We recently engaged in a conversation with Raphael Schranz, a circular economy specialist who possesses a background in waste management and has worked in complexity analysis for the implementation of a circular economy in Europe through the shared green deal arena hosted by the Dutch Research Institute for Transitions. Fueled by a deep passion for sustainability Schranz has evolved into a self-employed circular economy consultant with experience helping transform thousands of businesses towards a model of sustainability.
Schranz’s expertise unfolds through three core services. His educational programs illuminate circular economy principles, along with the integration of advanced technologies like blockchain and AI. Additionally, his circular mapping processes visualize resource flows, pinpointing areas for improvement. Finally, his strategic expertise merges sustainability aspirations with pragmatic business strategies, fostering comprehensive transformation to reduce emissions and costs for companies, organizations, and institutions.
In this interview, Schranz sheds light on the Circular Business Model, practical steps businesses can take, and the potential for a regenerative future.
Circular Business Models Vs. Linear Business Models
In the pursuit of clarity: Differentiating Between Linear and Regenerative Models
For those seeking a clearer understanding, let’s clarify the differences between linear and circular business models. In essence, a linear business model adheres to a ‘take, make, waste‘ approach—an inherently linear logic structure in a given production system. In contrast, a circular business model embodies a proactive shift, aiming to eradicate waste, circulate resources, breathe new life into, and regenerate the environment.
Source: pbl.nl
How to understand the impact of a business model?
Start: Examining resource flows
Examining circular business models by considering resource flows reveals their core nature. These models achieve their goals by orchestrating a delicate balance: they slow resource consumption by extending product lifetime, narrow resource usage to achieve equivalent outcomes with less, and, critically, close resource loops. This closure describes the reintegration of matter and energy to foster a regenerative loop that strengthens the environment.
The pivotal transfer of liability: The Liability Loop – A Key Differentiator
At the heart of this distinction between linear and circular business models lies a crucial factor: the transfer of liability. In linear models, liability for products often shifts to downstream stakeholders, such as wholesalers or customers, upon sale. In contrast, circular business models establish a liability loop—where product liability circles back to the producer when the product’s usefulness wanes. This innovative approach yields substantial environmental, economic, and social advantages.
Circular models wield their magic through waste-minimizing design choices, paving the way for a cleaner environment. Moreover, they foster predictable revenue streams, fueling economic prosperity. By nurturing job creation in diverse sectors, these models also sow the seeds of social well-being.
Advice on Navigating Circular Transformation for SMEs
Embracing Change: A Blueprint for Small & Medium-sized Enterprises (SMEs) Entering the Circular Economy
The First Step: Waste Stream Analysis
For small and medium business owners stepping into the circular economy, it all starts with a closer look at their waste streams. Waste isn’t just waste in this new way of doing business—it’s a signal of something to improve. Find out what products and materials end up as waste, and explore ways to replace them with better options in alignment with circular design principles. This not only saves on disposal costs but also sets the stage for creating value loops. These loops rely on qualities like durability to extend product lifetime.
Shifting Perspectives: A Mindset Makeover
Changing how you think about your products is vital. Instead of just selling things, shift your focus to delivering performance. Imagine an economy where products are rented, used, fixed up, and then rented again. This holistic mindset shift is part of a bigger move towards a sharing economy ethos, moving away from mass production and toward smarter, more sustainable use and renewal.
Economics of Transformation: Balancing Investment and Returns
Recognizing the need for investments is key. As you transition to circular practices, you’re not just putting in time and money—you’re also making choices about what you buy. Circular operations thrive when investing in circular-design-centric resources. The silver lining, however, is that these investments yield significant returns, in the long-term, by reducing disposal and resource costs. A notable avenue is reducing primary resource expenses through the recirculation of products.
Facing Financial Hurdles: A Path Forward
Budget limitations often worry small business owners when embracing circularity. While the investment landscape might not always be perfect, pragmatic approaches remain. Seek funding opportunities and explore partnerships with investors who align with circular goals. Though the liquidity in global markets is currently low (as of summer 2023), a host of changes can be initiated with careful financial allocation. Keep in mind that every change requires some investment, but the long-term benefits are worth it.
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Navigating Circular Transformation: A Practical Guide for SMEs
Taking the First Steps: Tailoring Circular Approaches for Different Sectors
Launching into a circular business model involves industry-specific strategies. While universal methods like slowing, narrowing and closing of resource loops apply, customization is key due to the diverse landscape of the circular economy.
Building a Solid Foundation: Waste Prevention and Design Choices
Start with waste prevention and resource assessment. Transition products from sale to rental, prioritizing durability to sustain circular loops. Weak products disrupt the cycle, while durability fosters a resilient foundation.
Practical Initiatives: Embracing Circular Energy and Resources
Extend circular initiatives to energy systems, storage solutions, and renewables. Shifting to biogas production and renewables saves costs while harnessing waste as an energy resource.
Charting the Course: Assessment and Alternatives
Begin your circular journey by assessing waste and inefficiencies. Identify alternatives grounded in longevity, durability, and waste reduction.
Shaping the Future: Predictions for Circular Economies
With only 7% of businesses currently embracing circularity, we asked Raphael what it would take to push this up to 50%
The future envisions a circular economy where public and private sectors collaborate extensively. To make this goal into a reality, the following steps are essential:
Private businesses, spearhead innovation, designing products with circular lifecycles, and embracing repairability.
Circular design integration, lifecycle assessments, and supply chain enhancements are essential for futureproofing our industries & the environment.
Encouraging rental and sharing models fosters longevity, curbing constant production and resource extraction.
Private investors play a pivotal role, in supporting startups and sustainable technologies.
Governments create and implement policies to incentivize circular practices through eco-design, standards, and extended producer responsibility.
Collaboration and stakeholder engagement, orchestrated by governments, drive collective progress.
Interested in starting your company’s pivot towards a sustainable business model?
Connect with Raphael on LinkedIn
Check out his website: www.ceconomyc.com
