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Checklist - Kognity
Checklist - Kognity
By the end of this subtopic, you should be able to:
apply and recommend circular business models in context (AO2, AO3)
In-Class Activities
In-Class Activities
What are circular business models?
Explaining the Circular Economy and How Society Can Re-think Progress | Animated Video Essay (Video)
https://youtu.be/zCRKvDyyHmI?feature=shared
Circular business models aim to get businesses to work more like nature, by designing systems that feed back outputs as inputs, and designing out waste from the start.
In your groups:
Step 1: Define and provide an example OR do a skit
Circular supply models
Product life extension models
Product service system models
Resource recovery models
Sharing models
Step 2: Present to the rest of the class
Circular Business Model.jpghttps://quizlet.com/pa/820245413/circular-business-models-flash-cards/?i=4jrhob&x=1jqt
Circular Business Models
Aim to get businesses to work more like nature, by designing systems that feed back outputs as inputs, and designing out waste from the start. Focus on the long-term environmental consequences and sustainability matters related to business activities.
Circular supply models
are a type of circular business model that focus on replacing virgin natural resources with renewable, recyclable, and/or biodegradable resource inputs.
Product life extension models
are CBMs focus on businesses extending the product life cycle of their goods rather than encouraging consumers to replace and upgrade their products.
Product service system models
are CBMs that focus on businesses providing a service instead of tangible products, whilst consumers buy a service instead of buying a physical product.
Resource recovery models
are a type of circular business model that focus on recycling waste (such as glass, plastics, and aluminium cans) into reusable raw materials, thereby diverting waste from final disposal.
Sharing models
are a type of circular business model that focus on allowing customers to share products that have a low ownership and/or usage rate, instead of them having to purchase and own such products.
Traditional business models (or linear business models)
focus on costs, revenues, and profits related to business activities, often with a short-term outlook.
What circular business models is Sony implementing here?
Circular business models aim to get businesses to work more like nature, by designing systems that feed back outputs as inputs, and designing out waste from the start.
Circular Supply Models (Cradle to Cradle)
Circular Supply Models (Cradle to Cradle)
Circular supply models are a type of circular business model that focus on replacing scarce and natural resources with renewable, recyclable, and/or biodegradable resource inputs.
Also known as Cradle-to-Cradle Product design
Circular supply models are modelled on natures; the outputs of a business feed back into the production process as inputs.
They are suitable for businesses that need and/or wish to replace scarce non-renewable resources with fully renewable, recyclable, or biodegradable resources in the production process.
Example
For example, an increasing number of farmers are using agricultural residue or waste as renewable fuel.
Chicken droppings and wood waste have also been used successfully to to power turbine boilers to create electricity.
Resource recovery models
Resource recovery models
Business models that are focused on collecting, sorting and processing waste materials to be used as inputs in the production process.
focus on recycling waste (such as glass, plastics, and aluminium cans) into reusable raw materials, thereby diverting waste from final disposal
The benefits of using a resource recovery circular business model include:
Preservation of the earth's scare and natural resources.
Minimizing risks of harm to people and the planet, including wildlife and ecosystems.
Saving landfill space (traditionally used for waste disposal and accumulation).
Reducing pollution to the land, air, and waters.
3 Main Resource Recovery Models
Collecting waste materials produced by households and businesses. This is often organised by local governments but can also be done in partnership with for-profit social enterprises (see Section 1.2.3).
Sorting waste into different materials. In some cases, this is also done by local governments, perhaps in partnership with private enterprises.
Secondary production where waste is transformed into finished raw materials. This is usually done by companies in the private sector, which then sell the raw materials to other businesses.
If you use recycling bins at school or at home, you contribute to the resource recovery model.
Walt Disney World Resort
The Walt Disney World Resort (also referred to as Walt Disney World or Disney World) in Florida, USA, sends its food waste (which includes uneaten food items, grease, cooking oils, and food scraps) from its restaurants in the entertainment complex. The company's organic waste is then converted into renewable biogas, with the energy created to generate electricity in Central Florida, including Walt Disney Resort’s own hotels and theme parks. The steam trains and the Mark Twain Riverboat at Disneyland Resort in California run on biodiesel made from Disney's own recycled cooking oil. The remainder of the solid material food waste is processed into fertilizers for plants.
Biffa - Waste Management Services
Biffa is a British publicly held company founded in 1912 that specialises in waste management services, including collections, recycling services, and hazardous waste management. It caters specifically to local authorities as well as industrial and commercial clients in the UK. The company's operations cover around 95% of the UK.
Refer to Biffa's website to discover how the company embraces "closed loop recycling" (a type of resource recovery circular business model), which are at the heart of its daily operations.
Product life extension models
Product life extension models
Product life extension models focus on extending the time that a consumer uses products.
If consumers use products longer, it reduces the amount of inputs needed to create new products.
Methods of Product Life Extension
Design for durability. With this strategy a business produces a high quality product that is meant to last. Businesses that design durable products can charge higher prices, called premium pricing, thus earning more revenue.
Reuse and repair. With this strategy, businesses ensure that products are used to the very end of their life.
An example of reuse is a second-hand clothing shop. Manufacturers can also offer repair services; third parties offer such services too.
Remanufacturing. With this strategy, businesses ‘reset the clock’ on their products, recovering and remanufacturing them to start a new service life (reassembling the product back to like-new condition). The original or third party businesses can resell products that have been remanufactured, earning revenue on a product a second time.
Examples of this are smartphones and other digital devices, which are often discarded after a short time but with a little attention can be as good as new again.
Reconditioning (or remanufacturing) involves disassembling a used product (such as a smartphone or motor vehicle), replacing faulty or worn out parts, and.
Renovation means to upgrade or improve the functionality of a product by adding new features to an existing product to improve its performance and to extend its life.
Remanufactured train on the Isle of Wight, UK
The trains on the Isle of Wight, UK, are an example of remanufacturing as an aspect of product life extension models. These trains were formally used on the London Underground. Having been decommissioned in favour of newer trains in London, the trains that were retired from service underwent a process of remanufacturing by Vivarail, a British rolling stock manufacturer. The reconditioned trains were delivered to the Isle of Wight, UK, where they are used on the Island Line, with an expected useful life of another 40 years.
Caterpillar
Caterpillar, the American manufacturer of construction equipment, uses a product life extension model for remanufacturing its engines and spare component parts, turning these products into what looks like new component and engine parts.
According to the company's website:
"virtually the only difference between a new part and a (remanufactured) part is the price."
The process used by Caterpillar for its remanufactured engines and component parts consists of numerous stages:
Disassembling engine and component parts to their smallest parts, losing their original identity
Cleaned to remove dirt and microscopic debris
Inspected for imperfections, such as cracks
Using state-of-the-art technology to salvage otherwise scrap parts
Assembled into like-new components with the company's latest engineering updates
Tested to the same standards as new Caterpillar parts
Backed by a Cat Parts Warranty (guarantee)
Source: adapted from Caterpillar - "What remanufacturing is, and what it is not"
Sharing models
Sharing models
Sharing models allow consumers to share use of products with strangers, reducing the new inputs needed for products that might be under-utilised by the consumer. The sharing is usually supported by online platforms that show what products are available, where they are, and when they are available.
Focus on allowing customers to share products that have a low ownership and/or usage rate, instead of consumers having to purchase and own such items for themselves that are often used just the once.
Enable products to be used more efficiently, providing a better use of an economy's scarce resources.
Types of sharing models:
Co-ownership involves the lending of physical goods. This could be the sharing of household tools and appliances through an online platform like Peerby.
Co-access involves allowing others to take part in an activity that would have occurred anyway. For example sharing seats in a carpool for a particular journey.
When businesses own and share the products (business to consumer or B2C).
Consumers can own the products and share them (consumer to consumer or C2C).
Carpooling
Carpooling is an example of a co-access version of circular sharing models.
Examples of Sharing Models
Airbnb - The world’s largest accommodation provider, but doesn't owns any of its own real estate or rental properties. This saves the economy from having to build new hotels and properties, alongside the environmental impacts of large-scale construction projects. According to the OECD, Airbnb rooms are typically around 15 to 20% cheaper than equivalent hotel rooms.
Uber - The world’s largest taxi company, but doesn't owns any physical vehicles or taxis. Other service providers of such sharing models include Lyft, Gett, DiDi Global, Grab, RelayRides, and BlaBlaCar.
Bicycle sharing service (public bike share), such as Mobike, Lime, JUMP Bikes, and Motivate rent bicycles to use in city centres rather than people buying their own bikes. Cities that have established bike sharing services include Shanghai, Taiyuan, Hangzhou, New York City, Montreal, Barcelona, Paris, and London.
Zipcar - Global car-sharing company (and a subsidiary of the Avis Budget Group) that provides car rental services to its members, billable by the minute, hour, or day. The global membership of urban car sharing schemes, such as Zipcar, is growing as more people see less of a need to own their own vehicles.
Many businesses in the catering industry also rely on the likes of Uber Eats, DoorDash, GrubHub, and Deliveroo as an outsourced sharing model, rather than hiring their own drivers and purchasing a fleet of motorbikes.
Online businesses can be used as sharing models, such as Fat Llama which is an online platform that enables people to rent almost anything from other who live in the same local area. Products that can be hired include bikes, cameras, chairs, drones, games consoles, ladders, musical instruments, power tools, scooters, and even sewing machines.
Toy Box Club - Re-sharing of children's toys, board games, puzzles, and books (see case study 5 below).
Toy Box Club
Toy Box Club is a UK-based company that delivers boxes of hand-picked and age appropriate toys, books, and puzzles each month to the homes of their subscribers. At the end of each month, the company swaps the old box for a new one with a different set of toys, books, and puzzles. The old toys are thoroughly cleaned, sanitised, packed as part of another Toy Box and sent out to another member. The service helps customers to cut clutter, save money, and keep their children entertained.
Toy Box Club was set up in 2016 by school friends Sheela Berry and Jessica Green. As mothers to young children, they had witnessed their homes being cluttered with a wave of plastic materials.
The founders of the business were convinced that there has to be a better solution for their children, their living environment, and for the planet. They share the vision of a new and more sustainable future, in which children are engaged and stimulated, while growing up in a greener world.
Source: adapted from https://toyboxclub.co.uk/
Circos
Circos is an online subscription business that provides baby clothing and maternity wear, using a circular business model. The company strives to increase the use and prolong the life of garments that are typically used for only a short period of time. Subscribers to the website pay a monthly fee to access a range of high-quality clothing from different brands such as Adidas and Patagonia, delivered to their homes. As babies outgrow an item of clothing from Circos, the item is returned, cleaned, and redistributed to another customer, thereby eliminating waste and capitalizing on the clothing value, as well as creating convenience for customers. Circos operates across Europe, with its services available in Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, the Netherlands, Poland, Portugal, Slovakia, Spain, Sweden, and the UK.
According to its Erick (founder and CEO of Circos), only 15% of all clothing globally is recycled or donated, with 13 million tons of textile waste each year, of which 95% could be reused or recycled. At Circos, between 8 and 10 families will share and enjoy the same piece of clothing rented from the company. Once the product wears out, the material is repurposed to make new products.
Read more about Circos and its circular business model here.
FLOOW2
"Asset sharing is an additional, value creating, business model."
- Kim Tjoa, Co-founder of FLOOW2
Many businesses have moved to a B2B (business-to-business) sharing model that enables organizations to share overcapacity of equipment, office space, as well as knowledge and skills of personnel. These businesses can register on the platform such as FLOOW2 to advertise their asset sharing. Read more about the benefits of such platforms and circular business models in this article from the Ellen MacArthur Foundation.
Product Service System Models
Product Service System Models
Product service system models involve selling the service for using a product rather than selling the product itself. This model improves incentives for sustainable product design because the business wants the product to last a long time so that it can sell its services.
Businesses typically use a subscription model as part of their pricing strategy (pricing method).
Examples of Product Service System Models
Cloud computing service providers, such as Google Drive and Dropbox, have reduced the demand for computers and laptops with large storage devices, including physical external hard drives and hardware accessories.
Gerrard Street has pioneered a subscription service for its modular headphones, meaning fewer virgin (natural) resources are used to create new headphones. The subscription product service model allows Dutch company Gerrard Street to recover and recycle headphones at the end of their life and help to cut down on the millions of tonnes of precious materials and electronics waste that ends up in landfill every year.
iTunes and Spotify have revolutionized the music industry, with a huge drop in consumer demand for physical products such as CDs, DVDs, and vinyl records as well as the physical devices to play the music using these platforms.
Michelin offers motor vehicle tyres as a service, based on a leasing contract to commercial clients to many business, with corporate customers charged on a rate per mile driven. Customers do not own the tyres but the hire agreement also mean Michelin is responsible for all repairs and maintenance costs (see case study 7 below).
Netflix is the world's largest provider of movies but doesn't own any cinemas of its own. Customers do not purchase any movies or programmes (unlike a retailer that sells CDs and DVDs), with customers paying a monthly subscription to access their streaming services.
Michelin Service Pro
Michelin, the French multinational tyre manufacturer, sells its tyres as a service to businesses that have a fleet of vehicles, such as supermarket and courier delivery companies. Rather than owning the tyres (which is an expensive option for corporate clients), business customers pay for the mileage of the tyres driven.
As corporate customers do not own the Michelin tyres, they do not have to take responsibility for any punctures, repairs, or maintenance of the tyres. Using this circular business model gives Michelin greater motivation to design and develop more durable tyres as well as tyres that can be easily repaired, recycled and/or reused.
Riversimple - a UK-based car manufacturer of hydrogen-powered fuel cell electric vehicles, founded in 2007.
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