Companies should play a significant role in a sustainable future, Nancy Bocken, professor of Sustainable Business & Circular Economy at Maastricht University, firmly believes. “The effects of climate change on people and the planet are becoming more evident every day. Society is facing unprecedented challenges. The way we do business is at the root of the problem. We need a new perspective; a breach with unsustainable linear business models thriving on volume over value.”
“In a linear economy, materials are used to make products that become waste after a limited time (take-make-dispose). In contrast, the circular economy is a model of production and consumption in which there is no waste; products are repaired, materials are recycled, and nature is regenerated”, Bocken explains. Her research revolves around the topic of sustainability in business. How can companies develop from linear to circular? What are the barriers, drivers, and strategies, and how can they increase their ambition levels and experiment with a circular business model?
Hampered by traditions
Bocken acknowledges that, currently, most companies still have a linear business model. “One of the major challenges is that implementation of circular strategies is often hampered by traditional business practices. Companies are designed based on a model in which they don’t have to take responsibility for a product once it leaves the factory. There is a lack of knowledge and capabilities for implementing the R-strategies (reuse, repair, refurbish, recycle, regenerate). Also, it must be affordable. If you have a product made cheaply in China and it breaks, it is easier to replace it than to repair it. The circular transition raises interesting issues for companies. Should they start producing closer to home, nearshoring? Integrate vertically? Switch from a production to a service model?”
Many flavours available
Service models can reduce environmental impact considerably. “There are many flavours”, Bocken says. “On the one hand, there is a 100% durable product sales model with warranty. The other side of the spectrum is a 100% service model, for example, selling clean laundry. The latter offers opportunities to optimise the washing process, cut costs and save the environment all at the same time.” Bocken is co-founder of HOMIE, a company providing home appliances like washing machines on a pay-per-use basis. “We found that a pay-per-use business model with differential pricing (the low-temperature setting is cheapest) raises awareness. It significantly reduces the temperatures of the wash and the number of washes per week, resulting in a 25% energy reduction. The same model can be applied to cars and many other energy-using devices.”
The most complex circular service model is the refuse-model; companies that design long-life products and encourage their customers to continue using the products by offering repairs and upgrades, encouraging them to buy less in total. To date, few companies are able to design profitable mechanisms to apply these kinds of radical strategies. However, examples such as Fairphone and outdoor clothing brand Patagonia prove that they are possible.”
Customers, too, can make the difference
“What customers do matters, too”, Bocken states. “Less flying, switching from cars to public transport, eating more plant-based, seasonal and local food, and buying less stuff in general, like clothing. Insulating your house and optimising the use of electrical appliances also support a sustainable lifestyle. I notice that people are becoming better informed. In the daily news, they can see the effects of climate change, waste and the images of plastic floating in the oceans. In the end, and for a large part, it will be the customer who can persuade the industry to make better products that last longer and have less impact on the environment.”
Circular Economy Package
According to Bocken, the question is not whether companies will switch to more sustainable business models, but when. Nancy: “Sooner or later, they all have to make the move. Because they want to do the right thing, because their customers expect it or because legislation demands it. The EU’s Circular Economy Package is coming, including extended producer responsibility, the customers’ right to repair and spare parts availability. For example, Ikea has already launched a spare parts platform. At the same time, companies increasingly recognise that sustainability is also about making money. A service model where you deliver a higher quality product that lasts longer also offers more possibilities for customer contact and customer loyalty.”
Circular X
To facilitate large and small companies and stimulate awareness among industry, governments and society, Bocken was one of the founding members of the Dutch Academic Network for the Circular Economy. She is also Principal Investigator of the research project Circular X. “This project is about experimentation with circular service business models. It’s funded by the European Research Council and the aim is to facilitate a diverse range of organisations with the implementation of the circular economy. On the website, we offer open-access tools, case studies and best practices. The website is well-visited by universities for input for their sustainability courses. Companies use the website for inspiration and to book workshops with us. In the workshops, we create awareness, delve deeper into the various circular business models and experiment with them. For instance, in the Circular Economy Masterclass (November 13-15 in Maastricht), we teach companies how to innovate for the circular economy, assess and improve their impact and let them discover how collaborations with government and other businesses in the supply chain contribute to achieving circular goals.”
Four circular strategies
Bocken created four circular strategies to accomplish the transition from a linear to a circular economy: narrowing, slowing, closing and regenerating resource loops. “Narrowing the loop is about minimising resource use per product through efficient design and production processes using fewer resources. Slowing the loop is about making products that last and ensuring the possibility for product lifetime extension. This strategy would ideally lead to sufficiency or using fewer products in total over time. Closing the loop is about recycling or reusing materials. Preferably, a product is used many times before it is recycled. Finally, regenerating loops is about using renewables and restoring the natural environment within which the business operates through, for example, regenerative construction practices. In Circular X, we research the efficacy of the various circular models and strategies. Our studies show that corporations increasingly address environmental challenges. We see that leading companies, such as Unilever, Philips, Ikea, H&M and many others, are experimenting towards a circular model. H&M, for instance, collaborates with a non-profit clothing repair organisation, and Unilever is part of reusable packaging trials. And, let’s not forget many smaller companies and start-ups that focus on sustainability issues, such as rescuing food and other products, reusable packaging, 100% recyclable and rental products, etc. It makes me feel positive.”
