lable at ScienceDirectJournal of Cleaner Production 190 (2.docx

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Journal of Cleaner Production 190 (2018) 712e721
Contents lists avai
Journal of Cleaner Production
journal homepage: www.elsevier.com/locate/jclepro
Business models and supply chains for the circular economy
Martin Geissdoerfer a, b, *, Sandra Naomi Morioka c, Marly
Monteiro de Carvalho c,
Steve Evans a
a Institute for Manufacturing, Engineering Department,
University of Cambridge, 17 Charles Babbage Road, Cambridge
CB3 0FS, United Kingdom
b Garwood Center for Corporate Innovation, Haas School of
Business, University of California, Berkeley, Berkeley, CA
94720-1930, USA
c Production Engineering of Polytechnic School, University of
S~ao Paulo, Av. Prof. Almeida Prado, 128 Tr.2 Biênio 2o.
andar, S~ao Paulo, SP, 05508-900, Brazil
a r t i c l e i n f o
Article history:
Received 19 June 2017
Received in revised form
27 February 2018
Accepted 16 April 2018
Available online 18 April 2018
Keywords:

Circular business models
Circular supply chain
Sustainable business models
Sustainable development
Circular Economy
Business model innovation
* Corresponding author. Institute for Manufacturin
University of Cambridge, 17 Charles Babbage Road,
Kingdom.
E-mail address: [email protected] (M. Geissdoerfe
https://doi.org/10.1016/j.jclepro.2018.04.159
0959-6526/© 2018 Published by Elsevier Ltd.
a b s t r a c t
The Circular Economy is increasingly seen as a possible
solution to address sustainable development. An
economic system that minimises resource input into and waste,
emission, and energy leakage out of the
system is hoped to mitigate negative impacts without
jeopardising growth and prosperity. This paper
discusses the sustainability performance of the circular business
models (CBM) and circular supply
chains necessary to implement the concept on an organisational
level and proposes a framework to
integrate circular business models and circular supply chain
management towards sustainable devel-
opment. It was developed based on literature analysis and four
case studies. The proposed framework
shows how different circular business models are driving
circular supply chain in different loops: closing
loops, slowing loops, intensifying loops, narrowing loops, and
dematerialising loops. The identified cir-
cular business models vary in complexity of the circular supply
chain and in the value proposition. Our

research indicates circular business and circular supply chain
help in realising sustainability ambitions.
© 2018 Published by Elsevier Ltd.
1. Introduction
Sustainable development aims at satisfying current needs
without harming future generations' ability to satisfy their needs
(WCED, 1987), while considering limitations in the Earth's re-
sources in face of human development (Meadows et al., 1972;
Meadows et al., 2004), as well as synergies and trade-offs
between
economic, environmental and social goals (Elkington, 1997).
Based
on the preceding Millennium Goals, the United Nations
proposed
17 sustainable development goals (SDG's), to be achieved by,
2030,
including issues related to poverty, gender equality, sustainable
cities, amongst others (United Nations, 2015).
In order to address sustainable development, the concept of the
Circular Economy is gaining traction and is increasingly seen as
a
complete or partial solution to these challenges (Geissdoerfer et
al.,
2017a). With an economic system that minimises resource input
into and waste, emission, and energy leakage out of the system,
it is
hoped that environmental impact can be reduced, without jeop-
ardising growth and prosperity (Bakker et al., 2014; European
g, Engineering Department,
Cambridge, CB3 0FS, United
r).
Commission, 2014; Evans, 2009; Webster, 2015). The origins of

the concept of Circular Economy is said to have been introduced
by
David Pearce in 1990 by Andersen (2007) and Su et al. (2013).
The
concept was addressing the relationships between the four eco-
nomic functions of the environment, consisting in amenity
values,
its function as a resource base and a sink for economic
activities,
and its role as a life-support system. However, Stahel (1982)
might
have introduced the concept earlier, talking of a self-
replenishing
system that minimises material and energy input as well as
envi-
ronmental deterioration without negative influences on growth
and progress.
The circular economy is based on the idea of putting private
business into the service of the transition to a more sustainable
system. As the singular actor with the most resources and capa-
bilities, companies could considerably advance this transition
by
creating additional value with an extended and more proactively
managed stakeholder network (Geissdoerfer et al., 2016; Porter
and
Kramer, 2011; Nidumolu et al., 2009). Especially the concept of
Failed Value Exchanges is decisive in this context; it assumes
that
by realising value that is either missed, destroyed, not
internalised,
or not offered despite existing demand in the market,
organizations
can potentially benefit society while at the same time gaining
competitive edge (Yang et al., 2016).

We and other authors (Chesbrough and Rosenbloom, 2002;
M. Geissdoerfer et al. / Journal of Cleaner Production 190
(2018) 712e721 713
Doleski, 2015; Knyphausen-Aufsess and Meinhardt, 2002;
Osterwalder and Pigneur, 2013) consider business model
innova-
tion as a key tool to implement these changes into organizations
because of the concept's usefulness in analysing, structuring,
planning, and communicating in face of the increasing
complexity
of organisational configurations and activities (Doleski, 2015;
Knyphausen-Aufsess and Meinhardt, 2002).
The business model concept became popular in the 1990s with
the emergence of new revenue mechanism accompanying the
emergence of e-commerce (Magretta, 2002; Osterwalder and
Pigneur, 2005; Zott et al., 2011). In this context, it was initially
used to pitch simplified but comprehensive business ideas to in-
vestors within a short time frame (Knyphausen-Aufsess and
Meinhardt, 2002). Several authors have defined the concept
differently and there have been comprehensive reviews of these
definitions to come up with a unified understanding (such as
Schallmo, 2013; Zott et al., 2011). On the basis of these
comparative
approaches, we define business model as simplified representa-
tions of the elements of a complex organisational system and
the
interrelation between these elements. It determines the
organisa-
tion's value proposition, value creation and delivery, and value
capturing and aims at analysis, planning, and communication in
face of increasing complexity. The organisational environment
and

value network is also considered to different degrees in most
ap-
proaches (Geissdoerfer et al., under review.).
Combining the challenges of putting Circular Economy into re-
ality and the practice-oriented approach of business model inno-
vation leads to the concept of circular business models (CBM),
a term
used to describe business models that are suited for the Circular
Economy by incorporating elements that slow, narrow, and
close
resource loops, so that the resource input into the organisation
and
its value network is decreased and waste and emission leakage
out
of the system is minimised (Bocken et al., 2016). As we lay out
in the
following section, we would add an emphasis on the linkage be-
tween CBM and circular supply chain management (CSCM)
towards
closed loops in different approaches as closing loops, slowing
loops,
intensifying loops, narrowing loops, and dematerialising loops.
intensifying and dematerialising loops.
The arguably biggest difference between conventional busi-
ness models and those designed for the Circular Economy lies in
their value creation and delivery element, and here particularly
in
the supply chain. We use the term circular supply chain
manage-
ment (CSCM), which comprises the configuration and coordina-
tion of the supply chain to close, narrow, slow, intensify and
dematerialise resource loops. Despite the importance of CSCM
for
CBMs and therefore for the implementation of the Circular

Economy, it remains a rather unexplored area of research
(Homrich et al., 2017). Moreover, it is important to
contextualize
CSCM with other related but not the same concepts like sustain-
able supply chain management (SSCM) (Wu and Pagell, 2011)
or
green supply chain management (GSCM) (Zhu and Sarkis,
2004),
in which the closed loops are not a core issue. in order to
contribute to the nascent knowledge about CSCM and add
insights
from industry on CBM, the present research aims to propose a
framework to integrate circular business models and circular
supply chain management towards sustainable development. To
address this goal, four case studies are presented, Alpha, an
office
furniture remanufacturer, Beta, a high recycled content flat
aluminium sheet manufacturer, Gama designs and produces
luxurious fashion accessories from fire hoses, and Delta
provides a
bike sharing service. This paper is structured in the following
way.
First, the research's background is illustrated (Section 2), before
we explain the applied research method (Section 3). This is fol-
lowed by a presentation (Section 4) and a subsequent discussion
of the findings (Section 5). The paper ends with a conclusions
and
outlook section (Section 6).
2. Literature background
This section introduces the two key concepts underlying this
research, circular business models (CBM) and circular supply
chains
(CSC), and illustrates their role in sustainable development.

2.1. Circular business models
The modern understanding of the Circular Economy is based on
different schools of thought, like Cradle to Cradle (McDonough
and
Braungart, 2002), Laws of Ecology (Commoner, 1971), Looped
and
Performance Economy (Stahel, 2010), Regenerative Design
(Lyle,
1994), Industrial Ecology (Graedel and Allenby, 1995),
Biomimicry
(Benyus, 2002), or the Blue Economy (Pauli, 2010). The
circular
economic system avoids waste and tries to preserve the inherent
value of products as long as feasible (European Commission,
2014).
The goal of this is to minimise the consumption of resources by
recycling materials and/or energy after the use phase to avoid
leakage out of the system (Ellen MacArthur Foundation, 2013).
The
butterfly diagram focus on the biological and technical closed
loops
as a continuous flow of materials through the value circle,
without
focusing on one particular circular loop but in the understanding
of
how these loops work (Ellen MacArthur Foundation, 2013).
To utilise the sustainable business model's analytical, strategic,
and communicational potential to integrate sustainability
consid-
erations on the organisational level, three mayor elements have
to
be added: sustainable value creation, more pro-active
management
of a more comprehensive set of stakeholders, and a long-term

perspective (Geissdoerfer et al., 2017b; Geissdoerfer et al.,
2016).
We synthesise this from an increasing range of definitions of
the
SBM concept in the literature. These key definitional elements
can
be found, among others, in the definitions of Boons and Lüdeke-
Freund (2013), who addresses not only the creation of superior
customer value but also private and public societal benefits;
Schaltegger et al. (2012), who highlights customer and social
value,
economic advantages, and the mitigation of social and environ-
mental concerns, Stubbs and Cocklin (2008), who emphasises
the
cooperation with a broad range of stakeholders. and Evans et al.
(2014), who focus on both the creation of social, environmental,
and economic value for and the alignment of interests of a
broader
set of stakeholders that is going beyond the monetary value for
customers and shareholders that ‘unsustainable’ business
models
would aim at.
Following Bocken et al. (2013), we consider business models
for
the circular economy as a class of or generic strategy for
sustainable
business models. By closing, narrowing, slowing, intensifying,
and
dematerialising loops, the resource inputs into and the waste
and
emission leakage out of the organisational system are
minimised,
and, consequently, the sustainability performance improved.
Closing, narrowing, and slowing loops (Bocken et al., 2016
refer to

the biological and technical nutrition cycles of the Circular
Econ-
omy (Ellen MacArthur Foundation, 2013), and comprises
recycling
measures (closing), efficiency improvements (narrowing), and
use
phase extensions (slowing or extending). Although considered
in
the original concept as part of slowing loops, we want to
emphasise
the importance of a more intense use phase (intensifying), and
add
the substitution of product utility by service and software
solutions
(dematerialising) to our conceptualisation.
Consequently, as illustrated in Fig. 1, CBMs can be defined as
SBMs - which are business models that aim at solutions for sus-
tainable development by creating additional monetary and non-
monetary value by the pro-active management of a multiple
stakeholders and incorporate a long-term perspective - that are
Fig. 1. Comparison of traditional, sustainable, and circular
business models.
(2018) 712e721714
specifically aiming at solutions for the Circular Economy
through a
circular value chain and stakeholder incentive alignment.
Figure further explores this correlation by contrasting circular
(C) and linear (L) configurations of the value proposition, value
creation and delivery, and value capture element of a business

model with its economic, environmental, and social
performance,
providing an example of each item, as well as a possible
manifes-
tation in an office furniture manufacturing operation. In this
paper,
it is argued that all three elements of a business model (value
proposition, value creation and delivery, and value capture
(Richardson, 2008)) have to ‘go circular’ to achieve optimal
sus-
tainability performance within the Circular Economy.
To further argue about the integration between CBM and sus-
tainability, Table 1 indicates how each business model element
(value proposition, creation and delivery system and value cap-
ture) is affected by economic, environmental, social dimensions
and a long-term orientation, which are four core issues of
corporate sustainability (Lozano, 2008). Regarding value propo-
sition, the core goal and vision of the organisation translated
into
offerings (products and services) need to ensure revenue to
compensate direct and indirect costs, to be designed according
to
approaches such as eco-design and design for disassembly, to
ensure society wellbeing, and finally to guarantee long-term ca-
pacity to address economic, environmental and social concerns.
In
terms of value creation and delivery system for CBM, it is
critical to
develop a value network with stakeholders that are motivated by
and contribute to economic viability, environmental benefits,
social concerns and preparation for long-term challenges of
businesses associated. Finally, value captured by the system
associated with CBM includes not only economic one, but also
natural resource preservation and society wellbeing both in the
short and in the long-term.

Table 1
Deployment of sustainability dimensions into circular business
models.
Sustainability
dimensions
Circular business models
Value proposition Value creation and delivery
Economic Offerings (products and services) with
economic margin to ensure profit
Incentives for actors in the
product use and return dis
Environmental Products and services designed to
minimise natural resources depletion
Eco-efficient production an
Social Maximize product and service value for
society well-being
Pro-active approach toward
closed loops
Protection of
future
generations
Long-term capacity to address economic,
environmental and social concerns
Incremental and radical cha

ensure long-term partnersh
2.2. Circular supply chain management
The term supply chain management (SCM) was first coined by
Oliver and Webber in 1982 (Christopher, 2016; Stadtler et al.,
2015),
and interest in the topic has rapidly increased ever since
(Cooper
and Ellram, 1993). Today, the topic is researched by a broad
range
of disciplines, from operations management to psychology
(Burgess
et al., 2006), resulting in a body of literature in excess of
40,000
journal articles and books (Asgari et al., 2016). As a
consequence,
there is hardly any periodical on marketing, manufacturing, dis-
tribution, customer management, or transportation that does not
contain one or more articles in the field (Ross, 1998).
This immense interest in SCM, combined with narrow silos of
knowledge of the different disciplines and organisational func-
tional units, and the broad diversity of employed research meth-
odology (Burgess et al., 2006) lead to a broad range of
definitions
and understandings of the topic (see e.g. New, 1997; Lummus et
al.,
2001; Mentzer et al., 2001; Kauffman, 2002). Based on these
defi-
nitions and the review articles illustrated in Table 2, we define
SCM
as the configuration and coordination of the organisational
func-
tions marketing, sales, R&D, production, logistics, IT, finance,
and
customer service within and across business units and organiza-

tions to improve operative effectiveness and efficiency of the
sys-
tem and generate competitive advantages. SCM depends on
organizations' network, since one single enterprise does not own
the entire set of skills and resources required to deliver its value
proposition (Taylor et al., 2001). In turn, these networks'
configu-
rations are variable according to certain attributes (such as
dynamic
behaviour, level of trust between nodes, distribution of risks or
benefits, geographical dispersion, etc.), to characteristics of
each
organisation representing the network node (such as strategy,
po-
sition in the value chain, degree of influence, etc.), and also to
product type (tangibility, customization, variability, etc.)
(Taylor
et al., 2001). Another fundamental issue is the type of
collabora-
tion between organizations, which vary depending on the level
of
formalisation, commitment and duration of relationship: simple
market transition, non-contractual agreement, contractual agree-
ment, joint venture, and integrated company (Jagdev and
Thoben,
2001). This discussion is particularly relevant in the corporate
sustainability context, since strong collaboration network tend
to
be crucial in terms of improving sustainability performance
(MacCarthy and Jayarathne, 2011).
There are also narrower definitions in the literature, which
usually focus functionally on purchasing and define SCM as the
strategic selection of, collaboration with, and control of
suppliers.
While these definitions have advantages for operationalisation

in
practice and demarcation from other concepts in theory, we
choose
a rather comprehensive definition to allow for broad
applicability
of our discussion. Depending on the definition, SCM can be an
important part or almost identical with the concept of the value
system Value capture
supply chain to extend
posal to the value system
Profit (or at least not negative result) to each
stakeholder
d logistic operations Reduced environmental burden by
extracting more
value from less natural resource consumption
s stakeholders in the Further environmental consciousness on
the value of
products
nges in the system level to
ips
Preparation of current production systems to be make
"perfect" circular economy viable in the future
Table 2
Literature overview SCM, developed from Burgess et al. (2006);
Asgari et al. (2016).
Most cited textbooks Review articles SCM Reviews Sustainable

SCM
(Chopra and Meindl, 2015) (Croom et al., 2000) (Fleischmann
et al., 1997)
(Christopher, 2016) (Rungtusanatham et al., 2003) (Browne et
al., 2005)
(Simchi-Levi and Kaminsky, 2007) (Sachan and Datta, 2005)
(Meade et al., 2007)
(Handfield and Nichols, 1998) (Kouvelis et al., 2009)
(Srivastava, 2007)
(Bowersox et al., 2012) (Gupta et al., 2009) (Carter and Rogers,
2008)
(Monczka et al., 2015) (Burgess et al., 2006) (Seuring et al.,
2008)
(Weele, 2014) (Storey et al., 2006) (Bekkering et al., 2009)
(Shapiro, 2007) (Giunipero et al., 2006) (Ilgin and Gupta, 2009)
(Tayur and Ganeshan, 1999) (Alfalla-Luque and Medina-
L�opez, 2009) (Carter and Liane Easton, 2011)
(Daugherty, 2011) (Sarkis et al., 2011)
(Seuring and Gold, 2012) (Gimenez and Tachizawa, 2012)
(Chen and Paulraj, 2004) (Abbasi and Nilsson, 2012)
(Giannakis and Croom, 2004) (Ashby et al., 2012)
(Ho et al., 2002) (Morgan and Gagnon, 2013)
(Lummus et al., 2001) (Lin et al., 2014)
(Mentzer et al., 2001) (Stindt and Sahamie, 2014)
(New, 1997) (Majid Eskandarpour et al., 2015)
(Skjoett-Larsen, 1999) (Fahimnia et al., 2015)
(Larson and Halldorsson, 2002) (Ntabe et al., 2014)
(2018) 712e721 715
chain (Porter, 2004) and value creation and delivery
(Richardson,
2008). Therefore, it is an essential part of the business model of
organizations (Knyphausen-Aufsess and Meinhardt, 2002;

Richardson, 2008) and plays a crucial role in transforming it for
the
Circular Economy. Organisational networks are called to
reassess
how and where value is added, consumed and recovered (Barber
et al., 2012).
The differences in supply chains of conventional and circular
business models stem from the necessary closing, slowing, and
narrowing of material and energy flows (Bocken et al., 2016. As
we
have argued in Fig. 2, we assume that CBMs achieve the best
sus-
tainability performance, if all elements of the business model
are
aligned to support these three functions (value proposition,
value
creation and delivery, and value capture (Richardson, 2008)).
While
there are already some reviews on sustainable and ‘green’
supply
chains, like (Abbasi and Nilsson, 2012; Ashby et al., 2012;
Carter and
Liane Easton, 2011; Fahimnia et al., 2015; Gimenez and
Tachizawa,
2012; Majid Eskandarpour et al., 2015; Sarkis et al., 2011;
Seuring
et al., 2008; Srivastava, 2007) and the special issue in Journal
of
Cleaner Production (JCP, 16(15), 2008), the literature on supply
chains for the Circular Economy is rather nascent, mostly
referring
Fig. 2. A value based view on the sustain
to closed loop supply chains with relatively few reviews to date,
like
(Govindan et al., 2015; Daniel et al., 2009; Stindt and Sahamie,

2014) The existing literature on Circular Economyis incomplete,
referring mainly to its implementations in China (including
sometimes dubious academic approaches, like (Ying and Li-jun,
2012)), with one review in the context of Waste-to-Energy
supply
chains (Pan et al., 2014).
Based on this literature, we define Circular Supply Chain Man-
agement (CSCM) as the configuration and coordination of the
organisational functions marketing, sales, R&D, production,
logis-
tics, IT, finance, and customer service within and across
business
units and organizations to close, slow, intensify, narrow, and
dematerialise material and energy loops to minimise resource
input into and waste and emission leakage out of the system,
improve its operative effectiveness and efficiency and generate
competitive advantages.
Following the importance of the value chain for the business
model and the need for alignment of all the business model's
ele-
ments for optimal sustainability performance, it can be argued
that
CSCM aiming at fostering sustainable development should
incor-
porate SBM characteristics. Thus, CSCM for sustainable
ability of circular business models.
(2018) 712e721716
development should comprise the creation of additional
monetary
and non-monetary value, a pro-active multiple stakeholder man-

agement, and a long-term perspective, as illustrated in Table 3.
3. Research method
The literature analysis provided a theoretical background for the
conducted case studies. This research method was chosen given
the
exploratory characteristic of the research. Besides, case studies
are
also suitable for investigations on contemporary phenomenon
(Yin,
2010) and provides in-depth understandings of unique set ups
(Simmons, 2009), as is the situation for the present research.
We
followed the recommendations of Eisenhardt (1989) and Yin
(2009).
Once the literature review was conducted, providing the main
literature background, the next step was to choose the
companies
to be part of the research. A specific selection criterion was
defined,
as the research method based on case studies calls for defining a
theoretical sampling (Eisenhardt and Graebner, 2007), rather
than
a statistically representative one. The main selection criteria
was
that the organisation's business model had to be aligned with
either closing, slowing, intensifying loops, narrowing loops
and/or
dematerialising loops. Four companies were selected for
exploring
business opportunities under the circular economy logic.
Alpha's
core idea is to provide remanufactured office furniture, using
end of

life goods to produce well-functioning products within an
internal
design solution. Meanwhile, Beta produces flat rolled
aluminium
with very high recycled content (significantly higher than others
in
the market). Gama designs and produces luxurious fashion
acces-
sories (such as purses and belts) from fire hoses and Delta
provides
a bike sharing service. The first three companies are from the
United Kingdom, while the forth one is a Brazilian company.
Beta is
the only large company, while the others are medium and
smaller
companies, with less than 50 employees (Delta) and around 10
employees (Alpha and Gama). Despite different sectors and
busi-
ness models, each company chosen as case study represents a
starting point for characterising elements and functions contrib-
uting to the Circular Economy.
Data collection was conducted mainly based on semi-structured
interviews with key informants of the companies, following the
recommendations of Miles et al. (2014). Biases in the
interviews
Table 3
Comparison of SCM, CSCM and CSCM for sustainable
development (SD).
SCM CSCM CSCM for SD
Aim Operative effectiveness and
efficiency
Operative effectiveness and

efficiency
Operative effective
Competitive advantages Competitive advantages Competitive
advan
Minimising material and
energy input
Minimising materi
Minimising waste and
emission leakage
Minimising waste
Social effectivenes
professional and p
Environmental effe
Economic effective
(VRIO) competitive
Means Configuration organisational
functions
Configuration organisational
functions
Configuration orga
Coordination of
organisational functions
Coordination of
organisational functions

Coordination of or
Closing resource loops Closing resource lo
Slowing resource loops Slowing resource l
Narrowing resource loops Narrowing resourc
Creation of additio
Pro-active multiple
Long-term perspec
and reporting were considered during data analysis, as pointed
out
by previous qualitative research on corporate sustainability
(Bolis
et al., 2015). To mitigate this research limitation, interview data
was complemented by published documents and companies'
websites. Besides during interviews, concrete examples were
asked
to illustrate generic statements. Key informants were chosen
given
their involvement and general knowledge about each company's
business model. Interviewees included the CEO and founder of
Alpha, Gama and Delta, and the corporate sustainability
manager of
Beta. The interviews encompassed questions about the in-
terviewees' description and perceptions according to the CBM
of
their respective companies. In particular, they were asked about
the
company's (1) value proposition in terms of economic, environ-
mental and social value the firm aim at delivering; (2) creation
and
delivery system with focus on the role of the business in closing
the
loop of the product life cycle; and (3) value captured by the
various
stakeholders of each case study. The collected data were

analysed
qualitatively, according to aspects regarding sustainable
develop-
ment and circular economy.
4. Research results analysis
As previously indicated by Table 3, CSCM for SD encompasses
traditional aims and means as SCM and as CSCM, with
additional
issues related to (1) social, environmental and economic goals,
(2)
pro-active multiple stakeholder management, (3) long-term
perspective, and (4) closing, narrowing and slowing resource
loops.
4.1. Economic, environmental and social goals
We initiated the data analysis by discussing social, environ-
mental and economic goals of the case studies. To do so, a
trian-
gulated analysis was performed, including the case studies'
declared mission and/or vision stated in their corporate
websites,
combined with the interviews. In order to maintain the
companies'
name confidential, the exact statements from the websites are
not
shown. All four of the organizations are for-profit
organizations, as
they aim at providing revenue to cover their costs and generate
profit by selling their products and services. Regarding environ-
mental goals, three of them explicitly seek to tackle
environmental
goals in reducing landfill, as declared in the respective
websites. In

ness and efficiency
tages
al and energy input
and emission leakage
s (e.g. Intra- and intergenerational equity, secure and
meaningful employment,
ersonal development)
ctiveness (e.g. Land use, biodiversity, pollution, resource
depletion)
ness (e.g. healthy ownership structures, financial independence,
sustainable
advantage)
nisational functions
ganisational functions
ops
oops
e loops
nal monetary and non-monetary value
stakeholder management
tive
(2018) 712e721 717
particular, they foster the market for recycled (Beta and Gama)
and
remanufactured (Alpha) goods. When asked about the environ-
mental impact of Delta, the company replied that they probably
have a positive impact on carbon emission, but have not yet
focused

effort to calculate it. They believe that by enabling the
possibility for
people to cycle instead of using their cars to move around the
city
can has potential to compensate the emissions associated to
their
operations.
The explicit connection of the studied companies to social goals
vary from one case to the other. Alpha's statement is clear and
specific on their goals to create local jobs through
remanufacturing.
Delta's goal for society is also explicit, which is to integrate
bicycles
as an alternative for urban transportation. Meanwhile, Beta de-
clares their commitment to customers, co-workers and local
com-
munities, without pointing out what specifically they intend to
create to these stakeholders. Data from both interview and
website
statement indicates Beta's contribution to society in terms of
technology innovation and development related to production
process of sheets from recycled aluminium, as well as to the
application and usage of aluminium sheets with high recycled
content. In turn, Gama's statement is also not explicit in this
regard
and mentions a more intangible value, indicating how much
society
loses with materials going to landfill or incineration, in terms of
quality, narrative and opportunity to do better.
4.2. Pro-active multiple stakeholder management
Another relevant aspect for CSCM and CBM is relates to a pro-
active multiple stakeholder management. A summary of the
stakeholders and the value created and delivered to each of
them is

shown in Table 4. It brings evidence that the organizations are
having a proactive approach not only towards its shareholders,
but
also to other internal and external stakeholders. Alpha and
Gama,
for instance, explicitly mentioned their intention to contribute
to
practice for circular economy, serving as an example and to
push
partners and innovation to make their circular business viable.
Besides, Beta saw the opportunity to reduce dependency of
imports
commodity-priced materials with high carbon emission and
turned
into heavy investments in new technology to produce quality
aluminium sheets with high percentage of recycled material.
Table 4
Sustainable value captured by stakeholders.
Stakeholder Alpha Beta
Shareholders/
Investors
Structurally lower cost disruptive high
growth and sustainable business
Supply risk reduction, longer te
Employees Opportunity to work for a company
with purpose
Motivation towards challengin
increasing rate of recycled con
product

Clients Quality and price combination for
products and services, wellness and
productivity (interior design)
Product quality (independent f
for production)
Partnership with clients for tec
development applied to low ca
aluminium components and ap
Suppliers Chance to sell surplus waste stock (used
as input for remanufacturing process)
Development of equipment sup
address the technical challenge
recycled content
Society Local semi-skilled jobs, reduction of
supply risk, demonstration of a working
circular business
Higher environmental awarene
Engagement of local organizati
recycled material
Low carbon footprint products
Environment Less burden on landfill Reduction of carbon
emission t
whole process
Government Local semi-skilled jobs, reduction of
supply risk, demonstration of a working
circular business
Retaining local production valu
buying from abroad)

Moreover, they also engaged in partnership with clients to
develop
technology applied to low carbon aluminium components and
applications, e.g., towards actively enabling the market for low
carbon products to grow.
Delta, on the other hand, saw from international market the
opportunity to invest bike sharing, as one of the pioneers of this
idea in its country (Brazil). It is worth noting that, what the
cases
have in common is the need to develop their consumer market,
actively promoting awareness on the environmental and/or
social
value they aim to create and deliver. Development of a supply
chain
network that is able to collect used office furniture that would
be in
the end of life and to combine skills and infrastructure to
reman-
ufacture goods is also a challenge for Alpha. The company is
engaged in developing these partners to enable their business to
grow.
4.3. Long-term perspective within short term actions
Alpha is an office furniture remanufacturer, Beta is a high
recycled content flat aluminium sheet manufacturer, Gama
designs
and produces luxurious fashion accessories from fire hoses, and
Delta provides a bike sharing service. Regarding the long-term
perspective, companies are pushed to account for future genera-
tions based on their decision of the present. The positive contri-
bution of each case study in the long run was also discussed
during
interviews. For Alpha and Gama, as mentioned before, it is
about
building an economically viable business today to help

disseminate
the circular economy principles. Regarding Alpha, this is
particu-
larly in the office furniture business, for which it is
fundamental
that other organizations in logistics (direct and reverse) and
pro-
duction (remanufacturing) are able to provide infrastructure to
other circular business.
Gama, on the other hand, is interested in materials with high
potential of usage, without the objective of closing specific
material
cycles. Although they started and are very strong with luxury
ac-
cessories from fire-hoses, they also work with other materials,
such
as leather waste and parachute silk. Their intention is to awake
on
people the perception on the value of certain materials and on
the
possibility of having goods that last virtually never end in the
landfill and can be used for many generations ahead. Beta's
legacy
Gama Delta
rm return Satisfaction of business with
purpose
Satisfaction and motivation
g targets for
tent in the
Satisfaction of business with
purpose

Decent salary
Satisfaction of business with
purpose
rom the inputs
hnology
rbon
plications
Purpose driven products
Long-term products (financial
return)
Private sponsor for bike sharing
service: brand value, relation to
local government
pliers to
s of high
Close relationship with
suppliers of materials (such as
fire-fighters community)
Income
Connection to the business
purpose
ss
ons to collect
(packaging)
Transition to a circular

economy
Environmental and health
awareness
Bike culture
hroughout the Less burden on landfill Low carbon additional
solution
for urban transportation
e (instead of Taxes Image before society
(2018) 712e721718
to the long-term is aligned with its business decision on
investing
in technologies for low carbon aluminium goods and production
process.
In turn, Delta aims to disseminate the culture of bike sharing as
a
day-to-day solution and not only for leisure to adults and
children
as users, and also to private and public organizations as
business
opportunity.
4.4. Circular resource loops and guidelines for sustainable
business
models
Regarding the companies' respective resource loops, interesting
insights were also collected in the field. The circular business
models presented by the case studies are aligned with the
Butterfly

diagram (Ellen-MacArthur-Foundation, 2013). Focusing on the
right side of the diagram (the technical cycles), Alpha clearly
con-
tributes to the refurbish/remanufacture cycle, while Beta and
Gama
are examples of recycling business models. Yet, Delta is more
aligned with the maintenance cycle, intensifying the use of their
bicycles by internally designing and manufacturing a robust
product that is easy repair. The CBM's value proposition
together
with requirements of a CSCM are summarized in Table 5.
5. Discussions and framework proposal
Combining the analysis of the literature and data from case
studies, a framework is proposed, combining the discussions on
sustainable development, circular economy, circular supply
chain
management and circular business models in practice (Fig. 3).
In
doing so, we try to bring initial discussion on how these
constructs
are interconnected. On the left side, the framework reinforces
the
dependency between a single organisation, a specific CBM, and
its
value network, as a circular supply chain. In this sense, the
research
corroborates with previous arguments on the contribution of
CSCM
to closing, narrowing and slowing the loop (Bocken et al.,
2017),
complementing this view with intensifying and dematerialising
efforts, as discussed in Section 4.4 and illustrated in Table 5.
Empirical evidence from performance case studies reinforces
the
Table 5

Towards circular business model and circular supply chain in
the case studies.
BM
type
Elements Case study
Alpha Beta
CBM Closing loops Development of partners to provide
reverse logistics of used furniture
and remanufacturing
High investment on R&D f
development
Slowing loops
Intensifying
loops
Narrowing
loops
Partnership with clients in
low carbon solutions
Dematerialising
loops
SBM Creation of
sustainable
value:
Interior design solution, combining
remanufactured and new office

furniture
Flat rolled aluminium with
recycled content
Pro-active
multiple
stakeholder
Pushing the supply chain to develop
towards circular economy
Pushing technology bound
low carbon aluminium goo
production process
Promoting the culture of
remanufactured goods
Long-term
perspective
Urgency to action to change
Need to develop alternativ
to reduce dependency on i
and commodity prices
crucial role of network infrastructure and capabilities to enable
CBM operations. For instance, Delta realized the key role of
using a
bicycle that was durable and relatively easy to perform mainte-
nance and decided to switch is operations from buying to assem-
bling their own bicycles.
Furthermore, the proposed framework also indicates that the

previous arguments depend on the following conditions (aims
and
means) for circularity and for sustainability: economic, environ-
mental and social goals, proactive stakeholder management,
long-
term perspective. Each business condition was previously dis-
cussed in the literature (Geissdoerfer et al., under review,b) and
the
performed research initially addresses this issue, as the case
studies
presented in Sections 4.1, 4.2 and 4.3 bring empirical evidence
on
the relevance of these conditions. These aspects reinforces that
the
triple bottom line approach focused on a sustainability based on
three pillars: economic, environmental and social ones
(Elkington,
1997b) is relevant, but not sufficient for CBM's and SBM's. A
broad
and proactive approach on stakeholders and long-term
perspective
to complement short termed ones are also crucial factors for
suc-
cessful sustainable businesses.
Previous knowledge has already pointed out initial discussions
on the relation between sustainable development and circular
economy (Geissdoerfer et al., 2017a). In this sense, our paper
adds
to this by bringing empirical evidence on the relationship
between
these perspectives, as the present research explores this link by
arguing the three conditions for CBM to address challenges for
Circular Economy and, at the same time, for Sustainable
Develop-
ment. The connection between these perspectives is still open

for
discussion. On the one hand, one can argue that Circular
Economy
is one possible way, amongst others, to reach Sustainable
Devel-
opment. On the other hand, Sustainable Development is a
concept
that is so broad and intangible that may lose meaning, while
Cir-
cular Economy could became a more tangible way to organize
so-
ciety and economy. In summary, our research seeks to
contribute at
some extend to this discussion, by illustrating an overlapping
area
between the concepts, but understands the need for further and
deeper arguments. This overlapping area represents arguments
from the case studies that, while the tackle the three conditions
for
Gama Delta
or product Low waste in the
production stage
Product design based on
long usage stage
Internal product development and bike
assembly to ensure long usage stage and
facilitated maintenance
Bike sharing intensifies use phase
terested in
Rent service instead of product
ownership

very high Luxurious fashion
accessories (such as purses
and belts) from fire hoses
Service for individual urban
transportation (bike sharing)
aries for
ds and
Pushing the supply chain to
develop towards circular
economy
Dissemination of the culture of bike
sharing as transportation for short
distances
Promotion of sustainable
consumption
e materials
mports
Urgency to action to change
Need for more efficient ways for urban
transportation
Fig. 3. Proposed framework.

(2018) 712e721 719
sustainability using a business model based on closing, slowing,
narrowing, intensifying and/or dematerialising.
6. Conclusions and outlook
The present research contributes to the literature by proposing
an integrated framework on CBM and CSCM built on theory and
practice, discussing their interrelation and the contribution to
the
dimensions of sustainability. To address this, four case studies
were
presented: Alpha, an office furniture remanufacturer, Beta, a
high
recycled content aluminium sheet producer, Gamma, a recycled
luxury accessories manufacturer, and Delta, a bike-sharing
company.
All four case studies present circularity aspects incorporated
into their business models and supply chains. The findings
confirm
previous research on SBMs derived from creating value from
waste
(Bocken et al., 2014) and evidence for CBM and CSCM
elements was
found. This includes products designed and manufactured from
disposed materials, partnership building for reverse logistics
and
efforts to provoke system change by communicating and
collabo-
rating for the Circular Economy. This reinforces previous
theoretical
researches that indicated the need not only for technical in-
novations (e.g., in terms of material flows), but also for social
in-
novations (e.g. in terms of changes in consumer behaviour),
such as

discussed in Winans et al. (2017).
However, the cases studied still face challenges in changing the
paradigm from linear to circular, especially regarding
adaptations
needed in the companies’ supply chains and in purchasing pro-
cesses of customers. Empirical data show alignment between
CBM
and consequently CSCM to sustainable development challenges.
As
proposed by the framework showed in Fig. 3, CBM, aligned
with
circular supply chain, can contribute to sustainable development
by
promoting economic, environmental and social goals; pro-
actively
managing stakeholders; including a long-term perspective; and
closing, slowing, intensifying, narrowing and dematerialising
resource loops. The resource loops for circularity were
previously
pointed out by the literature (Bocken et al., 2016). Our
framework
complements this view by adding explicitly initiatives on
intensi-
fying and dematerialising loops for circular economy.
This paper brings implications to practice by presenting
different CBM and discussing the main challenges faced in
practice.
The case studied present similarities and contrasts. For
example,
while Alpha is a small company, with local action, born with a
circularity mind-set and the explicit purpose to contribute to
sus-
tainable development, Beta is a large globally present
organisation

and enlarges the amount of recycled material into its product
mainly to compensate for uncertainty in resource purchasing.
Despite these differences, all the case companies' business
models
depend on changing consumers and suppliers' behaviour, since
CBM and CSCM demand a systemic paradigm shift. For
instance, the
companies' customers' product quality perception from remanu-
factured or recycled material tended to be lower than for
traditional
goods, resulting in lower realisable prices. This is despite the
products’ high quality requirements and comparatively little ad-
vantages in their cost structure.
The main limitations in our research encompass, first and
foremost, the limited number of case studies and data collection
based mostly on only one interview for each case study.
However,
the interviews were triangulated with publicly available docu-
ments to mitigate this. Interviews with other stakeholders from
the
supply chain to complement data collection can be an
interesting
future follow-up study to complement the present one. All in
all,
this research is to be seen as among the first steps in evaluating
whether ‘going circular’ really makes businesses and their
supply
chains more sustainable. A more systematic assessment of their
contribution to sustainable development goals will be desirable
to
confirm and complements these first steps.
Acknowledgements
This work was supported by the Brazilian institutes: National

Counsel of Technological and Scientific Development (CNPq)
and
Coordination for the Improvement of Higher Education
Personnel
(CAPES).
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! 1
Product design and business model strategies for a circular
economy
!
Sustainable Design & Manufacturing Conference, Seville, 12-14
April 2015.
Authors: Nancy M.P. Bocken, Conny Bakker and Ingrid de
Pauw
!
Abstract
There is a growing need for and interest in the business concept
of a circular economy. The
move to a circular economy brings with it a range of practical
challenges for designers and
strategists in businesses that will need to facilitate this
transformation from a linear take-
make-dispose model to a more circular model. This paper seeks
to develop a framework to
guide designers and businesses strategists in the move from a
linear to a circular economy.
The following research question is addressed: What are the
product design and business
model strategies for businesses that want to move to a circular
economy model? Building on
Stahel (1994, p. 179) he terminology of slowing, closing and
narrowing resource loops is

introduced. A list of product design strategies and business
model strategies for strategic
decision-makers is introduced based on this to facilitate the
move to a circular economy.
1. Introduction
Governmental organisations as well as business representatives
report an increasing
pressure on our global resources and the climate due to human
activity (WBCSD, 2014;
IPCC, 2014). The circular economy is viewed as a promising
approach to help reduce our
global sustainability pressures (European Commission, 2014;
Ellen MacArthur Foundation,
2014). The Ellen MacArthur Foundation (2014) has helped
popularise the move to a circular
economy with businesses. Europe (European Commission, 2014)
and China have adopted
Circular Economy principles as part of their future strategies
(Su et al., 2013). For example,
the move to a more circular economy for Europe is associated
with strategies such as:
boosting recycling and preventing the loss of valuable
materials; creating jobs and economic
growth; showing how new business models, eco-design and
industrial symbiosis can move us
towards zero-waste; and reducing greenhouse emissions and
environmental impacts
(European Commission, 2014).
The idea of a circular economy is not new and was given a
theoretical foundation in the field
of industrial ecology in the early 1990s (Allenby et al., 1994;
Su et al., 2013). Robert Ayres (in
Allenby et al., 1994) introduced the idea of industrial

metabolisms: “At the most abstract level
of description, then, the metabolism of industry is the whole
integrated collection of physical
processes that convert raw materials and energy, plus labour,
into finished products and
wastes in a (more or less) steady-state condition” (p23). The
ambition level of an industrial
ecology is to achieve an ideal state, one which resembles nature
most. Such a system would
be characterised by “complete or nearly-complete internal
cycling of materials.” Ayres also
observes that such a closed cycle of flows can only be sustained
as long as its external
energy supply lasts. According to Ayres, a logical consequence
of striving to create closed
loop systems is that there are only two possible long-run fates
for waste materials: either
recycling and reuse, or dissipative loss (for resources such as
for lubricants or detergents).
The circular approach contrasts with the traditional linear
business model of production of
take-make-use-dispose and an industrial system largely reliant
on fossil fuels, because the
aim of the business shifts from generating profits from selling
artefacts, to generating profits
from the flow of materials and products over time (Bakker et
al., 2014). Circular business
models thus can enable economically viable ways to continually
reuse products and
materials, using renewable materials where possible.
Since the first use of the concept of the circular economy the
terminology around the ‘circular
economy’ has been diverging rather than converging and the
terms closed loop and ‘circular’

economy are often used in parallel. Although these terms might
be used synonymously, in
this paper, the terminology of a ‘circular economy’ is used. It is
argued that at the product
design level and the strategic level of business model
innovation, a more coherent
! 2
terminology is appropriate and desirable to facilitate the move
of businesses to a circular
model. In this paper, a range of strategies for product design
and business model innovation
for a circular economy are developed based on the literature to
give clarity and direction to
designers and strategic decision makers in businesses wanting
to pursue a circular business
model. The following research question is addressed: What are
the product design and
business model strategies for businesses wanting to move to a
circular economy model?
2. Literature review on circular design and business model
strategies
The literature review brings together the relevant literature on
circular product design and
circular business models to develop a terminology and a
framework of strategies for closed
loop design and business models for a closed loop.
2.1 Resource cycles: Slowing, closing and narrowing loops
This section introduces the terminology of slowing, closing and

narrowing resource loops. To
distinguish circular economy models from linear models, we
categorize the design and
business model strategies according to the mechanisms by
which resources flow through a
system, building on Stahel (1994). When discussing closed loop
systems, Stahel (1994, p.
179) distinguishes two fundamentally different types of loops:
(1) reuse of goods, and (2)
recycling of materials. “The reuse of goods means an extension
of the utilisation period of
goods through the design of long-life goods; the introduction of
service loops to extend an
existing product’s life, including reuse of the product itself,
repair, reconditioning, and
technical upgrading, and a combination of these. The result of
the reuse of goods is a
slowdown of the flow of materials from production to recycling.
... Reusing goods and product-
life extension imply a different relationship with time.” (ibid.)
The second loop is related to
recycling: “The recycling of materials means simply closing the
loop between post-use waste
and production. Recycling does not influence the speed of the
flow of materials or goods
through the economy.” (ibid.).
In alignment with Stahel, the following two fundamental
strategies towards the cycling of
resources are introduced in this paper, as a high-level way to
distinguish between the
different interpretations of “closing the loop” and approaches
for a linear economy, illustrated
in Figure 1:
1) Slowing resource loops (i.e. reuse): Through the design of
long-life goods and product-

life extension (i.e. service loops to extend a product’s life, for
instance through maintenance,
repair) the utilisation period of products is extended, resulting
in a slowdown of the flow of
resources.
2) Closing resource loops (i.e. recycle): Through recycling, the
loop between post-use and
production is closed, resulting in a circular flow of resources.
These two approaches are distinct from a third approach
towards reducing resource flows: 3)
Resource efficiency or narrowing resource flows, aimed at using
fewer resources per
product. In the 1990s the influential book “Factor Four” was
published, authored by von
Weizsäcker and Mr. and Mrs. Lovins. It introduced the idea of
resource productivity (defined
as “reduction of environmental impacts per unit of economic
output”; ibid.). Resource
productivity was introduced as a way to decouple the link
between resource use and
environmental degradation. For product designers, resource
productivity is often treated as
an indicator of resource efficiency (using fewer resources to
achieve the same purpose).
Resource efficiency is not aimed at the cyclic use of products
and materials, but an approach
to reduce resource use within the product and production
process. This approach is different
from approaches for slowing resource loops, as it does not
influence the speed of the flow of
products and does not involve any service loops (e.g. repair).
Resource efficiency has been
applied successfully within a linear business model, and
existing strategies for resource
efficiency can be used in conjunction with both product-life
extension and recycling within a

circular system, an approach that can be characterized as
‘narrowing resource loops’. As
narrowing resource flows does not address the cycling of goods,
this strategy is not
addressed further in this paper.
The detail of the product requirements and business model
options building on Figure 1 are
based on the literature and relevant product/ process standards
and are described in the
! 3
subsequent sections. In the subsequent sections, the product
design and business model
strategies for a circular economy are described according to the
above categorization.
Figure 1: Categorization of linear and circular approaches for
reducing resource use.
Based on, and expanded from (Stahel, 1994; Braungart et al.,
2008).
2.2 Circular product design strategies
Integrating circular economy concerns at an early stage in the
product design process is
important, because once product specifications are being made,
only minor changes are
usually possible - it is difficult to make changes, once

resources, infrastructures and activities
have been committed to a certain product design (Bocken et al.
2014a). This section
describes the product design strategies relevant to slowing and
closing loops, and provides
an overview of the terminology of relevant terms as described
in the literature.
2.2.1 Design strategies for slowing resource loops
Slowing resource loops or extending the utilisation period of
products helps to avoid the
manufacture of new products and its associated resource and
energy use. Slowing resource
loops is about keeping the products we have in use for longer.
As argued by John Donahoe,
CEO of eBay Inc.: "The greenest product is the one that already
exists, because it doesn't
draw on new natural resources to produce” (eBay Inc, 2014).
Table 1 includes the typical design strategies to slow resource
loops: creating long-life
products (see Moss, 1985; Chapman, 2005) and extending the
product’s life, once in use
(British Standard, 2009; Bakker et al., 2014). Long-life product
design is supported by design
for reliability (Moss, 1985) and by design for both emotional
and physical durability
(Chapman, 2005). Design or product life extension can be
facilitated through maintenance,
repair, upgrading and remanufacturing (see British Standard,
2009; Linton and Jayaraman,
2005). Table 1 includes the terminology for these strategies.

! 4
Strategies & terms Definition
Designing long-life
products
Ensuring an extended / long utilisation period of products by
designing
products for reliability and durability (physical and emotional)
Reliability The probability that a product manufactured to a
given design will operate
throughout a specified period without experiencing a chargeable
failure,
when maintained in accordance with the manufacturer’s
instructions. (Moss,
1985; p. 17)
Durability
- Emotional
- Physical
Durability can relate to physical durability, e.g. the use of
corrosion resistant
materials, and emotional durability, a situation where “users
and products
flourish within long-lasting empathic partnerships” (Chapman,
2005).
Design for product-
life extension
Extension of the use period of goods through the introduction of

service
loops to extend product life, including reuse of the product
itself,
maintenance, repair, and technical upgrading, and a combination
of these.
Maintenance The performance of inspection and/or servicing
tasks (technical,
administrative, and managerial; EFNMS, 2014) to retain the
functional
capabilities of a product (Linton and Jayaraman, 2005, p. 1814)
or restore it
to a state in which it can perform its required function (EFNMS,
2014).
Repair
(recondition, reworking
or refurbishment are
forms of major repair)
Repair is about restoring a product to a sound/ good condition
after decay
or damage (Linton and Jayaraman, 2005, p. 1813).
After repair, the product is expected to be in a usable state, but
assurances
of performance are generally limited to the repaired part.
(British Standard,
2009). Reconditioning is concerned with rebuilding or repairing
major
components close to failure, even where there are no apparent
faults (ibid.).
Upgrade The ability of a product to continue being useful under
changing conditions
by improving the quality, value and effectiveness or
performance (…)

(based on Linton and Jayaraman, 2005, p. 1814).
Remanufacture Returning a used product to at least its original
performance with a warranty
that is equivalent or better than that of the newly manufactured
product.
From a customer viewpoint, the remanufactured product can be
considered
to be the same as the new product.(British Standard, 2009)
Table 1. Overview of design strategies to slow resource loops,
including terminology
2.2.2 Design strategies for closing resource loops
The Cradle to Cradle design philosophy, propagated by
McDonough and Braungart (2002),
has inspired many companies and designers to apply an
ambitious circular approach to
product design (Bakker et al. 2010, de Pauw et al. 2013). With
the introduction of design
strategies aimed at circular flows of materials, a more detailed
understanding of the concept
of recycling has been propagated. According to Ayres (1994),
there are only two possible
long-run fates for waste materials: either recycling and reuse, or
dissipative loss (e.g.
lubricants or detergents). McDonough and Braungart (2002)
developed this into a design
concept with distinct strategies for the two resource routes, in
which dissipative losses are to
be made compatible with biological systems (fit for the
biological cycle); and other materials
to be completely recycled (fitting a technological cycle).
Products that mix materials of both
cycles and thereby inhibit the recovery of the materials are

referred to as ‘monstrous hybrids’
(ibid.). In addition, to allow circular flows of resources, the
authors distinguish between
primary recycling and downcycling (see Table 2), to
demonstrate that downcycling does not
enable a cyclical flow of resources, but only delays the linear
flow of resources from
production to waste. Likewise, processes such as quarternary
recycling, or thermal recycling
(conversion of waste into energy) do not fit within a circular
approach to product design.
Table 2 summarises the strategies to close resource loops,
including the terminology used for
these strategies.
Strategies & terms Definition
Design for a technological cycle Design products of service
with materials or products (‘technical
nutrients’) that can be continuously and safely recycled into
new
materials or products (McDonough and Braungart 2002).
Primary recycling (NB. upcycling
is concerned with retaining or
improving the properties of the
material the latter concept being
relatively new and underexplored;
The conversion of waste into material having properties
equivalent to those of the original material (Aström, 1997).
Recycling in which resources retain their high quality in a
closed-
loop industrial cycle (McDonough and Braungart, 2002),

! 5
see e.g. McDonough and
Braungart, 2013)
Tertiary recycling
(depolymerisation & re-
polymerisation)
The structural breakdown of materials into their original raw
core
components (for instance depolymerisation) and consecutive
buildup (repolymerisation) of material with properties
equivalent
to the original material (Kumar et al., 2011)
Design for a biological cycle Design products of consumption
with safe and healthy materials
(‘biological nutrients’) that create food for natural systems
across
their life cycle (McDonough and Braungart 2002).
Biodegradation and composting Biodegradability is the
capability of being degraded by biological
activity (Vert et al., 2012); composting is a related process, in
which organic matter is biologically decomposed, performed by
microorganisms, mostly bacteria and fung (Vert et al., 2012).
Design for recycling strategies
that only fit a linear economy
Design products of which the materials can be applied again in
new products with loss of material quality, or can be burned
while

recovering part of the energy content.
Downcycling / secondary recycling Material is reprocessed into
a “low” value product, such as
industrial grade rubber being reprocessed into a general grade
rubber (Lee et al., 2001)
Table 2. Overview of design strategies to close resource loops,
including terminology
2.3 Circular business model strategies
This section discusses the potential business model strategies
for a circular economy. It
should be noted that the examples given in Table 3 do not all
necessarily present full
business model innovations, but rather, elements of business
model strategies that contribute
to a circular business.
Business models define the way a firm does business (Magretta,
2002) and they are viewed
as an important driver for innovation (e.g. Teece, 2010;
Chesbrough, 2010; Yunus et al.,
2010). Business model choices define the architecture of the
business and expansion paths,
but once established, companies often encounter great difficulty
in changing business models
(Teece, 2010). As Chesbrough (2010) observes: companies
commercialise product and
technology innovations through their business models and while
they may allocate extensive
investments to this, they often have limited capability to
innovate the business models
through which these innovations will pass. Following ‘dominant
business model logic’ can

lead firms to miss valuable uses of an innovation (Chesbrough,
2010; Prahalad & Bettis,
1995). The same technology or product innovation pursued
through different business models
will yield different economic outcomes (Chesbrough, 2010).
Hence, according to Teece
(2010), every new product development effort should be
coupled with the development of the
business model, which defines its ‘go to market’ and ‘capturing
value’ strategies, because
technology or products by themselves do not guarantee business
success.
The move to a circular economy model is an example of a
radical change, which will require a
new way of thinking and doing business. The more radical the
technical or product innovation,
the more challenging and the greater the likelihood that changes
are required to the
traditional business model (Teece, 2010). Based on the business
model frameworks of
Bocken et al. (2014a) and Bakker et al. (2014), key business
model strategies are identified,
in Table 3, that fit the approaches of slowing and closing
resource cycles.
Business
Model
Strategies
Definition Business model elements
Business model strategies to slow product loops
1 Access and

performance
model
Providing the capability
or services to satisfy
user needs without
needing to own
physical products
Value proposition: delivery of the service (access and
performance rather than ownership)
Value creation & delivery: The ‘hassle’ of service and
maintenance is taken over by the manufacturer or
retailer. The user can enjoy the benefits of performance
and access to a service (e.g. car sharing, launderette)
Value capture: pricing per unit of service (e.g. time,
number of uses, performance)
2 Extending Exploiting residual Value proposition:
manufacturers exploit the residual
! 6
product value value of products - from
manufacture, to
consumers, and then
back to manufacturing -
or collection of products
between distinct
business entities
value of products and are able to deliver the customer
an affordable ‘as new’ product through
remanufacturing, repair and other product life extension

design strategies (see Table 1)
Value creation & delivery: take-back systems and
collaborations (e.g. with retailers, logistics companies
and collection points) to be established to enable
consistent product returns (e.g. a deposit system at
retail, as in the case of soda bottles)
Value capture: reduced material costs (while
potentially increasing labour and logistics cost) can
lower overall cost and make this an attractive option for
manufacturers
3 Encourage
sufficiency
Solution
s that actively
seek to reduce end-
user consumption
through principles such
as durability,
upgradability, service,
warrantees and
reparability and a non-
consumerist approach
to marketing and sales
(e.g. no sales

commissions).
Value proposition: the manufacturer creates high
quality durable products and offers high levels of
service (reparable, reusable over time) and has a non-
consumerist approach to selling – fewer high-end sales
rather than ‘build-in obsolescence’
Value creation & delivery: non-consumerist approach
(e.g. no overselling, no sales commissions, conscious
buying) to sales. Only sell what is ‘needed’
Value capture: Often a premium model, where a high
price per product can justify lower volumes. Another
example includes ESCOs (energy service companies)
often subsidised by governments to incentivise users to
reduce energy use in the home
Business model strategies to close resource loops
4 Extending
resource value
Exploiting the residual
value of resources:
collection/ sourcing of
otherwise ‘wasted’
materials / resources/

energy to turn these
into new forms of value
Value proposition: Exploiting residual value of
resources, potentially making the product more
appealing to certain customers (e.g. those with a
‘green’ interest), while reducing material costs and the
overall product price.
Value creation & delivery: New collaborations and
take-back systems to be put in place to collect/ source
materials.
Value capture: Use otherwise ‘wasted’ resources to
turn these into new forms of value
5 Industrial
Symbiosis
A process- orientated
solution, concerned
with using residual
outputs from one
process as feedstock
for another process,
which benefits from
geographical proximity

of businesses
Value proposition: A process- orientated solution,
concerned with using residual outputs from one process
as feedstock for another process, across geographically
close businesses. The proposition for the business
network is a reduction in overall operating cost and
risks (e.g. environmental fines).
Value creation & delivery: collaborative agreements to
reduce costs across the network, by for example
sharing communal services (e.g. cleaning/
maintenance, recycling) and exchanging by-products.
Value capture: joint cost reduction and potential
creation of new business lines based on former waste
streams (see e.g. AB Sugar; Short et al., 2014)
Table 3. Business model innovations to slow and close resource
loops. Developed from Bocken et al.
(2014b); Bakker et al. (2014).
2.3.1 Business model strategies for slowing resource loops
In line with the Section 2.2, business models to slow resource
loops encourage long product

life and reuse of products through business model innovation.
Three key models are
described: access and performance, extending product value,
and sufficiency (Table 4).
! 7
Business Model Examples of cases
1 Access and
performance model
(or, PSS; Tukker,
2004; or Functionality
not Ownership; Bocken
et al., 2014)
- Car sharing

- Launderettes
- Document Management Systems (e.g. Xerox, Kyocera)
- Tuxido hire
- Leasing jeans
- Leasing phones
2 Extending product
value
- Automotive industry – remanufacturing parts
- Gazelle offering consumers cash for electronics and selling
refurbished electronics (gazelle.com)
- Clothing return initiatives (e.g. H&M, M&S’ Shwopping).
3 Encourage sufficiency - Premium, high service and quality
brands such as Vitsœ (Evans et al.,
2009) and) and Patagonia (Chouinard & Stanley, 2012)
- Energy Service Companies (ESCOs)
Table 4. Models to slow resource loops. Adapted from Bakker et
al. (2014) and Bocken et al. (2014b)
The ‘access and performance model’ (Bakker et al., 2014) is
concerned with providing the
capability or services to satisfy users’ needs without needing to

own physical products.
Similar terms include “Product Service Systems (PSS)” (e.g.
Tukker, 2004), a combination of
products and services that seek to provide this capability or
functionality for consumers while
reducing environmental impact is often used to refer to this type
of business model
(Goedkoop, et al., 1999) and “deliver capability rather than
ownership” (Bocken et al., 2014b).
Examples include launderettes, car clubs and clothing hire
models (e.g. tuxedo hire). The
advantage of the Access & Performance strategy is that it can
introduce economic incentives
for slowing resource loops, both with manufacturers (increasing
profits from e.g. durability,
energy efficiency, reusability, reparability) and users (reducing
costs when reducing use, e.g.
thinking before using a car) and potentially reduces the total
need for physical goods. In this
way, this type of business model can contribute to slowing
resource loops.
‘Extending product value’ is concerned with exploiting the
residual value of products. The
ideal business model might be the case where the

remanufacturing operation would simply
recover products which have ceased to function, with no new
net consumption of materials,
other than those consumed during transport and processing
(Wells & Seitz, 2005). In this
type of business model, remanufacturing typically becomes the
activity of the original
manufacturer. Refrigerators and other white goods in the EU are
examples of products whose
development is driven by Extended Producer Responsibility and
the WEEE Directive.
‘Encourage sufficiency’ includes solutions that actively seek to
reduce end-user consumption,
in particular through a non-consumerist approach to promotion
and sales (e.g. not overselling,
no sales commissions) (Bocken et al., 2014b). The main
principle of ‘encourage sufficiency’ is
to make products that last and allow users to hold on to them as
long as possible through
high levels of service. Although they do not need to be,
sufficiency based business models
are often premium business models – they are high end and the
price premium justifies
‘slower sales’ and higher service levels. Examples of premium

business models include that
of the furniture company Vitsœ (Evans et al., 2009) which
developed a video ‘against
obsolescence’ (Fablemaze Weather, 2014) and Patagonia
(Chouinard & Stanley, 2012) who
developed the iconic “Don’t buy this jacket” advertisement
(Patagonia, 2011) to support the
launch of its Common Threads Initiative to encourage repair
and reuse of its products.
Positive impacts of encouraging sufficiency include the
reduction in the consumption of
resources, sustainable living and long-term customer loyalty,
and new repair and service
markets. Businesses may benefit from premium margins on high
quality products and high
levels of customer loyalty. The principles of longer use and
repair and service are aligned with
the principles of a closed loop economy.
2.3.2 Business model strategies for closing loops
Closing loops in business model innovation is about capturing
the value from what is
considered in a linear business approach, as by-products or
‘waste’. These strategies may be

‘micro’ in scope, for example when materials are reused in
manufacturing processes within a
production facility (Wells & Seitz, 2005), or more ‘macro’
when products are eventually
disposed of and the content may be recycled via an entirely
independent network. This
business model is already profitable for some materials such as
aluminium where the energy
! 8
costs of creating the material are higher than re-melting (ibid.).
Table 5 summarises the
business model strategies that economically enable closing of
resource loops.
“Extending resource value” is about the collection/ sourcing of
otherwise ‘ wasted’ materials
and resources to turn these into new forms of value. An example
of this is InterFace Net-
Works TM – a programme that sources fishing nets from coastal
areas to clean up oceans and
beaches while creating financial opportunities for people in

impoverished communities and
serving as a source to create recycled into yarn for Interface
carpet (InterFace, 2008).
Similar to this, industrial symbiosis is a process-orientated
solution, concerned with turning
waste outputs from one process into feedstock for another
process or product line (Ayres &
Simonis, 1994 & Chertow, 2000). An innovative business model
example of internal
symbiosis practices is the case of AB Sugar, who managed to
reinvent its business model
focused on sugar refining through internal practices, described
by Short et al. (2014). This
paper discusses a range of business model innovations of
industrial symbiosis, such as the
creation of a new business line producing animal feed from by-
product bagasse (a common
by-product of sugar refining) and the use of latent heat and CO2
from sugar refining to heat
greenhouses and grow tomatoes near its sugar refining facilities
(ibid.). These internal
practices where value is created from ‘waste’ are not
uncommon, the Guitang Group in China
being another example of a sugar refiner developing new

business lines based on ‘waste’
streams (Zhu et al., 2007).
Whereas industrial symbiosis practices often take place at the
process and manufacturing
level and benefit from businesses located closely within a
geographical area, ‘extending
resource value’ often happens at the product level and may
happen across geographical
areas (see e.g. the Interface example).
Business
Model
Definitions Cases
1. Extending
resource
value
Collection/ sourcing of
otherwise ‘ wasted’
materials / resources/
energy to turn these into
new forms of value (e.g.

products and services)
- Interface – collecting and supplying fishing
nets as a raw material for carpets
- RecycleBank – providing customers with
reward points for recycling and other
environmentally benign activities
(recyclebank.com)
2. Industrial
Symbiosis
A process- orientated
solution, concerned with
turning waste outputs from
one process into feedstock
for another process
- Kalundborg Eco-Industrial Park
(http://www.symbiosis.dk/en)
- Symbiosis across business lines (e.g. Zhu
et al., 2007)
- AB sugar – internal ‘waste=value’
practices (Short et al., 2014)

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