Emergence of the Circular and Restorative Business Model
In recent years, further fueled by economic meltdowns and austerity, the advocates for a fundamental change of our prevailing economic model have become increasingly outspoken. Terms such as Capitalism 2.0, Regenerative Capitalism, Responsible Economy, Restorative Economy and Circular Economy abound.
At a business level several pioneers have tested and trialed these concepts for at least two decades. This includes the late Ray Anderson, chairman of carpet tile company Interface, who became a passionate advocate in the mid90s for “climbing Mount Sustainability.” Rather than a goal of just eliminating environmental impacts he gave his team the task to convert the company into a Restorative Enterprise, “first to reach sustainability, then to become restorative, putting back more than it takes and doing good to Earth, not just no harm – by helping or influencing others to reach toward sustainability.”
Another philosophy known as Cradle to Cradle found a broad audience in countries such as the Netherlands from 2006 onwards. Private and public entities felt compelled to experiment with and apply the concepts of “re-making the way we make things,” “waste = food” as well as considering companies, cities and societies as metabolisms with biological and technical loops, therewith linking natural eco-systems to man-made cycles.
Some of these ideas borrow heavily from earlier concepts around for example industrial ecology and bio-mimicry. Whereas the latter often failed to appeal to a very broad and diverse range of stakeholders, the restorative enterprise and cradle to cradle philosophies have been relatively successful to date in unleashing a flurry of innovative thinking through their compelling approach. An approach which challenges people to apply their imagination, specific skills and knowledge to re-thinking the way things are done.
Although such concepts are still evolving through an iterative process of trial and error at various scales and applied to different situations, they provide fertile ground for outlining an indicative framework for a circular and restorative business model.
Key attributes of such a model are briefly being distilled here with a focus on those representing a step change away from prevailing production and sales models:
- From a linear to an ecosystem approach for precious resources, thinking in continuous and causal loops – loops of materials and nutrients, but also loops of responsibility;
- Eliminating all forms of waste, i.e. any cost in a production process which doesn’t produce value – from physical waste (waste = food) to wasting time, resources and energy;
- Harnessing of renewable energy sources, creating energy loops rather than dead-ends;
- Where possible, moving information rather than molecules (products or people);
- Re-defining/-designing commerce by selling a service and its performance or values rather than the physical product – ownership of the product therewith remains with the supplying party. An example are ESCOs selling performance based energy efficiency services;
- In line with this is a focus on fulfillment, i.e. fulfillment of a customer’s needs and aspirations, rather than a focus on individual consumption;
- A distinction between biological nutrients, which can be used in cascades in order to gain as much value as possible from them and technical nutrients, which after first use can be maintained, reused, remanufactured or recycled;
- Designing with consideration of a product’s economical and useful life – as influenced by e.g. fashion, politics and innovation. This could mean a core which has been designed to last (e.g. phone blocks), with a cover designed for replacement if the customer desires a different look or functionality;
- A focus on upcycling instead of down-(re)cycling, in particular for technical nutrients, re-emphasizing and retaining the quality of resources;
- A focus on minimizing entropy and preserving exergy, for example by assessing the energetic performance differences between alternative uses of (constituent) resources or alternative pathways, as well as through designing for reuse and re)assembly.
This can be explained by referring to the second law of thermodynamics. Spontaneous processes tend to occur in the direction of decreasing energy quality (exergy) and increasing disorder (entropy). In current production processes, the quality of a set of materials used in the production of products is often compromised by entropy, meaning that it will require extra energy to retain the quality of materials, real energy, labor or both;
- Building resilience through diversity – in ecosystems this is based on biodiversity, while for business systems this resilience is based on different kinds of diversity: connections, customer relations, supplier relations, resources, and innovations;
- Building shared values – in ecosystems also known as ‘symbiosis’, in a circular economy it’s about creating shared values with suppliers, sellers, customers and clients through performance and cooperative entrepreneurship;
In practice we currently see companies mainly embracing two different approaches:
- A hybrid solution, utilizing the advantages of both, or rather focusing on diminishing the disadvantages of either system. Hybrid situation are a key component of transitions: use the beneficial elements of the existing system to compensate the first failures of the new system in order to maintain reliability.
- Companies starting a new transformational business or business line separate from the existing one, in order to fully develop and dedicate the resources needed for success. This allows innovations in technical specifications and service delivery to be introduced swiftly without interference to existing operations.
This only goes to show that when we start solving linear problems, we may find ourselves having to solve other pieces of the complex puzzle as well as part of the ‘game of change’.
References: Mission Zero, Interface; Cradle to Cradle, Remaking the way we make things, Michael Braungart and William McDonough (2002); Towards a Circular Economy, Ellen MacArthur Foundation (2012, 2013); Guided Choices Towards a Circular Business Model, C2C Bizz (2013); and others.
Renilde Becqué is an international sustainability consultant.
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