Business Model for the Circular Economy That Doesn’t Compromise Profits

In a rapidly evolving global landscape where sustainability has transcended buzzword status to become a necessity, businesses are feeling the increasing pressure to adopt circular business models that harmonise profit with environmental responsibility. This urgency is not just a moral imperative but a response to a shifting regulatory landscape that demands businesses embrace circularity. Governments worldwide are pushing for sustainable practices, and this shift is reflected in the expectations of consumers and businesses alike.

The challenge, however, lies in the delicate balance between profitability and circularity, leaving many companies at a crossroads.

The Regulatory Drumbeat:

Governments, recognising the critical role of businesses in achieving sustainability goals, are implementing regulations that incentivise or even mandate circular practices. For instance:

  • European Union Circular Economy Action Plan: The EU has set ambitious targets to reduce waste and boost recycling, promoting circularity as a key component of their environmental strategy. Companies operating in the EU are compelled to align with these circular economy principles.
  • Extended Producer Responsibility (EPR) Laws: Many countries, including parts of the European Union and certain states in the USA, are adopting EPR laws. These laws hold manufacturers responsible for the entire lifecycle of their products, encouraging them to design products with recycling and circularity in mind.

Industry Leaders Paving the Way:

Big players in the business world are not merely reacting to regulations; they are proactively embracing circularity as a core tenet of their business strategies. Examples include:

  • Apple's Circular Initiatives: Apple has committed to using 100% recycled or renewable materials in its products. The tech giant has introduced programs like Apple Trade In, encouraging users to return old devices for recycling. Apple's closed-loop supply chain approach aims to reduce its reliance on raw materials and minimise environmental impact.
  • Microsoft's Carbon Negative Pledge: Microsoft is not only striving for carbon neutrality but has gone a step further by pledging to be carbon negative by 2030. The company aims to invest in carbon removal technologies and circular initiatives to offset its historical carbon emissions.
  • Volkswagen's Circular Economy Strategy: In the automotive sector, Volkswagen has been actively pursuing circular economy practices. The company is focusing on recycling vehicle components and exploring ways to extend the lifespan of batteries, contributing to the reduction of e-waste.

Consumer Expectations Driving Change:

Consumers, armed with increased environmental awareness, are demanding sustainable practices from the companies they support. The shift in consumer sentiment is palpable, with people increasingly making purchasing decisions based on a company's commitment to circularity.

In this landscape, businesses are not just complying with regulations but are seizing the opportunity to redefine their identities as responsible stewards of the environment. The journey towards circularity is no longer a choice; it's an imperative driven by a confluence of regulatory pressures, consumer expectations, and the proactive initiatives of industry leaders. In such a context, the challenge for businesses is not just how to navigate the transition to circular models but how to do so profitably, without compromising their bottom line.

The solution may well lie in the innovative and financially rewarding realm of access-based business models, offering a pathway to circularity that aligns with both environmental and economic goals.

The Problem: Circular Aspirations vs. Profitability

Numerous businesses aspire to adopt circular business models, where the lifecycle of products is extended, waste is minimised, and resources are conserved. However, the stumbling block often comes in the form of profits. Companies grapple with the challenge of incorporating circular practices without sacrificing their financial viability.

The Solution: Access-Based Business Models

Enter the access-based business model, a game-changer in the quest for circularity without compromising profits. Instead of selling products for one-time transactions, businesses can offer their products as subscriptions, ushering in a paradigm shift from ownership to usership.

Benefits of Access-Based Models for Circularity:

1. Retained Ownership, Controlled End-of-Life:

By retaining ownership of the product, companies gain control over its end-of-life journey. This means products can be refurbished, recycled, or repurposed, significantly reducing waste and environmental impact.

2. Maximising Product Potential:

One product, multiple uses. Subscription models ensure that the same product can generate revenue multiple times, maximizing its potential and improving overall profitability.

3. Incentivising Returns:

Consumers often discard products prematurely, unaware of the remaining useful life. Access-based models incentivize users to return products, allowing companies to extract additional value and reducing the environmental footprint.

4. Service Modules for Product Maintenance:

Retained ownership also opens the door to incorporating service modules into the business model. Regular maintenance services not only enhance the product's lifespan but also provide an additional revenue stream.

Circular Economy in Action

These elements culminate in a circular business model that keeps products in use for longer periods, contributing to a sustainable and environmentally conscious economy.

Our Circular Success Story:

In the face of the challenging year that was 2023, circuly experienced remarkable growth, with a staggering 416% increase in Gross Merchandise Value (GMV). GMV represents the revenue generated by circuly's customers through the Circuly solution.

Over a six-month period, the GMV exhibited an impressive average monthly growth rate of 16%, showcasing sustained success in the adoption of circular business practices.

Moreover, our commitment to circularity is evident in the consistent improvement of the average rental cycle. Starting at 1.3 months, we have elevated the rental duration to an impressive 1.6 months. This means that products offered by our customers on a subscription basis are rented more than once, exemplifying the circular potential of our business model.

Embracing Sustainability Through Circular Business Models

In conclusion, the marriage of access-based business models with circular economy principles provides a pragmatic solution for companies seeking sustainable practices without compromising profitability. By focusing on usership over ownership, businesses can not only contribute to a circular economy but also reap the financial rewards of a more sustainable future.

Get Inspired By Other Companies Already Operating Such a Model.

See Case Studies

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Case Study: Paceheads - The Journey to Offering Sports Equipment in a Subscription Model.

Paceheads, a B2C sports equipment rental disruptor established in 2018, pioneers a flexible monthly subscription model, allowing users to test premium gear for up to 12 months. Facing challenges like manual workload and intricate subscription management, Paceheads partnered with circuly.

Business Model for the Circular Economy That Doesn’t Compromise Profits

Access-based business model for physical products: a unique way to embrace circularity without compromising profits. 416% growth in GMV showcases that access-based business models can create success.

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