Circular Business Models: Defining a Concept and Framing an Emerging Research Field

Abstract

To aid companies in transitioning towards a circular economy and adopting strategies such as reuse, repair, and remanufacturing, the concept of circular business models has been developed. Although the concept draws on contributions from various academic disciplines, and despite its increasingly frequent use, few scholars clearly define what a circular business model is. Understanding about what makes a business model circular is diverse, hampering the theoretical development and practical application of circular business models. This study aims to help frame the field of circular business model research, by clarifying the fundamentals of the concept from the perspectives of resource efficiency and business model innovation. Expanding on these findings, a review of how the concept is used in recent academic literature is provided. It shows that a coherent view is lacking on which resource efficiency strategies classify a business model as circular. This study clarifies which resource efficiency strategies can be deemed as relevant key strategies for circular business models, and suggests a new definition of the concept. With the definition grounded in analysis of the fundamentals in terms of resource efficiency and business models, the study contributes to theoretical advancement and effective implementation of circular business models.

Designing business models in circular economy: A systematic literature review and research agenda

“…The three main conceptual areas that arise in the literature are value creation, value transfer, and value capture (Ranta, Aarikka‐Stenroos, & Mäkinen, ; Urbinati et al, ). Within these dimensions, it is possible to locate all the decisions and actions implemented by the companies in the definition and execution of their circular business model (Geissdoerfer, Morioka, de Carvalho, & Evans, ; Nußholz, , ; Ranta et al, ).…”

“…In contrast with the linear business model, in which the value associated to a product or service is lost after its usage by customers, a circular business model represents a set of strategic decisions designed to preserve the embedded environmental and economic value of a product or service into the system (Clift & Druckman, ; Nußholz, ).…”

Configuring New Business Models for Circular Economy through Product–Service Systems

“…Lastly, a framework outlining the conditions and trade-offs for assessing the circularity potential of business models based on product-service systems is introduced as one of the key contributions.A business model for circular economy is defined as "how a company creates, captures and delivers value, with a value creation logic designed to improve resource efficiency through contributing to extending the useful life of products and parts (e.g., through long-life design, repair and remanufacturing) and closing material loops" [10] (p. 13). Product-Service Systems (PSS) are often outlined as one of the potential enablers for configuring new business models for circular economy, stimulating life-extension and product take-back [10][11][12][13][14][15][16]. However, PSS-or CE-oriented approaches do not necessarily lead to a reduction in resource consumption or automatically guarantee enhanced environmental or social sustainability [3,[17][18][19][20].…”

Business Models for Circular Economy and Sustainable Development: the Case of Lease Transactions

“…Circular economy is a new "emerging institution" (Stål and Corvellec, 2018), still in its early stages of development (Sauvé et al, 2016, p.53), promoted by the EU (European Commission, 2015;2017),), or by the governments of many countries -such as China, Japan, Great Britain, France, Canada, the Netherlands, Sweden, Finland etc., but also by companies around the world (Korhonen, 2018, p.39) and non-governmental organizations (e.g. Ellen MacArthur Foundation, 2010).…”

“…In a circular business model, an economic organization creates value in a circular economic system that "involves creating value by exploiting value retained in used products to generate new offerings" (Linder and Williander, 2015). Circular business models cover a wide range of activities, from waste recycling as raw materials and/or natural decomposition to minimal costs and nonpollution, designing modular and adaptable products to the uncertain and dynamic world of contemporary business, or providing services -by leasing, renting and simultaneous use of the goods by several users, remanufacture and re-use of the products (Lewandowski, 2016;Nußholz, 2017;Sousa-Zomer et al, 2017;Korhonen, 2018). As it is observed, in the circular economy, companies rather produce tangible goods not in order to sell them as such, but to sell their use or functionality, also called the "servitization of products".…”