Financing solutions for circular business models: Exploring the role of business ecosystems and artificial intelligence

Abstract

The circular economy promotes a transition away from linear modes of production and consumption to systems with circular material flows that can significantly improve resource productivity. However, transforming linear business models to circular business models posits a number of financial consequences for product companies as they need to secure more capital in a stock of products that will be rented out over time and therefore will encounter a slower, more volatile cash flow in the short term compared to linear direct sales of products. This paper discusses the role of financial actors in circular business ecosystems and alternative financing solutions when moving from product‐dominant business models to Product‐as‐a‐Service (PaaS) or function‐based business models. Furthermore, the paper demonstrates a solution where state‐of‐the‐art artificial intelligence (AI) modeling can be incorporated for financial risk assessment. We provide an open implementation and a thorough empirical evaluation of an AI‐model, which learns to predict residual value of stocks of used items. Furthermore, the paper highlights solutions, managerial implications, and potentials for financing circular business models, argues the importance of different forms of data in future business ecosystems, and offers recommendations for how AI can help mitigate some of the challenges businesses face as they transition to circular business models.

The role of digital technologies in supporting the implementation of circular economy practices by industrial small and medium enterprises

“…Following the suggestions by Adams (2015) and Meredith (1998), results related to CE practices implemented, DTs adopted, and the relationship between the two were analysed by considering their frequency and reported using graphs and supplemented by illustrative examples. The choice is in line with previous works adopting semi-structured interviews as the research method, and it is an interesting approach to allow grasping a snapshot of the overall results (Fallahi et al, 2022;Julkovski et al, 2022;.…”

Essential innovation capability of producer‐service enterprises towards circular business model: Motivators and barriers

“…Recent studies in the area of the sustainable supply chain (Chari et al, 2022; Kayikci et al, 2022; Kumar et al, 2022), CBMs in corporations (Arekrans et al, 2022; Fallahi et al, 2022; Ferasso et al, 2020; Hofmann & Jaeger‐Erben, 2020; Opferkuch et al, 2021), stakeholder relationship standpoint (Kayikci et al, 2022; Tapaninaho & Heikkinen, 2022), educating employees (Ruiz‐Pérez et al, 2021; Schröder et al, 2022; Fawehinmi et al, 2022; Lu et al, 2022), the media, and the government (ElAlfy et al, 2020; Fischer et al, 2017; Verma & Grover, 2021) could be used as stepping stone to build solid evidence and start from these different domains under the sustainability umbrella.…”

A Systematic Literature Review on the Transition to Circular Business Models for Small and Medium-Sized Enterprises (SMEs)

“…It broadens the traditional scope and range of corporate performance evaluation and offers a promising route for enterprises to acquire external capital and move towards sustainable growth [13]. However, the development of a circular economy also reinforces the necessity for enterprises to incorporate the end-of-life paradigm initially into their business strategies to establish a restorative and regenerative industrial system [14,15]. According to the studies in [14,15], the move from a linear economy to a circular economy is primarily influenced by two viewpoints.…”