Circular business models by Stefanos Kourelis

Door Ilse Hoenderdos,
op 05 september 2014

I had the opportunity to do my three-month research internship at Copper8 and study the circular economy, diving deeper into this rather vague and undefined concept and vision of how to do business. It was clear from the outset that my task was not easy: the vacancy description for the research internship at Copper8 described the circular economy as a ‘’trending hot topic’’ that is increasingly being (over)used in corporate environmental strategy, with the result that the concept is starting to lose its definition. During my research internship I explored the concept in theory and in practice by getting acquainted with the activities of Copper8 and their contribution to the transition to a circular economy. This fueled my enthusiasm to look at other companies that contribute to the circular economy as well, and marked the beginning of my search for circular business models in the Netherlands.

As a master’s student of Environment and Resource Management at the VU University of Amsterdam, one of my favorite topics this year has been waste management and the role of society and business in reutilizing waste. Having attended several lectures on this topic and hearing over and over that we are exceeding the boundaries of our planet, with impacts not only on environmental but also on social and economic fronts, the circular economy (CE) as a solution to this problem had increasingly grabbed my attention and interest.

With some help from the literature available from the Ellen MacArthur foundation and MVO Nederland, I selected four companies: Mud Jeans, Royal Mosa, Interface and Desso. I travelled all over the Netherlands to visit these innovative firms and see what their circular business models looked like and how their relationships with their partners were characterized. Following Copper8’s focus on “cooperation,” in my studies I focused on the role of cooperation in circular business models, and whether the role of partners is different between the traditional linear model and the new circular model. I thought the best way to figure this out would be to ask best practice companies what their motivations were to collaborate and form partnerships.

The companies I visited differed in size and maturity of circularity. Mud Jeans, for instance, is a start-up that set up its business model according to the principles of the circular economy. The company has offered jeans made from organic cotton to its customers via a leasing scheme since 2013, and currently has more than 3000 customers who are leasing jeans. Mud Jeans selectively chooses partners on the basis of enhancing the circularity of the product. The other companies – Interface, Desso and Royal Mosa – are in the transition towards a circular economy and were inspired by several schools of thoughts, including performance economy, cradle-to-cradle and blue economy, to reduce their environmental footprints and become more sustainable. All these companies shared promising goals and have a clear mission and vision regarding sustainability.

Mosa, an innovative manufacturer of high quality wall and floor tiles, changed its strategy from producing large quantities at low prices to producing high quality products with a focus on environmental performance. Interface, world leader in sales, design and production of modular carpet, launched Mission Zero: eliminating all negative environmental impacts of Interface by 2020. And in 2008, Desso, the first carpet manufacturer to work with the cradle-to-cradle concept, started in collaboration with EPEA, the transformation to become 100% cradle-to-cradle by 2020.

So what did these companies say about their partners, sustainability goals and the circular economy? Some interesting terms like shared value, co-creation, trust, transparency and win-win kept recurring in the interviews with these best practice companies. Instead of externalizing risks, they argued that within the circular business models risk was being internalized and managed collaboratively by the partners. The partners share a common benefit of entering into long-term quality driven relationships, rather than those that were cost-driven and short-term. The types of partners also changed: now the companies look beyond traditional partners and seek opportunities with unconventional partners. A good example is the Net-Works initiative from Interface and Desso, in which old fishnets are retrieved in developing countries, to be used as raw material for carpet tiles. Through this initiative the local economy is stimulated and ghost fishing is prevented – a win-win-win situation is created.

In these circular business models the partners in the value chain are no longer easily substitutable, but are important players with shared visions on sustainability, co-creating high quality circular products. Combining resources and competencies and sharing risks and rewards over the whole value chain establishes optimal outcomes, where everybody benefits!

In my view, this is what companies need to take into account when collaborating and going circular.

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