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Business model innovation accelerates circularity

For a circular future to become a reality, companies must redesign products and embrace new customer relationships with customers. That’s particularly true in apparel and electronics.

circularity illustration

Image by Sophia Davirro/GreenBiz

This article is an excerpt from GreenBiz Group's 16th annual State of Green Business, which explores sustainable business trends to watch in 2023. Download the report here.

Supply chain shortages, a hunger for critical minerals and a planet stretched to its breaking point. These macro trends have kneecapped whole industries over the past few years. That’s leading companies to rethink how we make, sell and interact with products.

Enter the vast opportunity of business models that can decouple growth from extraction.

Some of these models have been profitable for decades. Examples of remanufacturing in practice are Davies Office (furniture), John Deere (farm equipment) and Caterpillar (construction equipment). Others, such as clothing resale, have been a small part of their sector for ages (such as thrift shops), but are growing quickly through both independent platforms and directly through brands. Pilots and experiments abound in this space, but there’s still plenty of room for innovation.

One business model innovation could be called "redesign and rethink." It's a combination of product design and business model innovation working hand-in-hand. If products are redesigned for circularity, the concept goes, then offered through subscription services or with takeback programs, they can be recovered and put back into productive use or recycled.

A recent example is the On CloudNeo shoe made from a single material and offered only through subscription. Look for growth in this space as more companies experiment. The difficulty will come as companies such as On try to scale, which requires cooperation and reverse logistics hubs.

Another innovation is a return to the past; call it the "milk bottle method." New brands and old stalwarts alike are working to scale up refill and return models to reduce packaging and deliver only what’s needed to customers. Still another shift in business models includes grocery store chains increasing space devoted to bulk items and partnering with brands to deliver new refill options for shoppers. In both cases, the biggest challenge may be overcoming the customer’s desire for the convenience they’ve grown accustomed to with packaged and (heretofore) disposable products.

A third model might be called the "Ouroboros." This option, where a company becomes its own supplier, could be a game-changer in spaces where there is no next life for products. One example is the investment major roofing companies such as GAF and Owens Corning are putting into recycling asphalt shingles. While work is still to be done to improve the processes, these investments hold promise to bring new value to an entire waste stream. Similar opportunities exist for electronics, apparel and a number of other industries where reliable recycling infrastructure is lacking.

For a circular future to become a reality, companies must redesign products and embrace new relationships with customers. That’s particularly true in apparel and electronics due to the increased public awareness about the massive waste in both sectors. Transitions toward refill and reuse in food packaging and household items, while much needed, may come more slowly due to the challenge of overcoming convenience biases among users. The question of how to get from here to there is an open one, but we are looking forward to progress.

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