Book Review: Binder, J., & Braun, M., (2024), The Circular Business Revolution, Pearson

These days, we are seeing a clear shift from a so-called linear economy to a circular one and are increasingly focusing on regeneration outcomes. Linear business models are more and more of the past, while the circular, regenerative economy is becoming a strong reality across multiple sectors and economies worldwide. The Circular Business Revolution is a playbook for us as we dive into this tide and learn how to apply the principles in our own business initiatives.

As a start, circular business models provide us with a license to innovate and with innovation comes progress. This circular promise can be turned into a business reality in four steps:

-       Understand the signals of change – broad sensing!

-       Envision a circular, regenerative future – think ahead!

-       Explore and prioritize circular business models!

-       Leverage organizational enablers for progress.

The authors envision five circular business model archetypes, which are useful for business leaders:

-       Optimize resource use.

-       Capitalize regeneration and restoration.

-       Valorize waste.

-       Monetize extended product life.

-       Servitize products.

There seem to be fundamentally two different types of signals for change, and these are even applicable beyond the circular economy discussion since they concern our general ability to embrace or accept change:

-       An outside-in awareness of one’s ever-evolving operational context and environment.

-       An inside-out understanding of one’s value-creating system.

Let us first consider the latter in more detail, with our more traditional business-as-usual, linear system as the starting point.  There are at least five major challenges:

-       Overuse of costly and scarce resources.

-       Emissions (CO₂) and pollution.

-       Generation of significant low-value waste.

-       Low asset utilization.

-       Obsolescence/loss of value.

Now, back to the outside-in perspective. There are many signals for change when it disrupts one’s supply chain:

-       Resource scarcity/price volatility.

-       Increased reporting requirement to disclose environmental “footprint”.

-       More focus on ESG issues (environment/society/government).

-       Changes in one’s competitive environment (data/computer-based models/AI)

We can clearly envision supply chain disruptions! Should this “new” outside-in perspective be embraced or revisited? To be open to this seems important. It may be too late to be a pessimist! The future may be more and more founded on our ability to decouple ourselves from non-renewable resources.

Many different stakeholder groups are latching onto this - consumers, employees, investors, and lawmakers. New technologies emerge in the ways electric energy is being generated. Solar or wind-generated energy, with a “zero footprint”, is not cheaper than conventional electricity generation based on the burning of fossil fuel.

To dig deeper into this regenerative future, the concept of net positive seems central. Businesses should give more to the world than they take. They should find new ways to create value that are sustainable, regenerative and restorative. There are three key principles here:

-       Eliminate: Waste and pollution should be on the way out!

-       Circulate: Materials and products should be circulated at their highest values!

-       Regenerate: Operate in harmony with regenerative natural systems.

A way to further envision how this might work might be to consider the so-called ten circular R-strategic elements:

-       Reface: substitute the same function with a different product

-       Rethink/regenerate

-       Reduce

-       Re-use

-       Repair

-       Refurbish

-       Remanufacture

-       Repurpose: discarded products/pats may find new life in different functions.

-       Recycle

-       Recover

But it may still be a challenge of how. The government could have an important “say” here, by stifling taxation from focusing on our incomes to a lesser degree, with more focus on resources used. This could then lead to a higher degree of focus on design. In addition, we may draw parallels with how we go about embracing ventures, i.e., designating projects focused on the circular economy explicitly, to give it more of a focused attention.

The authors cite several examples from corporations regarding this – Ørsted, Luck, Alpro, Vande, Haniel (“readiness for future generations”), Siemens and Johnson Matthey. While it may be difficult to come up with a totally common denomination for how these companies come up with products/services that are easily repairable, refurbishable or recyclable, there seem to be three common factors: trust, purpose and a clear road map.

Let us now return to the three key principles (eliminate, circulate and regenerate). We shall see how each of these factors might have impact in various business cases. As we noted, there can be five business models in a circular economy. For each of these, the authors identify three special cases, bringing us to a total of 15 settings. And for every one of these, there are specific corporate examples, as well as discussions of pitfalls to avoid.  We shall not venture into the specifics of each setting in this review, however, but merely refer to the book (pp 70 – 139). We shall however report on each of the 15 headings.

A.       Optimize resource use

-       Green operating

-       Secondary and decarbonized materials— for instance, Holcim's development of software for minimizing the use of non-recyclable materials when constructing new buildings.

-       Bio-based materials— for example, the Finnish paper maker Stora Enso’s various types of wood-based packaging materials – paperboard; corrugated; molded fiber packaging.

B.       Capitalize on regeneration and restoration

-       Regeneration premium— such as fashion brand Eileen Fisher’s use of organically grown cotton fibers in its clothing collections. This fiber is regenerative!

-       Ecosystem service solutions— like Nestlé’s water producer, Perrier, which pays farmers to protect its water basin by not using pesticides, thereby ensuring cleaner water.

-       Regenerative infrastructure.

C.      Valorie waste

-       Waste-to-value— an example here might be the Danish firm Rockwool taking back and recycling its insulation.

-       By-product utilization.

-       Secondary material market platforms.

D.      Monetize extended product life

-       Repair and upgrade— such as Caterpillar, running an advanced service that repairs, rebuilds, remanufactures and retrofits its earth moving equipment.

-       Recommerce— an example is Walmart refurbishing and reselling pre-owned electronics and appliances.

-       Re-use and reverse logistics ecosystem.

E.        Servitize products

-       Pay per use— as in the case of the Swiss maker of heavy construction machinery and tower cranes, which charges a pay per use. Volvo is another example, which offers a monthly subscription.

-       Pay per outcome— for instance, the Liechtenstein-based firm Hilti offering a fleet management solution for their construction tools.

-       Sharing/pooling platforms— i.e., Uber, with its system that allows passengers to share taxi rides.

So, we see that there are five circular business model archetypes, within which a total of 15 business model patterns are embedded. An exploration of these business model archetypes and patterns should suffice to identify a comprehensive opportunity set. These may range from quick wins to transitional opportunities, i.e., new activities that can be completely “revolutionary”.

Having identified our business model archetypes, with its embedded business model patterns, the key issue now becomes how to move toward implementation, i.e., action. The authors suggest a so-called “circular readiness scan” for this, which firstly consists of having a clear strategy. Examples from Bosch (to design products and services that spark enthusiasm), Lego (to clean used bricks and redistribute them to disadvantaged schools), Nespresso (to recycle aluminum capsules for use by Caran d’Ache or Victorinox), and others come to mind.

Execution becomes critical. There are three types of drivers here— those focused on economic value (such as cost savings or affordability), functional value (such as quality or flexibility), and emotional value (such as reduced CO₂ emissions, improved animal welfare, etc.).

Such drivers may become the backbone of the so-called “life cycle analysis” (LCA). Examples are given regarding how firms such as Unilever or Logitech make use of LCA. Two issues should then be addressed:

-       How are sustainability and circularity typically organized?

-       How can new business model initiatives be embedded?

This leads us to the third critical aspect of implementation, the people. It is important to bring together passionate individuals who see their roles as drivers in the circular economy, often across different business units. Good examples here are the management and teams from Patagonia (we are in business to save our planet and to use business to inspire solutions to the environmental crisis), and Lombard Odier, the Geneva-based private bank, with its Circular, Lean, Inclusive and Clean (CLIC) approach to investing.

So, to move from idea to action requires a clear implementation plan and to build a set of main enablers. But this is not easy! Herman Hesse said it well, however: “You have to try the impossible to achieve the possible”. Hopefully, evolution will take us towards green growth rather than de-growth, and towards an inclusive circular economy.

This book is inspiring— practical, actionable, and written to deliver results. The issues that are raised are timely. Highly recommendable!