Circular Business Models are considered a subset of the broader group of sustainable business models. Several definitions of circular business models can be found in the recent literature but currently no consensus has emerged on a generic definition. Mentink (2014) defines circular business model as “the rationale of how an organization creates, delivers and captures value with and within closed material loops” while Linder and Williander (2015) define a circular business model as “a business model in which the conceptual logic for value creation is based on utilizing the economic value retained in products after use in the production of new offerings”.
Adopting a circular economy strategy requires several organizational and strategic shifts. Looking at the business model architecture including value creation, value proposition, value delivery and value capture, the following changes are required:
Circular business models can be characterized taking a product lifetime perspective. Using this perspective, circular business models can be classified according to their position on three distinct phases:
The position of these business models according to the product lifetime also has consequences on the value dynamics being unfolded.
The following table shows how circular economy principles differ from linear principles.
Resource flow characteristics
Type of resource
Renewables resources 🡺 Regenerating loop
Resource efficient 🡺 Narrowing loop
Speed of circulation
Slow speed 🡺 Slowing loop
High intensity 🡺 Intensifying loop
Intangible resource intensity
Dematerialized 🡺 Dematerializing loop
Number of lifecycles
Multiple lifecycles 🡺 Cascading loop
Circular 🡺 Closed loop
Source: Mouazan, E. (2019).
As seen in the table, the circular economy principles are various and differ as written below: