Best Practice Examples of Circular Business Models

Best practice examples of circular business models are presented in this report. The purpose is to inform and inspire interested readers, in particular companies that aspire to examine the potentials of the circular economy.
Circular business models in two different sectors are examined, namely the textile and clothing sector as well as the durable goods sector. In order to appreciate the notion of circular business models, the basics of the circular economy are outlined along with three frameworks for categorizing the various types of circular business models. The frameworks take point of departure in resource loops, value bases and business model archetypes respectively, and they are applied for analysing and organizing the business models that are presented throughout the report.
The investigations in the report show that circular business models are relevant to businesses because they hold the potential to provide significant economic benefits in addition to new ways of forming partnerships with suppliers and connecting with customers. Furthermore, circular business models generate essential environmental benefits as a result of the improved resource productivity they offer. These benefits are, however, not the key focus of the current report.
The point of the study is to describe the diverse and unique circular business models that companies around the globe have established already within the textile and clothing sector and within the durable goods sector. Even though these two sectors are different, circular business models can be found in both. These models operate in both young and mature firms, small and large, which points to the fact that circular business models can be successfully implemented in a wide range of business settings as long as they are individually tailored to each company.
The notion of individually tailored business models is important. Hence, the business models are found to be versatile in both industries, and speading across all of the aforementioned resource loops, value bases and business model archetypes. Some companies choose to focus on just one resource loop, while others are involved in several loops. Some work with resource loops in relation to their supply chain, invisible to the end-user, but others built relationships with end-users through new circular offerings. Moreover, in some of the best practice examples presented, resource loops are tightly closed, whereas in other cases they are more open due to initiatives being voluntary, experimental or small scale, covering only part of the market.
The study indicates that the ability of companies to apply life cycle thinking, which involves the entire value chain from sourcing to disposal, and to look for circular business opportunities in this flow of goods and value, is key in a circular economy. Establishing new or closer collaboration with stakeholders within or beyond the traditional supply chain is another important skill in creating circular business models.
Many of the examined companies are found to apply a step-by-step or experimental strategy, where they test the resilience of a circular business model within a limited number of product lines or in one business unit at a time. This allows for a corresponding step-by-step organisational learning and for leveraging the risk associated with new ventures.