Circular Business Models (DP IB Business Management)

Circular Business Models

• A circular business model is an approach to business designed to minimise the consumption of scarce resources and reduce waste whilst maximising the use and value of resources

  • Materials and products are recycled, reused, or regenerated rather than being disposed of after use

  • A circular business model is also known as the cradle-to-cradle approach 

• In a circular business model, products are designed with durability, reparability, and recyclability in mind

  • The focus is on creating products that can be easily disassembled and their components reused or recycled

  • This promotes the use of renewable resources, reduces dependence on finite resources and minimises a businesses environmental impact 

• Adopting a circular business model requires a shift in mindset including

  • Involving multiple stakeholders including businesses, governments, consumers and investors

  • Rethinking business processes, product design, supply chains, and waste management practice

Key Principles of a Circular Business Model

• Advantages of a circular business model include

  • reduced waste generation

  • decreased reliance on finite natural resources

  • cost savings through resource efficiency

  • enhanced brand reputation

  • increased resilience to resource scarcity and price volatility

Patagonia: an example of a circular business

• One example of a business with a circular business model is outdoor clothing company Patagonia which has implemented several initiatives to promote sustainability and reduce waste

• Its circular business model focuses on extending the life of products, promoting repair and reuse, using recycled materials and encouraging responsible consumption

  • The "Worn Wear" program encourages customers to repair and reuse their clothing instead of buying new items

    • The business offers free repairs for their products and also sells used clothing through their online platform, extending the lifespan of their products and reducing the overall demand for new clothing

• Patagonia has made efforts to use recycled and environmentally friendly materials in their products

  • E.g. they have introduced a line of clothing made from recycled plastic bottles and recycled polyester and use organic cotton to minimise the environmental impact of their manufacturing processes

• Patagonia encourages responsible consumption by actively discouraging customers from purchasing products they don't need

  • E.g. advertising campaigns with slogans like "Don't buy this jacket" raise awareness about the environmental consequences of excessive consumption