Fraunhofer Institute for Production Systems and Design Technology
Fraunhofer Institute for Production Systems and Design Technology

Developing Circular Business Models

Four steps to more sustainable corporate governance

Series of workshops supports SMEs in their transformation to a circular business model

The current linear economy is characterized by the raw material extraction, consumption of resources and subsequent disposal of resources. The negative environmental impact of this model is immense. Extracting and processing naturally occurring resources causes the largest share of greenhouse gas emissions, biodiversity loss and water consumption worldwide. A circular economy would be able to decouple economic growth from resource consumption and achieve a more sustainable future. However, to make entire economic systems circular, the level of corporate business models must also be considered.

Current studies reveal that although many companies consider developing towards a circular economy an opportunity for their existing business model, a similar number of companies are unable to evaluate the implications for their own business model. Furthermore, they lack the skilled employees and the know-how to implement the transformation.

With our workshop series, we help you to overcome these challenges and support you with close guidance in successfully transforming to a circular business model.

What are circular business models?

Circular business models are a central component of the circular economy. They aim to use resources more efficiently and minimize waste. This distinguishes them from linear business models, in which products are disposed of at the end of their useful life.

They promote reusing, recycling and reprocessing materials. This sustainable value creation significantly reduces waste and promotes a better use of raw materials. This is not only sustainable, but also reduces costs for companies.

Specific development measures for implementation


To successfully implement circular business models, the existing business model is analyzed using the Business Model Canvas. This helps to identify and define potential for circular improvements.

To do this, we use tools we have developed and tested together with industry partners. The central modules include:

  • a general guide to the procedure for developing circular business models
  • various instruments for diagnosing and designing circular business models
  • a catalog with over 40 circular business model patterns and practical examples
  • checklists, templates and tools for implementation in companies

The result is a manageable roadmap with specific development measures.

Four steps to a circular business model

Successfully developing and implementing a circular business model happens in four main phases:

Four steps to development and implementation

Step 1: Understanding the business model

First, a general assessment of the existing business model is carried out, along with an analysis of strengths and weaknesses. A detailed analysis using the Business Model Canvas (value proposition, customer relationships, resources, etc.) provides a clear and comprehensive understanding of current operations.

Step 2: Extended examination of the business model from a circular economy perspective

In the second step, the Business Model Canvas is used to identify elements that already support circular economy practices. It also identifies elements that offer potential for circular economy improvements.

Step 3: Selection and prioritization of circular business model patterns

Based on the insights gained in the previous step, a two-stage analysis of the business model elements is used to select and prioritize suitable circular business model patterns from an extensive catalog.

Step 4: Deriving measures for implementing circular economy principles

The final step involves planning and realization measures to implement the selected business model patterns.

From business model patterns to circular business models

The Business Model Canvas (center image) is a common method for visualizing a company's business model in a summarized way. At its core is the value proposition, i.e. the products or services that are produced or distributed. In addition, the company side describes all aspects needed for the value proposition: the key partners, resources and activities. It also includes the costs incurred. The customer relationships, segments and distribution channels, in conjunction with the revenues, define the market side and thus describe how the company operates in its environment.

In the context of the circular economy, there are five principles that can transform a business model in a circular way (product service systems, life cycle extension, collaboration platforms, circular inputs, resource recovery). Individually suitable business model patterns derived from these principles are evaluated together in the workshop series and form the basis for the definition of strategic measures at the end of the support process.

Further information on circular business models

 

© Circular Economy Solutions GmbH

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Difference between a business model and a business model pattern

A business model is always company-specific. It describes how a company functions and how it creates value. It defines the resources, activities and partnerships needed for a value proposition and describes the company's environment through customer relationships, segments and sales channels.

Business model patterns show how business models work in general. These templates are independent of industry and organizational size and are therefore defined in a way that is as universally valid as possible. With clever design and adaptation, suitable business model patterns can be applied in any company or organization.

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