The focus of many companies is currently on sustainability, however a big gap still exists between the actions taken and the current state of the planet. As shown in the previous blog post, the circular economy is a holistic solution to keep products at their maximum utility and value. This article explains our framework called «Circular Navigator» which provides an actionable path for companies to design, validate, and implement a circular ecosystem with suitable business models that are beyond the reach of single companies.
The process: Seven steps to implement circular ecosystems
Impulse: The company recognizes the need for change in the way of doing business, such as altering consumer behaviour and legislation, reducing resource dependencies and costs and increasing motivation for its employees.
Identify: The environmental and social impact of the current business model and of the entire value chain is assessed metrically. One new tool that helps with that it the sustainable business model that combines the three spheres of sustainability (planet, people and profit) with the magic triangle concept of business models.
Ideate: Ideas for circular models that go beyond existing solutions are created using our circular pattern cards, resulting in a full ecosystem with innovative solutions that enable to close the loop in a sustainable way.
Integrate: The generated ideas in the creativity process are consolidated into a circular logic and the circular ecosystem is designed from start to finish closing the loop.
Imagine: The vision and motivation for a circular transformation in the company is formulated, aligning all stakeholders: employees, management, partners and customers in the circular ecosystem. Since many parties are involved, it becomes fundamental to have a shared vision, mission and goal.
Incorporate: The ideal partners are approached and incorporated into the ecosystem. This aspect is especially important for the success of circular solutions, since (almost) no business can deliver or create all the needed products, services or guidelines alone. If new partners join, the whole ecosystem might change because new services and possibilities are added, which might also alternate the vision.
Implement: The ecosystem implementation happens at the individual business model level for each company. The key elements to realising the designed ecosystem follows the current best practices of de-risking and assumption-based testing for validating new business models, as well as adapting these to the specific requirements of the circular economy.
Circular ecosystems
The step «Identify» will be explained into further detail to gain a better understanding about how to create new sustainable business models. Since many hurdles exist with regards to circular and sustainable projects (see our previous blogpost), the first crucial question to be asked is how can the circular economy and business model innovation be combined. Firstly, the business model itself has to be examined:
WHO: Who is the customer? What are their needs and problems?
WHAT: What products and services are offered to the customer? What is the value proposition?
HOW: How is value being created and generated within the value chain?
VALUE: What is the revenue model from the company perspective? How can profit be achieved?
Overall, it can be observed that the business model is solely focused on the company perspective and profitability, missing any notion of sustainability. Sustainable growth and profit are words which are not used in the context of sustainability for the environment, but as a meaning for “long-term” success. Therefore, from a holistic point of view, not only the company business model should be presented, but also the impact on the environment and society as a whole. As shown below, the different dimensions have different impact on the triple bottom line. For example: what you offer and how you create it, is the main driver for your impact on the environment. Using the sustainable business model concept, companies need to question the impact their choices have. Creating such an explicit description allows them to create more sustainable solutions.
A circular economy is not created by one circular business model, but rather by ecosystems of business models that are linked together, generating interaction of different actors and companies and working together to close the loop.
On the other side, the focus should not only be centred around the material flow or recycling. It is of highest importance to also create a value proposition for the end-user that is compelling even beyond being sustainable. Otherwise the sight on the main goal is lost which is to generate a benefit for the end-customer. Finally, another very important point to be mentioned is the orchestration of the players within the ecosystem - the coordination and drive needed to actually create results with many different players. At least one leader is necessary who drives forward the project and communicates with all the companies involved. By incorporating all these features a successful circular ecosystem can be built.
Generating innovative and sustainable ideas
After having identified the state of quo, new ideas can be generated. As with classical business model innovation, patterns support the creativity process. For example, when applying the logic of McDonald’s to another company it becomes easy to come up with solutions. Simultaneously, if these patterns are chosen carefully and used from a sustainable point of view, a lot of implicit knowledge can be incorporated by adding and displaying sustainable solutions that have been effective far. That is the reason why the BMI Lab team has reviewed more than 200 successful sustainable business models (even though not all are fully circular). Nevertheless, all these companies highlight very important sustainable patterns that contribute to their success.
Three examples: Blueland, Infarm and Loop by TerraCycle
Example 1: Blueland
To illustrate some best practices for circular business models, Blueland is an excellent first example. The company focuses on selling cleaning detergents, such as glass and mirror, multi-surface and bathroom cleaning products. The innovation lies in a household cleaning system which reduces single-use plastic containers by providing bottles from long-lasting glass, as well as cleaning detergent pills which get dissolved in water. This is a very convenient solution, as water is already available and the pills are the only cost for the customer. Additionally, single plastic containers are eliminated, thus logistic and transportation costs are reduced. This pattern can be described as de-materialisation, since water has been removed from the product. The containers are re-used and explicitly produced to last long. Finally, biodegradable packing solutions and non-toxic materials are utilized, so that the environment, people and animals are not harmed in any way.
Example 2: Infarm
The second sustainable example is Infarm, which is a German startup that grows food directly in local stores. These plant growing facilities are located within the supermarket, eliminating the need for long supply chains and using low energy LEDs. No pesticides are used, a close customer relationship can be fostered, since people see and understand how the food is grown from the source, and the produce is harvested directly in store, being as fresh as possible. All Infarms are managed through a cloud-based farming platform, which learns, adjusts and improves itself continuously, so each plant grows better than the previous one.
Example 3: Loop
Last but not least, Loop is a great showcase of an American company orchstrating a circular ecosystem. Thanks to the partnership with many big brands, Loop offers zero-waste versions of everyday essentials in long-lasting, high-quality containers. The customers order their products online, which are then delivered in a Loop crate to their house. After using the product, the empty containers are picked up, cleaned, and used again. Loop has specific cleaning facilities in place, so their system removes a large amount of disposable plastic and packaging.
Conclusion
To mitigate the challenges of climate change, excess use of planetary resources and deterioration of ecosystems, gradual changes in doing business as usual are no longer sufficient. By designing a circular ecosystem that involves multiple companies and initiating a circular innovation process between more partners, the benefits for society, environment and the companies themselves can be significant. The Circular Navigator provides an intelligent framework through which many companies have already incorporated sustainable patterns into their processes. Overall, the circular economy is one way to initiate a positive revolution in the way of doing business.
Interested in additional information on circular business models? Take a look at The Circular Navigator and download the corresponding whitepaper on Business Model Innovation for the Circular Economy.