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Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 1.1.3 Degenerative economies, which explain the problems for people and planet with the way our current economies operate.
Section 1.1.4 Regenerative economies, which explains how circular, distributive and caring, needs-based and sufficient economies can meet human needs within planetary boundaries
Section 1.4.1 Biomimicry for economic design, which explains how Nature’s Unifying Patterns provide principles for regenerative economic design
Section 1.4.2 Circular economies, which explains circular economy principles
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Section S.5 Causal loops, feedback and tipping points, which explains the feedback loops that can stabilise or destabilise systems.
Learning objectives:
describe the principles of a circular economy
explain various circular business models including: circular supply models, resource recovery models, product life extension models, sharing models and product service systems
describe the conditions that make it easier for businesses to move to circular business models
You might not realise it, but you’re likely already part of the circular economy.
Do you ever decide not to buy something because you don’t need it? Have you swapped clothes with friends or bought second-hand? Do you refill a reusable water bottle or collect food scraps for compost? Do you repair items instead of throwing them away, or recycle plastic, paper, or glass?
If you do any of these things (Figure 1), you’re supporting the circular economy, helping human systems become more regenerative. Businesses play a big role too. Which business models support circular practices, and what are the key principles?
Figure 1. 7Rs of the circular economy
(Credit: Icons from Noun Project, various artists)
What are the principles of a circular economy?
What are the principles of a circular economy?
A linear economy takes resources from nature, makes products, uses them, and discards waste into landfills, by burning, or dumping them into ecosystems where they poison plants and animals (Figure 2). This system harms Earth systems in two ways: by depleting resources and polluting ecosystems.
Figure 2. The linear economy, degrading Earth’s systems
In contrast, a circular economy mimics nature, taking less from ecosystems and returning valuable matter back into biological/ecological and economic systems. Its three principles are:
eliminate waste and pollution: design products to avoid waste from the start;
circulate products and materials: reuse, repair, or remanufacture items, made possible with good planning;
regenerate nature: return nutrients to the Earth and restore damaged ecosystems.
The short video below summarises the ideas.
What types of circular business models exist?
What types of circular business models exist?
Businesses that support the circular economy use circular thinking at every stage of production development, from design to disposal. There are a number of circular business models, and some businesses use more than one:
Circular supply models
Circular supply models
Circular supply models replace non-renewable resources with renewable resources or recovered ones. Many businesses now find it easier to switch from plastics to eco-friendly materials. They can design their production and distribution to support these models from the start.
For example, packaging business Loop works with companies like Procter & Gamble and Nestlé to create reusable packaging. Customers return empty packages, which are cleaned, refilled, and reused. This reduces single-use plastics and waste, turning disposable items into long-lasting resources.
The 1-minute video below promotes choosing recyclable, biodegradable wool over synthetic fibres that “haunt” the planet.
Resource recovery models
Resource recovery models focus on collecting, sorting, and processing waste to be reused by producers. Unlike circular supply models, the focus here is on collecting waste and turning it into resources businesses can buy.
People may need to place recyclables in designated containers (Figure 3), or a service might collect the materials (Figure 4). For example, some businesses collect food waste from homes, schools, and organisations. They decompose the waste, capture methane for energy, and turn the leftovers into compost, which can be sold to farmers and households to fertilise soil.
Figure 3. If you collect and deposit glass, plastic, paper or other waste for recycling in bins, you are participating in the resource recovery model
(Credit: Vlad Vasnetsov, Pexels licence)
Figure 4. Some businesses collect materials from households and businesses, as in this case with cardboard
(Credit: zhang kaiyv, Pexels licence)
Product life extension models
Product life extension models keep products in use longer, reducing the need for new resources. There are several ways to do this:
durable design: making high-quality products that last.
repair and reuse: using products until the true end of their life, supported through second-hand clothing stores or tailors that repair clothes (Figure 5). Businesses can also ensure easy access to replacement parts and design for simple repairs, even for non-experts.
remanufacturing: giving products a second life by refurbishing them for resale. This is common in industries like smartphones and electronics.
Figure 5. A tailor repairs clothes, helping them to last longer and reduce waste and use of new raw materials
(Credit: nappy, Pexels licence)
Sharing models
Sharing models, often supported by digital platforms, let multiple people share access to a product, reducing the need for ownership and saving resources.
Shared products can be owned by businesses and rented to consumers, called business-to-consumer models (B2C). Or consumers can own the products and share them with other consumers, called consumer-to-consumer models (C2C). For example, many cities offer car-sharing services so residents don’t need to own a car. These can be B2C or C2C models. People can also rent bikes and scooters to reach areas public transport doesn’t cover, usually through B2C models (Figure 6).
Figure 6. Cities now have shared bikes and scooters to rent in many locations, helping people get to their destinations without cars.
(Credit: Krzysztof Popławski, CC BY-SA 4.0)
Product service systems (PSS)
In product service systems (PSS) models, businesses sell access to a product rather than the product itself. This encourages the business to make durable, high-quality products since they keep responsibility for maintenance.
For example, Signify’s "light as a service" model lets businesses pay for the light they use while Signify maintains and upgrades the lighting fixtures. This pushes them to design energy-efficient, long-lasting products. The Papillon Project, in partnership with Bosch, rents energy-efficient appliances to low-income households, with Bosch handling maintenance and recycling.
A product service system model that you might be familiar with is music or movie streaming services. Years ago, people owned physical music records, tapes, CDs and DVDs. Now they may subscribe to stream music or movies (Figure 7).
Figure 7. Instead of owning music or movies, many people buy listening or viewing services instead, though these have their own negative impacts on energy use
(Credit: KoolShooters, Mikhail Nilov, Pexels licence)
What conditions make it easier for businesses to adopt circular business models?
What conditions make it easier for businesses to adopt circular business models?
Several factors affect how easily businesses adopt circular models:
laws and regulations: strict laws on circular design, processing, and waste management help level the playing field so that all businesses can move to circular strategies. Political leadership is needed to make system-wide changes. States can also subsidise circular initiatives or develop shared infrastructure. Examples of supportive laws include France’s Anti-Waste Law adopted in 2020 or the Ecodesign for Sustainable Products Regulation of the European Union. Figure 8 shows a new repairability index for goods sold in France.
Figure 8. The French repairability index helps consumers choose products that are more easily repaired. A higher index number means more easily repaired.
(Credit: Chloé Mikolajczak)
social norms: consumer demand for circular products pushes businesses to adopt new models.
access to technology: advanced recycling systems, digital platforms, and new manufacturing methods reduce waste and extend product life. For example, 3D printing can minimise material waste.
access to energy and material resources: businesses with access to affordable renewable energy and sustainable materials can more easily implement circular strategies.
What are some limitations and possible unintended consequences of circular business models?
What are some limitations and possible unintended consequences of circular business models?
Circular business models are key to regenerative economies, but they come with challenges and unintended consequences.
First, it’s hard for a single business to adopt circular strategies. Circular models often need multiple businesses working together. For example, a clothing company using recycled cotton must buy cotton materials from a resource recovery firm. Finding and collaborating with such partners isn’t always easy. Also, higher production costs can make circular businesses less competitive. That’s why it's in their interest for strict laws on circularity to ensure equal rules for all.
Second, circular strategies can have negative side effects. Using bio-based materials could reduce food production. Monocultures, like rapeseed for biodiesel (Figure 9), can harm biodiversity. Social problems can also arise (Figure 10). For example, investors have bought housing in popular cities to rent out on sharing platforms like Airbnb. This limits housing and pushes up rents for locals.
Figure 9. Cultivating plants like rapeseed, to replace fossil fuels can result in less land for food and less biodiversity.
(Credit: Chafer Machinery, CC BY 2.0)
Figure 10. Temporary apartment rentals have reduced housing available for permanent residents and increased noise in neighbourhoods in popular tourist destinations
(Credit: Miltos Gikas, CC BY 2.0)
Another unintended consequence is the rebound effect, or Jevons paradox. If businesses lower production costs through circular strategies, they may reinvest the savings to increase output, which cancels out the benefits (Figure 11). This is common when business and economic growth is the main goal.
Figure 11. A ‘fix’ that can fail, circular business models increase efficiency, but if we still focus on growth, resource extraction will continue to grow
Note: the + symbol means that the two variables have a positive relationship, when one increases the other increases and when one decreases, the other decreases. The - symbol is an inverse relationship; when one increases the other decreases and vice versa. The || symbol indicates a delay in the feedback.
To avoid these issues, circular business models should be used with other strategies discussed in this course to meet human needs within planetary boundaries.
The slideshow below offers a quick and interesting comic illustration of the limitations of circular economy:
Activity 3.4.2
Activity 3.4.2
Concept: Regeneration
Skills: Thinking skills (transfer)
Time: varies, depending on option
Type: Individual, pairs, or group
Option 1: Video examples of circular business models
Time: 20 minutes
Watch the short video below, which shows some examples of circular business models and consider (alone, with a partner, on paper or verbally:
Describe the businesses highlighted in the video: Notpla and Niaga. What products are they making, and how are they making them?
How are the two businesses meeting the principles of the circular economy: eliminating waste and pollution, circulating products and materials, and/or regenerating nature?
Which circular business models are they using (may be more than one)? Explain.
Option 2: Circular business models in your community
Time: 20 minutes
Do you know of examples of these business models in your community? For example, you might have a sharing system for cups at coffee shops, or bowls for take-away food? Maybe there is car or micromobility (bike or scooter) sharing? A library of things?
See how many you and your classmates can come up with and classify them by business model.
Option 3: Circular economy laws and regulations in your community
Time: 40+ minutes, depending on how much time is given to research
The text mentions France’s 2020 Anti-Waste Law that strengthens the circular economy. Research what, if any, laws have been passed in your country related to the circular economy. If there are laws, to what extent do you think they will be effective at helping businesses move to circular strategies? Share what you find with a partner, or your class. Difficulty level: high
Option 4: Exploring circular businesses globally
Time: 35-40 minutes
Use Ellen MacArthur Foundation library of circular business case studies.
Identify one you are interested in and write up a brief description of it, including linking it to the principles of circular economy and one or more of the business models covered in this section. You could work with other students to make an exhibit of these to put in the classroom or school hallway.
Note: there are more activities on circular economy in Section 1.4.2.
Ideas for longer activities and projects are listed in Subtopic 3.5 Taking action
Checking for understanding
Checking for understanding
Further exploration
Further exploration
Ellen MacArthur Foundation - the organisation’s website has excellent resources to further explore strategies and examples of circular economy around the world. The website is well worth exploring. Difficulty level: medium
They recently produced three short videos to address each of the three circular economy principles. Difficulty level: easy
Various online courses in circular economy. Difficulty level: varies
The Circularity Challenge: Expect Disruption and Get Out in Front of It - a Bain Company report on the challenges of the circular economy for businesses. Difficulty level: medium
Sources
Sources
Ellen MacArthur Foundation. It’s time for a circular economy. https://www.ellenmacarthurfoundation.org/
Jensen, H. (2022). “5 circular economy business models that offer a competitive advantage”. World Economic Forum. https://www.weforum.org/agenda/2022/01/5-circular-economy-business-models-competitive-advantage/
OECD (2019). Business Models for the Circular Economy. https://doi.org/10.1787/g2g9dd62-en
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House
Terminology
Terminology
Link to Quizlet interactive flashcards and terminology games for Section 3.4.2 Circular business models - in order of appearance
circular economy: an economic system where nature is regenerated and materials are kept in circulation through maintenance, reuse, recycling, composting, and other processes
compost: to collect and store plant material so it can decay and be added to soil to improve its quality
regenerate: the process of restoring and revitalising something
business model: a plan for the successful operation of a business, identifying sources of revenue, intended customers, products, and financing
linear economy: an economic system where resources are extracted to make products that eventually end up as waste
landfill: the place where waste is disposed of by burying it
ecosystem: the interaction of groups of organisms with each other and their physical environment
pollution: the presence of a substance that has harmful effects on the environment
economy: all the human-made systems that transfer and transform energy and matter to meet human needs and wants
system: a set of interdependent parts that organise to create a functional whole
circular business model: business models that focus on keeping materials in use for as long as possible and minimizing waste
circular supply model: a circular business model that focuses on replacing non-renewable resources with renewable resources or recovered ones
nonrenewable resource: natural resources that cannot be regenerated in a human timescale
renewable resource: natural resources that can be regenerated in a human timescale
resource recovery model: a circular business model focusing on collecting, sorting, and processing waste to be reused by producers
energy: the ability to do work or cause change
product life extension model: a circular business model that aims to keep products in use longer, reducing the need for new resources
refurbishing: to repair and make improvements to something
sharing model: a circular business model that organises multiple people share access to a product, reducing the need for ownership and saving resources
business-to-consumer model (B2C): market activity where products are sold from businesses to consumers
consumer-to-consumer model (C2C): market activity where used products are sold from consumers to consumers
product service systems (PSS): a circular business model where a business sells access to a product rather than the product itself
regulation: a rule that guides individual or group behaviour and enforced by an authority
subsidy: a payment made by the state to a business or individual to encourage certain behaviour
infrastructure: large scale physical systems that a society needs to function (roads, railways, electricity networks, etc)
repairability index: a rating system that indicates the repairability of a product
norm: a social rule for accepted and expected behaviour, can be stated or unstated
demand: the quantity of a product that consumers are willing and able to purchase at various prices
renewable energy: energy from sources that are continuously available or regenerate quickly
sustainability: meeting people’s needs within the means of the planet
regenerative economy: an economic system that meets human needs in a way that strengthens social and ecological systems
unintended consequence: unforeseen outcomes or effects that arise as a result of a particular action or decision
bio-based material: a material made entirely or partly from substances derived from living (or once-living) organisms
monoculture: when a single crop is grown a given area
biodiversity: the variety of living organisms on Earth
investor: an individual that puts money into an entity such as a business for a financial return
rebound effect: a situation where efficiency gains in an input are counteracted by increased consumption and production, resulting in even greater use of the input
Jevons paradox: a situation where efficiency gains in an input are counteracted by increased consumption and production, resulting in even greater use of the input
economic growth: an increase in the total value of goods and services produced in a period of time
planetary boundaries: the limits of Earth systems to absorb the impact of human activity and continue to function
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