Circular Revenue models

Background

In theory, circular revenue models such as lease, pay-per-use and buy-buy back contribute to extending producer responsibility, thereby boosting the circular economy. At Copper8, we believe that incorporating a financial incentive can be a good way to guarantee circular use. However, in practice, we encounter a number of limitations (accounting and tax-related), which makes the application of circular revenue models challenging to scale.

Research question

We have two research questions for this study:

• Which business models lead to the most circular incentives?
• What are the (policy-oriented) barriers that make it difficult to apply circular revenue models at scale?

Approach

For this study, we conducted interviews with parties who have practical experience in applying circular revenue models. We interviewed large organizations such as Auping, Interface and Signify, as well as smaller ones like Mud Jeans, Gerrard Street and Bundles. Based on these interviews, we analyzed the opportunities and challenges associated with the different circular revenue models; the parties then tested this before publication.

Status

This study was completed in 2019.

Results

This study led to two different publications:

1. Circular Revenue Models: practical guidance for entrepreneurs (only available in Dutch).
2. Circular Revenue Models: required policy changes for the transition to a circular economy.

The first publication introduces the ‘Circular Revenue Models Staircase’, which suggests that, in theory, a pay-per-use model leads to the most circular incentives, and a lease model to the least. In the second publication, themes such as depreciation, maximum return values, traditional financial risk assessment and VAT are considered as important limitations in the existing accounting and tax system.