5. Circular Business Models
Circular solutions, practices and business models will become the mainstream out of necessity.
Circular businesses move beyond profit making and cost cutting through improved supply chain efficiency. The focus is on revamping and restructuring production systems from the ground-up to ensure the future viability of operations.
Circular businesses are fully involved in the product consumption phase and generate revenue by offering services rather than selling physical goods. They rethink traditional producer-consumer relationships, value creation activities, and value chain structures while promoting ecological and social considerations in business culture and philosophy. The circular business model helps companies minimize their environmental footprint and produce innovative sustainable products.
Some of the circular business models, are listed below:
1. Product-as-a-service: Businesses can provide a service that enables customers to enjoy a product, without purchasing it as an alternative to selling things. This can promote material circularity by cutting on the number of products that are manufactured and discarded.
For Example: A laundry service that involves use of washing machines rather than selling washing machines. Here, customers would pay a charge to use the service. This strategy encourages the reuse and repair of existing washing machines, which can contribute to increasing their useful life and lower the demand for brand-new washing machines and materials.
2. Recycling and recovery: Instead of mining and using new raw materials, businesses can engage in material recovery and recycling.
For example: Materials such as glass, plastic and paper can be easily recovered and recycled to promote a circular economy.
3. Sharing and collaborative consumption: Businesses can promote resource sharing and the utilization of common infrastructure, such car-pooling or workspace-sharing.
For Example: a car-sharing service enables numerous individuals to share the use of a single vehicle rather than requiring that each user owns a vehicle separately. This system encourages the sharing of existing vehicles, which can assist to increase their useful life and lower the demand for new materials while lowering the demand for new automobiles.
4. Leasing and subscription models: Instead of selling goods or services outright, businesses might offer them on a lease or subscription basis. This may lower the need for new materials and increase the functional life of products.
For example: Leasing a vehicle as and when needed instead of purchasing the new vehicle.
The circular business model provides a unique perspective towards economic growth and resource consumption, which has prospects to have positive environmental and social impacts.