A systemic logic for circular business models

The Circular Economy is gaining traction in academia, industry, and policy making as an alternative model that minimises resource depletion, waste, and emissions. To implement the concept on the organisational level, business models are an important leverage. A body of literature has emerged investigating the notion of circular business model and circular business model innovation, however, there is considerable lack of clarity about their theoretical conceptualisation. To address this and systematise the state-of-the-art of the nascent field of circular business models and circular business model innovation, we have reviewed this literature, employing systematic database searches and cross-reference snowballing. Our contributions to conceptual clarity are: (1) an overview of the history of the concepts of circular business model and circular business model innovation, (2) an overview and synthesis of definitions of circular business model and circular business model innovation, and (3) an overview and synthesis of conceptual frameworks for circular business model and circular business model innovation.

Business models have a crucial role to play in the transition to a circular economy. Circular business model innovation provides an arena for studying the creation of such circular business models and enables companies the possibility to identify new value creation opportunities, such as capitalizing on embedded value of products over multiple lifecycles. In comparison with the trajectory of traditional business model innovation literature, circular business model innovation is underdeveloped, and this paper aims to make a contribution to the ongoing theoretical discussion. Through review and categorization of 140 circular business model case examples, this paper makes a first attempt to verify previous literature and unify academic and industry understanding of circular business models. The findings are expected to be useful in advancing the field of circular business model innovation and assisting practitioners in the design and development of new circular business models. While the results suggest convergence around three circular business model types: ‘Access/Performance Model’, ‘Extending Product Value’, and ‘Extending Resource Value’, other previously identified circular business model types should not be discounted.

In view of the rapid depletion of natural resources and the associated overloading of the biological ecosystem, the concept of circular business models (CBMs) is increasingly discussed in the literature as well as in business practice. CBMs have the potential to significantly reduce the demand for natural resources. Despite their increasing relevance, the diffusion of CBMs in business practice is largely unexplored. Consequently, this article investigates the extent to which CBMs have already been adopted by large German companies. To answer this question, the annual and sustainability reports of the members of the DAX40 are analyzed for the presence of five specific types of CBMs. Data was gathered for the years 2015 and 2020 in order to describe the development over time. The results show an increasing prevalence of CBMs in the DAX companies. In addition, it is noticeable that CBM types that serve to close material cycles are implemented more frequently than those that decelerate material cycles. In particular Sharing Platforms and Product as a Service stand out due to comparatively low adoption. Potential reasons for these findings are discussed and managerial as well as policy implications suggested.

The role of artificial intelligence (AI) in achieving sustainability goals has garnered attention in academic literature. While AI has been argued to be crucial in addressing circularity challenges, organizations face challenges in configuring a business model. Designing new business calls for insights on how AI can be integrated into value creation and capture mechanisms. There is a lack of clarity on how organizations deploy AI as they transition to circular business model innovation. The purpose of the study is to explore how AI is integrated into organizational processes while adopting circular business models. We conducted online open‐ended interviews with 55 participants to explore the potential role of AI in enabling the adoption of circular business models. Our findings have implications for theory building relating to AI business model innovation and provide a novel avenue for further research on business model innovation literature. Building on a natural resource‐based view, the findings indicate that while implementing a circular business model is challenging, AI enables organizations to create, transfer, and capture value through resource efficiency and the reuse of resources. As AI technologies continue to evolve, organizations must develop adaptive capabilities to continually explore opportunities. AI enables organizations to reduce costs, develop novel value‐creation strategies, and capture opportunities, resulting in improved efficiency. Transitioning to a circular business model requires developing routines, and organizations must adapt existing systems to ensure these systems result in pollution prevention, product stewardship, and sustainable development. It is important for managers to develop organizational resources and capabilities that enable the development of AI capabilities.

Social business has emerged as a sustainable and innovative means to solve emerging social problems. Although it is gaining momentum, there is a paucity of studies on the drivers of social business models and its key success factors. Drawing on a systematic literature review and an in-depth analysis of 31 social businesses in Bangladesh, the study presents eight key drivers and four success factors for a sustainable social business model. The findings show eight key drivers for social business models including customer centricity, quality, social needs, latent demands, incidental gains, innovation through partnerships, inspirations from initiatives and collaborative eco-systems. The findings also report four critical success factors including social goals, collaboration, simplicity and start from home. Overall, this study discusses the scope of developing and sustaining social business models for empowerment, quality of life and economic growth in emerging economies.

The multi-stakeholder collaboration is one of enablers for circular business models (CBMs), involving various actors - the industry, academia, government and society or communities in the transdisciplinary setting. However, there is lack of approaches for sharing responsibilities and ownership in the circular value. The aim of this paper is to investigate existing concepts of collaborative approaches within CBMs, investigating following research questions: (1) What is the collaboration framework within CBMs, (2) What are enabling factors for collaborative CBMs, (3) How the collaboration is perceived within the tyre recycling CBMs. Findings reveal that the collaboration requires changes in the perception of the societal role in CBMs and the circular value chain. This research contributes to CBM theoretical concepts and practices. This study identifies dilemmas and the future research agenda related to the ownership of the shared circular value and the collaboration engagement.

Purchasing and supply decisions face new challenges due to resource scarcity and the urgent need for solutions. While circular business models—which focus on closing, slowing, narrowing, and intensifying resource loops to keep resources in use longer, minimize waste, maximize value, and reduce virgin material consumption—offer essential solutions, little is currently known about supply decisions within such models. This qualitative exploratory study investigates supply decisions and their associated criteria for circular business models. We focus on clothing libraries, a novel circular business model where members borrow curated garments. Drawing on insights from six clothing libraries and 10 suppliers, we developed a framework for supply decisions for circular business models. This framework shows four selection decisions as key decisions for circular business models: 1) supplier, 2) product, 3) material, and 4) supply channel. The results also distinguish between criteria for the upstream and downstream aspects of the supply chain. This highlights the importance of understanding the entire lifecycle of products and materials. While our study identifies a wide range of criteria for supply decisions for circular business models, it does not propose a fixed order for their consideration. Instead, these decisions rely on multiple sets of criteria across different levels (supplier, product, material, channel). The sequence and weighting of these criteria vary, depending on expert knowledge applied case-by-case. This approach allows supply decisions to effectively support circular business models in facilitating more sustainable resource use. As a contribution to purchasing and supply management, our study elaborates on circular sourcing and supplier selection by expanding the scope of circularity criteria and deepening the understanding of individual criteria, but also challenging the conventional approach of identifying and weighting criteria. • Presents a framework for supply decisions for circular business models. • Identifies decisions at four levels: supplier, product, material, supply channel. • Extends the supply decision criteria for circularity. • Distinguish between upstream and downstream supply chain criteria.

Circular business models in manufacturing, especially in the recycling industry, face many barriers that need to be managed and mitigated for successful business implementation. Therefore, this study aims to analyse the hierarchy of the main barriers to the implementation of circular business models in the recycling industry and evaluate strategies to overcome them. To achieve this goal, we first conducted a systematic literature review on barriers to implementing circular business models. Second, barriers were prioritized through a survey followed by an expert focus group. Building on these steps, we used interpretive structural modeling combined with a ‘matrix of cross-impact multiplications applied to classification’ to identify the hierarchy among barriers and describe their interdependencies. As key findings, 10 barriers were prioritized through a survey to identify the most important barriers for the recycling industry. The hierarchy of these barriers highlights regulation and government incentives as the most important, followed by those related to supply chain collaboration and lack of material flow indicators. Finally, internal barriers appear as high investments and associated risks. Finally, we suggest strategies to overcome these barriers based on their hierarchy. The implications of this study provide a proposal of strategies for implementing circular business models in the recycling industry, derived from the hierarchical correlation among the barriers, and can be applied in different regions through expert opinion assessment.

To aid companies in transitioning towards a circular economy and adopting strategies such as reuse, repair, and remanufacturing, the concept of circular business models has been developed. Although the concept draws on contributions from various academic disciplines, and despite its increasingly frequent use, few scholars clearly define what a circular business model is. Understanding about what makes a business model circular is diverse, hampering the theoretical development and practical application of circular business models. This study aims to help frame the field of circular business model research, by clarifying the fundamentals of the concept from the perspectives of resource efficiency and business model innovation. Expanding on these findings, a review of how the concept is used in recent academic literature is provided. It shows that a coherent view is lacking on which resource efficiency strategies classify a business model as circular. This study clarifies which resource efficiency strategies can be deemed as relevant key strategies for circular business models, and suggests a new definition of the concept. With the definition grounded in analysis of the fundamentals in terms of resource efficiency and business models, the study contributes to theoretical advancement and effective implementation of circular business models.

PurposeThe purpose of this paper is to investigate the role of the different circular business models (CBMs) in the manufacturing and service sector and apply this in the context of the food industry (FI), through a systematic literature review of related published journals and articles. The research study is designed to illustrate the impact of CBMs in the manufacturing and service sectors through a combination of real-life examples and direct references to existing literature.Design/methodology/approachThe underlying research study follows a systematic literature review approach where the relevant CBMs are explored in the context of the manufacturing and service sector (FI.) The journals most cited in the context of CBMs and their implication in the manufacturing and service sector were chosen for this study. There was no fixed timeframe applied to complete the research. A total of 54 articles were selected which referenced: discussion in the context of the concept of CBMs; different types of CBM; definition of the manufacturing sector; definition of the service sector (FI); application of different CBMs in these two sectors; and included a comparison of the application of CBMs. In total, 40 of the 54 articles were shortlisted for best relevance and used in the research study.FindingsThe underlying research study was limited to 40 articles and the data contained within them. The article search was limited to the keywords of the CBM; the implication of CBM; the CBM in manufacturing (textiles); circular business in service (FI); and comparison and application of the CBM.Practical implicationsThe final analysis demonstrates that circular business promotes sustainability by allowing companies to generate maximum return from given resources and reach zero waste targets. Greater customer satisfaction is also achieved through service innovation that cuts down negative impact on the environment. These findings are relevant and applicable to the FI.Originality/valueA review of existing literature showed that whilst there is significant research on the implications of the CBM in general, there has been little focus on the use of different CBMs specifically in the manufacturing and service industry (FI). This research study is designed to tease out the specific benefits of CBMs in this context, highlighting the contribution they can make to efficiency in both the manufacturing and service sectors (FI) through useful comparison.

The transition of a business to a circular business model (CBM) calls for significant and ongoing shifts in different business management models and strategies. However, there is a lack of research focused on the technological, financial, societal, and institutional influences on the CBM transition in small and/or medium-sized enterprises (SMEs). To address this gap, our study develops a theoretical framework for the transition towards CBM. We conducted a systematic literature review with the objective of determining the relationships among technological, financial, societal, and institutional influences for CBMs. Following this, we then established a conceptual framework that comprises these four key influences for a transition plan in the context of an innovative business model with a focus on the value proposition, value creation, and value delivery. An illustrative case example of the manufacturing industry for the transition plan to CBM was presented as well. The proposed framework is designed to lead the shift towards circular economy-oriented business models that aim to promote sustainability in business. In addition, we uncovered several potential avenues for further investigation. We expect the framework towards both contribute to the expansion of the existing body of research in the field and provide business practitioners with guidelines on the CBMs’ transition for SMEs.

The circular economy (CE) has become a prominent concept to drive sustainability transitions in business. In the CE, resource loops are narrowed, closed and slowed to deliver on the increasing demands of a growing world population. This chapter introduces the types of innovation in a CE. Trough case analysis, it describes the companies' experimentation practices with circular business models. The CE requires innovations at the process, value chain, product, business model (BM) and ecosystem level. Business experimentation has gained foothold in the start-up and incumbent business sphere and academic literature and, recently, the sustainability sphere. Experimentation has been described as a process to learn about future BMs and co-create them in practice. The chapter explains two approaches to experimentation in business: Lean Startup and effectuation. The Lean Startup is a possible approach to experimentation which gained popularity in business practice. It involves validated quantitative and qualitative learning starting with a hypothesis about the future process.

The smartphone industry faces sustainability challenges from greenhouse gas emissions and resource depletion to growing e‐waste volumes. Circular business models have been proposed as a pathway to address these issues, yet their adoption remains limited, lacking integrative assessment frameworks that connect environmental performance with business viability. This study develops and applies such a framework combining life cycle assessment, monetisation of externalities via the eco‐cost method and a structured value alignment score. Using primary data from Fairphone 5 as a case study, four scenarios with increasing levels of circularity are analysed: (S0) a linear business‐as‐usual baseline, (S1) extended use with moderate user‐led repairs, (S2) long‐life use with intensified user‐led repairs and (S3) a product‐as‐a‐service model based on manufacturer‐led refurbishment. The results demonstrate that all circular business models outperform the linear baseline in terms of both environmental impacts and monetised externalities. Incremental models that extend product lifespans through user‐led repair (S1, S2) yield significant reductions in greenhouse gas emissions (up to −46%) and eco‐costs (−36%). However, their strategic alignment is constrained by weakened consumer value propositions and original equipment manufacturing profitability. In contrast, a product‐as‐a‐service model (S3) achieves superior outcomes by internalising life cycle responsibility and aligning incentives with longevity and service quality, reflecting systemic reconfiguration of value logics. The study contributes theoretically by operationalising an integrated framework that bridges environmental metrics with strategic value dimensions to evaluate circular business models. Practically, it provides firms a structured tool for evaluating trade‐offs and advancing scalable pathways towards a sustainable circular economy.

Consumer preferences regarding product acquisition, repair, and discharge towards a circular economy: A segment-specific market simulation based on conjoint analysis.

Characterizing Circular and Open Business Models in a profit-driven environment through Business Model Patterns