5 main categories of circular business models can be defined, as shown on the graph below: 1. Clean loop, 2. Short loop, 3. Access loop, 4. Cascading loop and, 5. Long loop business models. Let’s look at their characteristics and read some more details after!
Source: Mouazan, E. (2019).
In these generic circular business models, value creation is designed around the use of materials that are renewable, recyclable or biodegradable. Clean loops business models focus on the regenerative feature of the circular economy definition and adopt the regenerating loop principle. By using renewable and recyclable inputs, the business model rationale enables materials to be returned to either the technical or biological cycle and enables 100% closed material loops. The central circular value dynamic is to retain value of the materials used while maintaining the quality of the materials for many consecutive cycles.
In these generic circular business models, value creation is designed around products manufactured for an extended life-time and additional value is created through services supporting the maintenance of the product for the same customer (repair, upgrade), or different customers (reuse, remanufacture).
As the circulation of resources remain in the form of a product in Short loop business models, the loop between product provider and users is considered “short” as opposed to Long loop business models (see below) in which the loop is focusing on materials which inherently extends the length of the loop, including the participation of additional agents (waste processing and material manufacturers) in the cycle.
Short loops business models adopt two circular economy principles: the narrowing loop principle and the slowing loop principle. On one hand, by producing long-lasting products these business models eliminate the need to extract additional virgin resources in order to replace existing products, thus reducing the number of resources in circulation. On the other hand, by providing a full range of services aiming at extending the useful lifetime of products, they reduce the speed of circulation of materials and products. The central circular value dynamic is to retain value in the existing products for as long as possible during the use phase as well as in the post-use phase when recovering products to be remanufactured/refurbished.
In these generic circular business models, value creation is designed around offering access to a solution through leasing/hiring/renting products without necessarily a change of ownership (Product-Service systems), or through a platform allowing multiple users to maximize the rate of utilization of products (Platform business models).
Access loops business models adopt two circular economy principles, the dematerializing loop and the intensifying loop. On one hand by focusing on the functional results rather than on the product associated to the solution, these business models dematerialize value creation through a focus on servitization. On the other hand, product use is intensified through an optimization of the value delivery, allowing multiple users to access one single product, therefore maximizing the use rate of the products. The central circular value dynamic is to optimize value during the use phase.
In these generic circular business models, value creation is designed around a multiplication of uses of materials to create new value from coproducts in multiple value chains within and between industries. Cascading loops business models adopt the cascading loop principle. In these process-orientated solutions, waste outputs from one process are turned into feedstock for another process or product line. The central circular value dynamic is to recover value.
In these generic circular business models, value creation is designed around recovering already used-resources from discarded products in order to extend the value of resource through recycling. Long loops business models adopt the closing loop principle. Materials are recovered to be reprocessed into new components or products. Long loop business models can provide downcycling solutions or upcycling solutions. In the latter, materials are reprocessed into higher-quality and value products, while downcycling generally decreased the embodied value of the recovered material. The central circular value dynamic is to recover value in the post-use phase, focusing on the recovered materials.