New Business Models for Enabling The Circular Economy
[Editor's note: This article originally appeared in Tetra Pak's Ideas Unpacked Blog.]
New business models lie at the heart of the circular economy, a restorative or regenerative economic model in which resources are endlessly cycled back into supply chains and waste does not exist. Accenture has identified five circular business models companies can leverage – singly or in combination – to generate resource productivity improvements in innovative ways that also cut costs, generate revenue, and enhance customer value and differentiation.
The Circular Supply-Chain model is particularly relevant for companies dealing with scarce commodities, in which scarce resources are replaced with fully renewable, recyclable or biodegradable resource inputs.
Tetra Pak is committed to using renewable materials—those natural resources that can be regrown or replenished over time—to develop a 100% renewable package. Tetra Pak is implementing circular economy principles by capturing value at both the front end of the life cycle as well as increasing recycling at the end of a product’s useful life. All their cartons are made on average of 70% renewable resources, i.e. paperboard sourced responsibly. They also started using sugar-cane based plastic for their caps, closures and laminated barriers. The company, along the Carton Council, has worked to expand household access to carton recycling over 58% throughout 12,000 communities in 48 states.
Recovery & Recycling
The Recovery & Recycling model leverages technological innovations and capabilities to recover and reuse resource outputs that eliminates material leakage and maximizes economic value. Examples include closed loop recycling, industrial symbiosis, and Cradle-to-Cradle® designs, whereby waste materials are re-processed into new resources.
Through a collaborative effort, The Dow Chemical Company piloted The Energy Bag, a first of its kind program aimed at recovering non-recycled plastics and converting it to energy. Through this pilot, which took place in Citrus Heights California, 6,000 pounds of material was captured—candy wrappers, frozen food bags, laundry pouches, juice pouches, pet food bags and more—and processed into 512 gallons of synthetic crude oil. This pilot helped identify a viable model for keeping more material out of the landfill.
The Product Life-Extension model helps companies extend the lifecycle of their products and assets to ensure they remain economically useful. Material that would otherwise be wasted is maintained or even improved, such as through remanufacturing, repairing, upgrading, or re-marketing. By extending the lifespan of the product for as long as possible, companies can keep material out of the landfill and discover new sources of revenue.
Companies like Sealed Air are reimagining food packaging to prevent waste through damage or spoilage. Sealed Air’sDarfresh® vacuum skin packaging—which removes the air around food to create a vacuum—allows perishable foods such as meats to last weeks instead of days and helps reduce the amount of food that is spoiled and thrown away.
The Sharing Platform model is centered on the sharing of products and assets that have a low ownership or utilization rate. Companies that leverage this model can maximize the use of the products they sell, enhance productivity and value creation, and create new relationships and business opportunities.
Peer-to-peer sharable food networks are helping neighbors, retailers, farmers, and restaurants give away unused but still edible food. Innovative startups in this space include Ampleharvest.org, Casserole, and Leloca.
Contract manufacturing, common to many industries from aerospace and computer chips to personal care and food and beverage, uses common equipment to manufacture goods for many different companies. This model reduces barriers to entry and helps get products to market without big upfront investment in manufacturing assets.
Product as a Service
Through the Product as a Service model, customers use products through a lease or pay-for-use arrangement versus the conventional buy-to-own approach. This model is attractive for companies that have high operational costs and ability to manage maintenance of that service and recapture residual value at the end of life.
Brambles, the global supply chain logistics provider that primarily serves customers in fast-moving consumer goods, deploys a circular business model focused on pooling. The company offers containers, crates and pallets for shared use among multiple supply chain participants, which are either returned to Brambles or transferred to another participant in their supply chain network. This enables customers to transport their products through the supply chain while eliminating the financial and environmental risks of purchasing, owning, and disposing of one-way transportation platforms.New business models lie at the heart of the circular economy, a restorative or regenerative economic model in which resources are endlessly cycled back into supply chains and waste does not exist. Accenture has identified five circular business models companies can leverage – singly or in combination – to generate resource productivity improvements in innovative ways that also cut costs, generate revenue, and enhance customer value and differentiation.