Circular business models: the most important answers

Many companies are working on a climate-neutral supply chain, but these traditional supply chains follow the linear take-make-waste model. This means that consideration stops abruptly at the customer. Access to the product is lost and the story ends, although this is where it should really pick up speed. Long-term access to high-quality materials and product components is only guaranteed with circular business models. A circular approach means moving away from a linear view of the supply chain towards a circular value chain.

The circular economy therefore influences every phase of the supply chain, from the extraction of raw materials to the recovery and reuse of goods.

Turning away from linear business models is often a major challenge for companies. Only if the corporate strategy, business processes and management are in line with the new, circular business model, will the expected benefits materialise. This means, the circular economy strategy must be anchored in the long-term corporate goals and empower the stakeholders (e.g. through top-down corporate communication and internal training).

1. Circular Inputs
   
   Many companies already utilise the simplest form of circular business models in the form of waste avoidance or by substituting non-renewable resources in production with recycled, recyclable or renewable alternatives.
   
   
2. Resource Recovery
   
   A further step is the use of secondary raw materials, which is made possible by reprocessing and recycling waste streams.
   
   

4. Product Lifetime Extension
   
   A third circular economy model is the extension of the product life cycle. Here, the service life of products is extended through services such as maintenance, repair, or upgrades. This also includes reselling the refurbished product on secondary markets.
   
   
5. Sharing Platforms and Initiatives
   
   These enable a more intensive use of resources through the sharing of products. Digital platforms are used to make the products accessible to the largest possible user group.
   
   
6. As-a-Service Models
   
   They focus on service orientation. The focus is not on the purchase of the product or machine, but on its use. The distributor/manufacturer remains the owner of the product so that the materials and components of the products can be recycled at the end of their useful life and ideally remain in the cycle.

On the one hand, customers expect businesses to invest and embrace circular business models. For customers, the new services (e.g. a machine as an as-a-service model) are the highlight. They no longer have to take responsibility for the product, maintenance, repair, or disposal, which all become the responsibility of the manufacturer/distributor.

On the other hand, regulations are increasingly focusing on the circular economy. Particularly in the context of the CSRD (Corporate Sustainability Reporting Directive), companies' circular economy initiatives must be reported accordingly. The ESRS* E5 standard deals in detail with resource utilisation and the circular economy.

Last but not least, sustainability plays an increasing role in the corporate assessment conducted by lenders and investors. Circular business models promote the positive ESG assessment of financial institutions and thus the accessibility of favourable financing solutions.

*European Sustainability Reporting Standard

**ESG Environmental, Social und Governance