Circular Economy Business Models: A Critical Examination
AbstractIn a recent paper, we outlined the circular economy (CE) perspective and its compatibility and complementarity with institutional economics. We traced the CE notion to Kenneth Boulding’s emphasis on the need for humans to live in harmony with an ecosystem that has a finite quantity of raw materials and limited capacity to sustain itself in the face of pollution. And we suggested that a dialogue among CE researchers and institutionalists could help humanity move in the direction Boulding described.
But our paper also observed that some CE proponents give so much attention to the business case for alternatives to the linear economy perspective (of “take, make, and dispose”) that they have decoupled the CE notion from its attention to ecosystem sustainability. In this follow-up paper, we highlight the decoupling through a critical examination of CE business models, drawing on our review of over 250 enterprise cases discussed in the CE literature. These models include pay-per-use (while the product remains enterprise property), product-life extension (via repair or refurbishment and resale), and recycling.
Such business models have the potential to yield enterprise success. On their own, however, the models say nothing about ecological sustainability—and an enterprise’s aim instead becomes profitability and business growth by means of increased production efficiency, risk mitigation, and pursuit of new revenue opportunities. What’s needed is attention to what institutionalists call “higher efficiency,” and that requires strategic action and systemic changes at the societal level by means of public policy.