Tips from iimpcoll

Building up a list of circularity best practices is a good starting point to map what your company is already doing.

3. Deep dive into your 'linear' hotspots

With the circularity gaps and your goals in mind, it is time to dive deeply into the problem and gather more information about the situation. With a holistic view of your value chain, analyze relevant business areas that contain the circularity gap and will directly or indirectly support you in achieving your goal. All the tangible information gathered here will help you take concrete actions to make your business model more circular.

For instance, if your goal involves making the product more recyclable, you shall investigate your product design, procurement and raw materials selection, manufacturing processes, and the current end-of-life of your product. We have listed some elements of a value chain with relevance to a circular economy. Each of these areas will demand a different set of competencies.

• Stakeholders network.
• Business Environment.
• Inbound Supply Chain.
• Product design.
• Production.
• Distribution.
• Use phase.
• End-of-life.
• Organizational aspects.

Tips from iimpcoll

Make sure to dedicate time and budget for this stage. It is not uncommon that organizations lack data in terms of their complete material flow, LCA, or other relevant data.

Looking at your in-house capabilities, you can find ideas on how to collect missing data.

4. Enhancing your business model

Refining your business model can be effectively achieved via ideation workshops. These sessions bring together the working team and decision-makers to discern the most suitable circularity initiatives. It is beneficial to keep other relevant stakeholders in mind, as they often provide valuable insights when needed. A good starting point is to organize all the intelligence gathered so far in a clear, simple way.

You can use, for instance, a SWOT matrix. Furthermore, the scientific publications about the circular economy contain a wide range of circular business model frameworks to guide you in this stage. However, you can make use of the well-known business model canvas, which is more familiar in the eyes of the business community. It is important, although, to keep in mind the circular economy principles, as well as how your new business model will promote circularity.

Multiple alternatives can be designed during the workshops. The process is simple: idea generation, evaluation, and prioritization to determine the most suitable model for your organization.

5. Testing and scaling-up

As your organization defines a new circular business model, testing it on a small scale is recommended first. Testing helps you identify improvement opportunities and mitigate issues during this process.

Once your testing has been concluded and the decision-makers have approved it for a large-scale launch, an implementation roadmap is also necessary. Don't forget to consider time, budget, human resources, and all supporting processes to ensure your new circular business model will be carried out successfully.

With everything set, it is time to scale up and celebrate your contribution to a more circular society!

Tips from iimpcoll

Remember that continuous monitoring and improvement are important to keep your business model competitive. Not only define appropriate KPIs, but also consider having a system in which you can collect, display, and report reliable data about your circularity progress.

Do you know how to start your circularity journey?

We hope that this article was useful. Please, CONTACT US if you have any questions.

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