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Circular economy for business

Get guidance on circular business models and find five tips for making your business more circular.

The global economy has traditionally followed a 'take, make, use, discard' approach to natural resources. As the world shifts towards a circular economy, find out why adopting circular business practices could help you gain a real market advantage. 

A growing number of companies and governments around the world are acknowledging that 'business as usual' is no longer sustainable. Rising demands on natural resources pose an ever-increasing threat not only to economic growth but to environmental and geopolitical stability. 

Several factors are driving this change: 

  • Growth in the global population (predicted to reach 9.5 billion by 2050)
  • A greater demand for goods
  • More use of materials from at-risk resources

For the world's economies to keep surviving and thriving, resource use must be separated from economic growth. 

What is the circular economy model?

The circular economy model provides a viable, scalable and more sustainable alternative. It enables economic development within the Earth’s natural resource limits.

It's based on three key principles:

  • Designing out waste and pollution
  • Keeping products and materials in us
  • Regenerating natural systems

Worldwide opportunities

Global savings of €1.8 trillion by 2030 are potentially available to businesses that adopt more circular ways of working. 

Only 9% of the 92.8 billion tonnes of minerals, fossil fuels, metals and biomass that enter the global economy are reused every year. A circular economy shifts the focus towards a much more efficient reuse of our resources.

The global shift towards a circular economy

The circular economy has become a key policy priority in several leading economies.

In 2018, the European Union and China signed a Memorandum of Understanding on Circular Economy Co-operation. This is helping to pave the way for a global shift towards a more circular economic system that works for businesses, people and the environment.

Making Things Last (2018) is Scotland’s circular strategy. It sets out a clear vision and priorities for moving towards a circular economy.

Learn more about this strategy on the Scottish Government website opens in a new window  

Scotland's policy leadership has gained international recognition, including the World Economic Forum’s prestigious Award for Circular Economy Governments, Cities and Regions.

More recently, the Scottish Government has set a series of ambitious new targets to drive circularity across the economy.

The benefits of adopting circular practices

Businesses increasingly recognise the benefits of a circular economy.

Many see it as a strategic opportunity to boost competitiveness. It can help your company gain a real market advantage with ever-more environmentally savvy customers and consumers.

Other advantages in applying circular practices include:

  • Protecting your business from risks posed by scarce resources and volatile pricing
  • Improving your productivity through reduced demand and raw material costs
  • Innovation through product redesign – for example, redesigning for longevity, resassembly, reuse and remanufacture
  • Creating new products and market opportunities – which could lead to new revenue streams
  • Enhancing your customer and supplier relationships by developing new value propositions (the feature or service that makes your business attractive)
  • Opening opportunities for collaboration across many industries

Circular business models

There are five key circular business models that your business can start using today:

1. Circular supplies: Use fully renewable, recyclable or biodegradable inputs to replace single-life inputs

2. Resource recovery: Recover useful resources or energy from  products or byproducts that you would throw away

3. Product life extension: Extend the working lifecycle of products and components by repairing, upgrading or reselling them

4. Sharing platform: Make more use of products and components through shared use, access or ownership

5. Product as a Service (also known as Servitisation): Offer access to your product while remaining the owner, allowing you to use resources more efficiently

Alone or in combination, these models can help you drive resource productivity improvements in innovative ways. This will allow you to reduce costs and drive revenue while boosting value and differentiation.

Finding the right way to adopt new models depends on understanding which models are most suitable for your business. You should also think about how you can use them to protect your existing value proposition, capture additional value or change the way you deliver value to your customers.

Five tips to make your business circular

Before you begin, it's worth considering each of the following five tips. This will help you prepare for any changes in the way you provide value to your customers. 

It's crucial to find out where your key risks and opportunities lie. You should:

  • Check for exposure to any finite or scarce resources
  • Check environmental legislation that applies to key resources used
  • Identify opportunities created by inefficiencies in the current value chain and minimise or eliminate these through the adoption of one or more of the business models above

It's important to make sure your circular practices are effective across your whole value chain. You can:

  • Identify and understand how and where real value is delivered to customers, for instance, is it in product(s) or is it with customers?
  • Investigate where and how value can be monetised across the whole life cycle of product(s)
  • Identify how more value can be created and how this can be delivered without any being lost to third parties, for example to waste management companies

To ensure your circular model is as agile and scalable as possible, it's crucial to:

  • Identify and understand current and future trends in technologies in science, engineering and/or digital that could impact the business
  • Identify how these developments could disrupt the existing value chain
  • Identify fast-changing technological developments that could enable the scaling up of more circular approaches, for example, remote visibility, control of assets or enabling of dematerialisation

Successful adoption of circular practices will require new skills within your organisation. You should:

  • Assess whether your business has the skills and capabilities required to support circular business models(s) selected, like strategic management, sales and marketing, and engineering
  • Consider whether different types of raw materials need to be sourced from suppliers, from the existing value chain or via a closed-loop system
  • Consider if your business has the requisite skills it will require in business planning, strategy development, innovation, product and service development, procurement and manufacturing, sales and marketing, and reverse logistics and return chain

A practical timeline will make the transition more straightforward and effective. You can:

  • Decide how quickly changes must be made, for example, first-mover advantage
  • Consider whether there is already a market segment or new markets seeking new circular offerings
  • Identify whether circular products would add value to existing customers or products and services
  • Consider how barriers to change (for instance, cultural or financial) could impact the business

Download our full guide on the circular economy (PDF, 220 KB)  

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