{"id":822,"date":"2021-06-15T15:06:06","date_gmt":"2021-06-15T14:06:06","guid":{"rendered":"https:\/\/blogs.bath.ac.uk\/business-and-society\/?p=822"},"modified":"2021-06-15T15:06:06","modified_gmt":"2021-06-15T14:06:06","slug":"4-ways-to-make-your-business-circular","status":"publish","type":"post","link":"https:\/\/blogs.bath.ac.uk\/business-and-society\/2021\/06\/15\/4-ways-to-make-your-business-circular\/","title":{"rendered":"4 Ways to Make Your Business Circular"},"content":{"rendered":"

Here Alisha Tuladhar<\/a> from the University of Bath and Maya Fischhoff, the Network for Business Sustainability's Knowledge Manager, outline the four different ways that businesses can engage with the circular economy, and how they can make their choice. This was originally published on the Network for Business Sustainability blog.<\/a><\/em><\/p>\n

If the circular economy is the destination, there are a number of ways to get there. And \u201cSmartMan,\u201d \u201cTelcoPro,\u201d \u201cTelcoBasic,\u201d and \u201cMaintainOp4\u201d provide models.<\/p>\n

These are the names that researchers gave different companies in the European smartphone market.\u00a0 Researchers\u00a0Erik Hansen<\/a>\u00a0(Johannes Kepler University) and\u00a0Ferdinand Revellio<\/a>\u00a0(Leuphana\u00a0University\u00a0& Johannes Kepler University)\u00a0spent four years looking at the strategies that different manufacturers and retailers used to become more circular. Their insights apply to multiple industries.[1]<\/p>\n

Why move to a circular model?\u00a0Many say that the\u00a0circular economy<\/a>\u00a0is the future of sustainability. That\u2019s because a circular economy\u00a0provides\u00a0ways to keep materials and products in use, by\u00a0repairing, reusing, and\u00a0finally\u00a0recycling them. Used products don\u2019t just become waste, as in the traditional \u201clinear\u201d economy, but a valuable resource.<\/p>\n

The circular economy benefits society and the environment and creates new\u00a0business opportunities<\/a>.<\/p>\n

Four Ways to Make Your Business More Circular<\/h3>\n

The researchers identified four strategies for engaging with the circular economy. These are \u201cMake,\u201d \u201cAlly,\u201d \u201cBuy,\u201d and \u201cDo Nothing.\u201d In other words, companies can\u00a0(1)\u00a0build internal capacity (\u201cMake\u201d), (2) \u201cAlly\u201d with\u00a0organizations with circular expertise, (3)\u00a0\u201cBuy\u201d\u00a0circular services\u00a0from third party contractors (outsource),\u00a0or\u00a0(4)\u00a0\u201cDo\u00a0Nothing,\u201d\u00a0standing by while\u00a0unrelated circular providers offer services to their customers.<\/p>\n

These strategies represent different levels of investment in the circular economy. \u201cMake\u201d\u00a0means\u00a0full integration into the business model. \u201cAlly\u201d is still strategic, while \u201cBuy\u201d has a more compliance focus.<\/p>\n

Different strategies also enable different kinds of circular activities.\u00a0Advanced circular activities<\/a> like repair and reuse require a company to be at the \u201cMake or \u201cAlly\u201d stage, note the researchers. \u201cYou can hardly outsource a repair service through an arm\u2019s length transaction as it is too complex and specific,\u201d Revellio told NBS. \u201cThat\u2019s in comparison to recycling, which is standardized.\"<\/p>\n

This article will show what the different models look like and show the\u00a0strategic value each offers from the\u00a0circular economy<\/a>.<\/p>\n

Four\u00a0Companies Show\u00a0Ways to Engage with the Circular Economy<\/h3>\n

Here\u2019s how four smartphone companies pursued the strategies for engagement: Make, Ally, Buy, and Do Nothing.<\/p>\n

\u201cMake\u201d:\u00a0SmartMan\u00a0builds internal capacity<\/strong><\/p>\n

For\u00a0SmartMan,\u00a0a\u00a0niche\u00a0German smartphone\u00a0manufacturer,\u00a0the circular economy is a core competency and\u00a0key to brand positioning.<\/p>\n

Circular activities:<\/em>\u00a0<\/strong>SmartMan\u00a0began by making\u00a0their phones\u00a0more\u00a0repairable\u00a0and\u00a0offering\u00a0reasonably-priced spare parts\u00a0and\u00a0in-house repair\u00a0services.\u00a0They extend the product\u00a0lifetime through a strong user-product relationship:\u00a0for instance, by\u00a0supporting do-it-yourself repairs through\u00a0online\u00a0repair manuals.\u00a0They\u00a0implemented\u00a0a first-of-its-kind\u00a0deposit system to increase\u00a0phone\u00a0return\u00a0rates.\u00a0SmartMan\u00a0remanufactures these phones and\u00a0remarkets\u00a0them\u00a0to customers with lower performance requirements<\/p>\n

SmartMan\u00a0executes\u00a0most circular economy activities internally but has\u00a0hired a non-profit reverse logistics specialist\u00a0to comply\u00a0with European recycling regulation.\u00a0SmartMan\u00a0staff build internal capacity by\u00a0participating\u00a0in\u00a0circular economy\u00a0trainings and hiring\u00a0circular specialists.<\/p>\n

Strategic value<\/em>:<\/em>\u00a0<\/strong>SmartMan\u2019s\u00a0emphasis on circularity and sustainability has become its\u00a0core competency and\u00a0unique selling proposition.\u00a0The\u00a0company\u00a0also\u00a0generates\u00a0revenue through spare parts sales, in-house repair services, and remarketing activities, thus moving toward a product-service\u00a0system.<\/p>\n

\u201cAlly\u201d:\u00a0TelcoPro\u00a0makes strategic partnerships and equity investments<\/strong><\/p>\n

TelcoPro\u00a0is one of the largest telecom operators in Germany and follows a circular strategy based on close relationships.<\/p>\n

Circular activities:\u00a0<\/em>TelcoPro\u00a0provides circular services such as maintenance, limited repair and refurbishment (e.g. if a screen is broken) and recycling.\u00a0TelcoPro\u00a0offers these services by drawing on\u00a0a close-knit network of firms with expertise in electronics reuse, repair, recycling and reselling.\u00a0TelcoPro\u00a0has bought or invested in pioneering electronic maintenance\/repair\/recycling firms.\u00a0The company also provides vouchers and discounts for returning used phones.<\/p>\n

Strategic value:\u00a0<\/em>Providing these circular services meets customers\u2019 demand and enhances customer loyalty. A customer with a broken screen can easily get it fixed, for example. The repair program is particularly well-received by customers and has helped the company increase its market share.<\/p>\n

When\u00a0TelcoPro\u00a0began its circular efforts, departments with sales goals to meet worried about cannibalizing the company\u2019s sales-first model. But by investing in firms doing circular work,\u00a0TelcoPro\u00a0created a strong business case for these activities, going beyond a reputation\/CSR rationale. Circular activities\u00a0now made financial sense, as they would safeguard\u00a0TelcoPro\u2019s\u00a0market share and let it tap into new markets (e.g. selling refurbished phones).<\/p>\n

The two companies described so far,\u00a0SmartMan\u00a0and\u00a0TelcoPro, execute a wide range of circular economy activities, either in-house (\u201cMake\u201d) or through close partnerships (\u201cAlly\u201d). Shifting to the \u201cBuy\u201d and \u201cStand By\u201d models of circular economy engagement, the range of activities drop and they occur farther away from the smartphone company.<\/p>\n

\u201cBuy\u201d:\u00a0TelcoBasic\u00a0buys\u00a0basic\u00a0circular services from\u00a0non-profits<\/strong><\/p>\n

Circular activities:\u00a0<\/em>TelcoBasic\u00a0is a large German telecom operator. Its primary circular economy activity is collecting outdated mobile\u00a0phones from users,\u00a0on a donation basis, and paying a non-profit charity to take them. The non-profit recycles the phones and resells a small percentage.\u00a0TelcoBasic\u00a0has a basic contract with this recycling operator, rather than a deeper partnership.<\/p>\n

Strategic value:<\/em>\u00a0This \u201cbuy\u201d approach means limited circular engagement by the company. It is primarily a\u00a0corporate social responsibility (CSR) initiative<\/a>\u00a0rather than a financial strategy.\u00a0TelcoBasic\u00a0improves its image by partnering with charities with a strong social and environmental reputation, and the charities benefit financially.\u00a0TelcoBasic\u00a0does reduce some of its\u00a0recycling compliance costs by working with the charity.<\/p>\n

\u201cDo nothing\u201d: Third parties fill the void<\/strong><\/p>\n

Some manufacturers or retailers don\u2019t engage directly with the circular economy. They take a \u2018sales first\u2019 approach, focused on selling new phones. They\u2019re still following a traditional business model of creating and disposing of products, without building in any circular activities themselves.<\/p>\n

\u00a0Ironically, this \u201cdo nothing\u201d approach creates a gap that other companies have filled. Unrelated third-party companies have stepped in to provide the maintenance and repair services customers seek. These providers have no relationship to the manufacturers, and often struggle to find necessary spare parts or guidance on repairs.<\/p>\n

\u00a0Strategic value:\u00a0<\/em>\u00a0In this\u00a0situation, smartphone companies lose potential value from circular activities such as repair, reuse, reselling, and refurbishing. Customers are paying other companies to provide\u00a0these services. Additionally, the smartphone companies miss out on information. The third-party companies often develop great insight into product durability and customer preferences.<\/p>\n

Capture Circular Value for Your Company<\/h3>\n

The researchers\u2019 core message: Nearly every company can profit from the circular economy, but you need to be in the right position.\u00a0\u201cThink about your position in the circular value chain, and whether you might want to realign your strategy\u201d said Revellio. \u201cDo you want to remain as a manufacturer or expand your area of influence?\u201d<\/p>\n

For a long time, the status quo has been Do Nothing. \u201cManufacturers had a laissez-faire posture regarding circularity of their products and services,\u201d explained Revellio. \u201cThey\u00a0saw no strategic value.\u201d<\/p>\n

But there\u2019s now a trend toward the more ambitious approaches, \u201cMake\u201d and \u201cAlly.\u201d Companies are choosing to conduct circular economy activities in-house (also called\u00a0vertical integration<\/a>)\u00a0or ally with partners. \u201cMore and more firms realize the strategic value behind circular activities,\u201d explained Revellio, \u201cespecially the activities to prolong product lifetimes like repair and selling secondhand (reuse).\u201d<\/p>\n

If your company is in \u201cBuy\u201d (outsourcing) or \u201cDo Nothing\u201d mode, consider making the shift to \u201cAlly\u201d or \u201cMake.\u201d Change is definitely possible. For example, in the European smartphone market, Samsung has begun to offer a mobile repair bus that comes to customers\u2019 houses and repairs phones on the spot. The circular economy is taking off, with opportunities for\u00a0innovation<\/a>, profit and positive environmental impact.<\/p>\n

\u201cThe circular economy transition is coming,\u201d notes Revellio. \u201cPreparing for it now can increase your company\u2019s piece of the circular pie.\u201d<\/p>\n

[1] The researchers studied the electronics industry as an example, but other industries \u2013 including packaging and automotive \u2013 show similar strategies. A follow-up article will provide more examples.<\/p>\n

Read the article: <\/strong>Hansen, E.G. and Revellio, F., 2020. Circular value creation architectures: Make, ally, buy, or laissez\u2010faire<\/a>. Journal of Industrial Ecology<\/em><\/strong>, 24<\/em>(6), pp.1250-1273.<\/p>\n

See NBS page for supplementary graphic.<\/p>\n","protected":false},"excerpt":{"rendered":"

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