Traditional economic models (or business models), which consider the productivist triptych (exploitation, manufacturing, disposal), regard nature as a prodigal of an infinite amount of resources. In other words, our economic systems are designed as wide open circuits that constantly absorb natural resources to make products that, at the end of the chain, are completely or partially destroyed.
Unlike linear economic models, circular models are based on a closed-loop system, which aims to use and modify materials that are already rotating economically, rather than withdrawing them from nature. . Thus, these circular models have a lower environmental footprint on two levels: they avoid the exploitation of natural resources and regenerate resources that can be considered waste.
The massive growth of global consumption, along with supply chain disruptions due to health, climatic, regulatory or market turmoil, has made it more apparent the need to change our business practices towards closed loop circular principles. economy. However, business strategies that value circular systemic solutions and innovation could enable greater resource efficiency and annual savings estimated at a trillion dollars by 2025, according to figures from Ellen MacArthur Foundation launched by British navigator.
Sources of opportunities
Systematic restructuring of our business models can greatly reduce the pressure on the natural ecosystem. Rethinking value creation to avoid taking virgin raw materials when substitutes are already in circulation, as well as redesigning supply chain relationships to avoid waste, are emerging. as two fundamentally different methods. to produce and consume products and services.
In my latest research article published in Innovation Research Handbook for the Circular Economy, I propose a flexible orientation framework to guide the development of new economic models that require an in-depth design of each of its building blocks: products, supply chains and customer journeys. This is now the principle, for example, of textile-clothing group H&M’s roadmap for achieving a “circular ecosystem”, developed in collaboration with the Ellen MacArthur Foundation.
Some of the expected changes include redesigning sustainable products, thus allowing the use of recycled or reused materials, the creation of reverse logistics, collaboration networks that mimic existing supply chains and the development of customer journey that values circular products.
In this three-block redesign, companies can modify, add, create or modify different dimensions within the proposed modular framework, in order to methodically redesign their processes while implementing circular application. For example, various initiatives of the clothing brand Patagonia, which began in search of circularity over two decades, aim to redefine its products as a priority so that the company can recover and utilize all waste. its.
Top players for 10 years
Despite their definite sustainable competitive advantage, however, circular models are still gaining a foothold in suitable markets, which means they enjoy a lower market share compared to traditional mining models. On average, circular business models cost approximately 15% of production in all industries. However, technological advances, generational changes, commercial risks, or even new supranational regulations at the European Union level are accelerating this proportion.
The EU Circular Economy Action Plan adopted in 2020 as part of the European Green Deal notably introduces measures that rely on the participation of consumers, businesses and citizens according to a timetable that serves as a prerequisite for becoming the first climate-neutral continent. in 2050.
Despite their commitment, circular business models still face a major challenge: breaking down cultural and commercial barriers. A study by Deloitte and the University of Utrecht found that despite the hype and clear appetite for changes in the circular market, both consumers and businesses are rejecting the concessions that need to be made now.
On the one hand, consumers are slightly unaware of the issues or unwilling to change their consumption habits, especially when they are in a hurry or have a limited budget. On the other hand, companies must arbitrate between satisfying the interests of shareholders, supporting high initial investment in the innovation process, developing new partnerships and new market routes and training in their employees in cyclical processes. Furthermore, circular materials (reused, recycled, upcycled, bio-based) still remain more expensive than traditional materials (e.g. petroleum-based plastic).
Fortunately, the accumulation of social pressure, political interest and investor influence has drawn a path that is unlikely to succeed if it follows a linear economic model. According to a recent article published by the World Economic Forum, companies born with circularity will be leading players in 2030, precisely because their models based on circular principles give them a clear advantage. The hygiene brand with less packaging Unbottled in France and its counterpart Lush in the UK are two great examples. Aside from the ethical and environmental reasons they defend, these circular companies from their creation both offer more than half of their products without packaging. Although there is no business model yet that is truly circular, change seems to be advancing rapidly.