Roadmaps and business models: key building blocks of a circular economy
Munich, 07 February 2022
As part of the World Circular Economy Forum (WCEF) 2022 programme, the Circular Economy Initiative Deutschland (CEID) hosted two new side events under the heading “From Ambition to Action – The Circular Economy Roadmap for Germany and selected deep dives into Circular Business Models”. These online events focused on business models for the circular economy and the experiences of different European countries with implementing their circular economy roadmaps.
Circular business models
The side event “Circular Business Models: Overcoming Barriers – Unleashing Potentials” addressed the question of how to overcome barriers to the circular economy and unleash its potential. The CEID “Circular Business Models” working group published a report of the same name in November 2021. The research undertaken by the working group was introduced by Erik Hansen (Institute for Integrated Quality Design, Johannes Kepler University Linz), who co-led the group with Patrick Wiedemann (Reverse Logistics GmbH). The working group’s goal was to devise a scientifically based practical manual for the successful implementation of business practices for advancing a circular economy (CE). The working group identified 22 actor-specific circular business models (CBMs) and described their interaction in business ecosystems. It also outlined the existing barriers to CBMs and identified their digital and regulatory enablers. Finally, it formulated a series of concrete recommendations for decision-makers in government, industry and science geared towards accelerating system transition towards a CE.
From linear to circular business models
The subsequent panel discussion with Patrick Wiedemann, Christian Schiller (cirplus GmbH) and Stephen Jamieson (SAP) provided an opportunity to take a closer look at various aspects of this topic. As well as addressing the roles and responsibilities of the actors and the need to switch from product-centric to service-based business models, the discussion also highlighted the fact that a circular economy relies on different disciplines and industries being prepared to cooperate with each other. It is important to find ways of rethinking products, services and business processes and implementing the resulting new solutions. The lack of sufficient successful use cases makes implementation especially challenging. Too many people are still trying to modify existing linear business models for a circular system rather than completely reimagining the entire product life cycle in terms of reuse, repair, reconditioning/remanufacturing and recycling. While there are numerous barriers for established companies, young businesses and start-ups have the opportunity to develop and implement circular processes and business models right from the outset.
The keys to success: digitalisation, cooperation and the right mindset among the actors
All the participants agreed that much more must be done to bring the actors across the entire circular value chain together in order to highlight the benefits and analyse weaknesses such as potential rebound effects. From materials and finance to regulatory issues, there are many unresolved questions that can only be answered collectively. There is also a consensus that digitalisation is key to transparent circular strategies, since it allows processes and supply chains to be tracked, full product data to be recorded and product passports to be generated. But it is not all about technological advances – the mindset of circular economy actors is also critical. Companies and other actors must be open and willing to assume responsibility for the entire life cycle of their products and services in accordance with extended producer responsibility (EPR) principles. This will be key to initiating and consolidating the desired transformation process in industry and society as a whole.
The second online side event “Roadmaps towards Circularity– Experiences from the Netherlands, the Nordics and Germany” looked at different national circular economy roadmaps and implementation strategies. As well as Germany, it focused on the Netherlands and Scandinavia, countries that are all further on in their journey towards a circular economy. Head of the CEID Office, Susanne Kadner, kicked off the event with a presentation on the Circular Economy Roadmap for Germany, outlining the potential of different circular measures for reducing greenhouse gas emissions and saving resources. She also presented the ten action points for achieving the transition to a circular economy. These are the product of two years’ work by the CEID working groups. They include the implementation of circular business models, the development of standards, greater transparency through the use of digital technology, regulatory amendments and economic incentives. The development of appropriate education and training will also be key to the success of a circular economy.
Different approaches to implementing the roadmaps
The subsequent panel discussion highlighted the need for greater global awareness of the circular economy and for more knowledge sharing between the different actors. Panellists Cathrine Barth (Nordic Circular Hotspot), Freek van Eijk (Holland Circular Hotspot) and Michael Kuhndt (Collaborating Centre on Sustainable Consumption and Production (CSCP)) discussed the European and global dimensions.
The Netherlands is one of the countries currently leading the way in the transition to a circular economy. After the Paris Climate Agreement was signed in 2015, both government and industry in the Netherlands took the initiative in promoting a circular economy model in order to reduce emissions and meet the climate targets. Policymakers and the business community opted for a pragmatic approach, setting themselves the clear goal of building a circular economy without yet knowing the details of how this might be achieved. The actors were brought together through both top-down and bottom-up processes, and the government provided support right from the outset, especially for businesses that had already incorporated circular economy strategies into their business models. The fact that motivation and a willingness to cooperate existed at several different levels meant that all the actors rapidly acquired an extensive knowledge of the topic. Norway and its neighbours closely monitored developments in the Netherlands and were quick to start sharing information among each other. Taking inspiration from the Dutch approach, they used the lessons learnt as a blueprint which was then adapted to local conditions in Scandinavia (Norway, Finland, Sweden, Denmark and Iceland). Compared to the approach of the Circular Economy Roadmap for Germany, the resulting strategies are less focused on an overall circular economy system and more on creating the conditions and meeting the requirements for a circular economy in key individual sectors and industries. However, it was also emphasised during the discussion that, with its systemic approach, the German CE roadmap clearly sets out the overarching priority areas for the transition to a circular economy, providing an easily understood overview of how the transformation can be structured. The different national activities and transnational initiatives demonstrate the vital importance of extensive cooperation at different levels of government, industry, science and civil society.
Building trust: the first step towards creating a circular economy
Mutual trust is key to productive cooperation, especially in areas affecting competition and core aspects of companies’ business models. All the participants stressed the importance of taking the time to implement measures that build trust and thus facilitate cooperation.
Another insight was that as well as accumulating and exchanging knowledge about the CE, it is vital to provide consumers with wide-ranging, factual information about the opportunities that it offers. Curricula and training programmes must also be adapted to reflect the requirements of circular models. Moreover, the fact that many regulatory requirements and legal frameworks are still based on linear economic models can hinder the introduction of a circular system.
Accountability, responsibility and liability are all clearly defined and delimited in the linear economy. But these limits are inappropriate for a circular system, where a holistic approach must be taken with regard to product design and responsibility, encompassing everything from the initial concept to end-of-life. While a start has been made, implementation needs to progress much faster. Local and regional initiatives could lead the way in this regard. As far as Germany is concerned, it is hoped that the new government will be ambitious in its implementation of the circular economy commitments contained in the coalition agreement.