Develop your circular business in Circular Business Lab

Design the product, manufacture, sell. Buy, use, and discard. Then start over again with a new product. 

This is the principle (albeit simplified) behind linear business models, a principle that almost all industries, in almost all countries, have utilised for the last hundred years. But right now, something is happening. 

“The development is still in its infancy, but interest in circular business models is increasing significantly, and there are a lot of cases to be inspired and learn from,” says Pernilla Dahlman, Senior Advisor and Innovation Manager in Circular Business at RISE. 

Regulatory changes accelerating development 

This development is expected to accelerate even more in the coming years due to several regulatory changes from the EU. For example, stricter requirements for sustainability reporting will be implemented, while, at the same time, the new Ecodesign Directive will enter into force, with requirements on circularity and life-cycle considerations as early as the product development phase. 

“2024 will mark a major tipping point on the path from linear to circular business models. The new regulations will initially only apply to larger companies, but since small businesses often supply large companies, the requirements will spread relatively quickly, and companies will face a completely new reality.” 

And as always, the companies that start to change immediately will have a competitive advantage in the new market. 

A circular business models aims to minimise the world’s resource consumption

But how can it be done? How can you move from a linear to a circular business? To understand this, we must first understand what a circular business model is. 

“A circular business model aims to minimise the world’s resource consumption, and is based on one of three principles, or a combination of them.” 

The first principle involves preserving the value of the product, i.e. designing the product to be rebuilt or refurbished, or preserved for as long as possible.  

“Here at RISE, we call it future-adaptive design, and our team is working with Polestar and Volvo Group, among others, to investigate how to ensure – as early as the design phase – that the product has a long service life. One of the ways this is done is by identifying heavy-wear parts and thinking about how they can be repaired or replaced instead of having to discard the entire vehicle.” 

The second principle involves increasing the utilisation rate of products that are currently used very little during their service life. Clear examples are cars, tools, and boats that essentially stand unused for most of their service life. 

“If more people could instead use the same product, the utilisation rate would increase without increasing the resource extraction from the planet.” 

An example of such a business model is Ihopa, a company that sets up tool sheds stocked with good-quality tools in residential areas. For a fixed monthly fee, residents can use the tools as much as they want, thereby getting access to the function without needing to have all the tools standing at home. 

“We have carried out a research project together with them in which we have, among other things, conducted behavioural studies and studies on willingness to pay for such services.” 

The third principle is so-called recirculation, that is, the product is circulated in one more user cycle: firstly as a functioning or refurbished product (such as clothes and phones), secondly as a component, and thirdly as a material. 

Collaboration with other operators important 

It will be important for companies to adapt according to one or more of these principles, and to succeed will require a strategic approach, along with orientation to the prevailing conditions in the market, to what the industry is already doing, and to what customers have learned to demand in other industries, and so on. Not least, you need to link arms with your ecosystem to create the right customer value.  

“In circular business models, close collaboration with other operators is often required, something that is not always easy to achieve because organisations have different goals, priorities, and incentive models. For this succeed, a new form of leadership is necessary. 

To facilitate collaboration between companies, RISE established a collaboration platform called Circular Business Lab in 2023, which will be a type of joint workshop for circular business.” 

“Members receive help in their transition work and in meeting potential partners, while at the same time they will have access to all of RISE’s expertise. As an independent party accustomed to creating collaboration between the business community and public sector, we recognise that we have an important role to play in this chain.”