Management Perspectives

Why and how is the world better off because your company is in it? This question, posed by Paul Polman and Andrew Winston, challenges business leaders to think beyond profit and consider the broader impact their companies can have on society and the environment. In today’s dynamic business environment, companies must shift away from purely profit-driven models and embrace sustainability as a core value, with a business and operating model that contributes positively to the planet, enables long-term economic success, strengthens resilience of the value chain, and builds deep customer relationships. Embracing the circular economy mindset and transitioning to a circular business model offers a robust framework for achieving this, presenting opportunities for businesses to thrive.

Understanding the signals for change Most companies today operate within a linear model— extracting resources, producing goods, and generating waste. While this approach has driven economic success, it has also led to significant environmental challenges such as resource depletion, pollution, and climate change: the ‘triple planetary crisis’ we face as a society. Business leaders are increasingly aware that their current operations will face disruptions over the next decade due to changing regulations, consumer demands, and environmental constraints. Nature risk is becoming business risk.

Recognising the limitations of the linear system and the urgent need for transformation is crucial. Traditional models are becoming unsustainable, and companies must adapt to remain competitive and relevant. This shift requires rethinking value creation, focusing on sustainable practices, and preparing for a future where business success is intertwined with environmental stewardship.

Envisioning a circular and regenerative future Crafting a circular and regenerative vision is not just about setting targets; it is about envisioning a future where your company thrives while positively impacting the planet. This vision acts as your guiding north star, blending environmental ambitions like achieving Net-Zero emissions and embracing circularity with business goals such as growth, resilience, customer value, and innovation. It is a dynamic journey that requires commitment, collaboration, and a readiness to challenge norms.

By defining this compelling vision, you position your company as a leader in the circular economy, driving transformative change and setting new industry standards. In a circular and regenerative future, your business operates within a closed-loop system where products are designed for durability, reuse, and recyclability. Waste is minimised, and resources are regenerated or repurposed, creating continuous value.

For example, innovations like product-as-a-service models or regenerative sourcing not only reduce environmental impact but also enhance efficiency and adaptability. Your business optimises for resource productivity. You make clear design choices that enable circular resource flows. Envisioning a circular and regenerative future is not just about sustainability; it is about seizing opportunities to lead in a rapidly evolving global landscape. It positions your company at the forefront of positive change, where economic prosperity and environmental stewardship drive lasting impact. Through ambitious goals, strategic alignment, and new partnerships, your company can chart a path toward a resilient, innovative, and sustainable future.

Bridging the gap: Circular business model innovation Transitioning from the unsustainable status quo to a circular economy requires innovative business models that align with sustainability principles and provide tangible economic benefits. Building economically viable, circular business models can be the driving force of the transformation. Here are five key business model archetypes that can help your company thrive in a circular and regenerative future:

1. Optimise resource use: Business models that optimise resource use focus on greening operations and integrating secondary, decarbonised, or bio-based materials. These models lead to cost savings, increased resilience, improved reputation, and superior product positioning. For example, Interface, a global leader in modular flooring, integrates recycled materials into their carpet tiles and employs energyefficient processes, significantly reducing its environmental footprint and enhancing brand reputation.

2. Capitalise regeneration and restoration: These business models integrate regenerative production principles at their core, often involving practices like agroforestry and soil health initiatives. They aim to restore and regenerate natural ecosystems, aligning with land restoration efforts and emerging credit schemes. For instance, Dr. Bronner’s, known for its organic personal care products, sources materials from regenerative organic farms, supporting soil health and biodiversity while creating a resilient supply chain.

3. Valorise waste: Models that valorise waste focus on extracting value from resources that would otherwise go to waste and efficiently utilizing by-products. They create secondary marketplaces for the exchange of secondary raw materials. A case in point is FREITAG, which creates bags and accessories from discarded truck tarps, turning waste into durable, stylish products and promoting a circular economy.

4. Monetise extended product life: These business models revolve around providing maintenance, repair services, and product upgrades. They focus on refurbishing or reselling products, guiding them through multiple sales cycles and developing takeback and reuse ecosystems. Consider the well-known sustainability leader Patagonia, which encourages customers to trade in used gear and buy refurbished items through its WornWear program, extending product lifecycles and reducing waste.

5. Servitise products: This archetype emphasises the transition from product ownership to access, offering services based on usage or outcomeperformance rates. It results in increased utilization, improved unit economics, and prioritises quality and repairability.

An interesting example is Swapfiets, which offers bicycles as a service in urban areas, providing maintenance and repairs for a monthly fee, ensuring efficient use and high-quality transportation options.

Practical steps for preparing your company for the circular economy

Transitioning towards a circular business requires 10 practical steps that integrate sustainability into everyday operations:

1. Reflecting on your purpose: Start by revisiting your company’s mission and values. Consider how they can evolve to encompass a broader commitment to sustainability and positive impact. Your purpose should inspire and guide your entire organisation.
2. Integrating your circularity vision into strategy: Embed your vision into your business strategy, ensuring it guides decision-making at all levels. Align your operational goals, performance metrics, and incentives with your vision for a circular and regenerative future.
3. Engaging your team: Involve employees at all levels in the visioning process and build an internal circularity community. The teams’ insights and buy-in are crucial for creating a vision that resonates throughout the company. Host workshops, brainstorming sessions, and discussions to gather diverse perspectives.
4. Assessing impact: Conduct comprehensive assessments to understand current environmental and social impacts, across the full product life cycles. Identify areas for improvement. Define clear, measurable environmental goals. These might include achieving Net-Zero emissions, transitioning to 100 per cent renewable energy, or implementing closed- loop systems for product life cycles.
5. Monitoring progress: Implement systems to monitor and report progress toward sustainability goals. Regularly communicate environmental and social performance to stakeholders to maintain transparency and accountability.
6. Innovating business models: Explore and adopt circular business models that optimise resource use, regenerate natural systems, and extend product life cycles. Examples include transitioning to renewable materials and offering productas-a-service solutions.
7. Investing in digital technologies: Invest in digital technologies that support circularity, such as digital passports for supply chain transparency, remote monitoring to extend product lifecycles, or advanced data analytics to improve customer engagement. Technology can be a critical enabler for circular transitions.
8. Building circular ecosystems: Foster a culture of sustainability and collaboration within the organisation and build external partnerships. Build a solution ecosystem, which involves partnerships along your supply chain to deliver your offerings. Invest resources in enabling ecosystems that help you to co-shape framework conditions and leverage support networks.
9. Enabling circularity ‘by design’: Design decisions influence a significant part of products’ environmental impact over their lifetime and are a key enabler. Re-evaluate product design and material choices, but also service design components for enhanced customer value.
10. Innovating continuously: Stay agile and open to new ideas, and push the boundaries of the circular solutions. Innovation is key to maintaining momentum and adapting to changing circumstances. Encourage a culture of experimentation and learning within your organisation.

Conclusion

The transition to a circular economy marks a pivotal moment for Indian businesses, offering more than just economic benefits. By transcending profit-driven models and adopting sustainable practices, companies can forge resilience, drive innovation, enhance customer value and generate enduring value for society and the environment alike. This journey demands visionary leadership, grounded in practical steps and a steadfast commitment to ongoing improvement. In this era of rapid global change, Indian businesses have a unique opportunity to lead by example and push technology-enabled solutions for the circular economy, setting new standards of environmental stewardship and ethical responsibility. By following the ten steps for preparing your company for the circular economy you can chart a course towards a resilient, innovative, and sustainable future.