Jessica Bradley explores the key differences between a linear economy and a circular economy, and looks at the latest business innovations in circularity.
In recent years, there’s been growing attention on the circular economy.
This production model encompasses businesses and consumers in a symbiotic relationship of efforts to minimise emissions and waste through sharing, lending, reusing, repairing, refurbishing and recycling materials and products.
For businesses, a crucial part of enabling consumers to keep up their end of the deal is designing products and services for a longer life span.
By comparison, the traditional linear economy – otherwise known as the “take-make-waste” economy – extracts resources to make products that end up as waste, usually much sooner, thanks to planned obsolescence.
The linear model is significantly contributing to biodiversity loss and global warming. It requires large amounts of non-renewable resources and contributes hugely to landfill – around 20% of greenhouse gas emissions come from the linear industrial production of consumer goods.
However, while experts argue that shifting to a circular economy could dramatically cut resource use, they also warn that many businesses will find this difficult.
Moving to a new way of working is a complex task, but it’s becoming increasingly clear that circular ways of working will be an integral part of reaching international climate goals.
We spoke to some of the businesses trailblazing circular models that show that there’s a much more planet-friendly way to do business.
Innovative business models: Linear economy vs circular economy
There are many components of circular practices across the value chain, including sharing economies and upcycling, but another model gaining traction is product-as-a-service.
For some companies, transitioning from selling products to offering leasing or renting services is the most effective way to ensure longer product lifecycles.
Danish brand Vigga offers a subscription service for baby items. Parents who sign up receive a collection of clothes for the baby in every size, which they can return once their child has grown out of them. Vigga created a clothing brand specifically for this to ensure high enough quality for circulation.
IKEA retailer Ingka Group’s circular model informs everything from the materials it uses and how they’re sourced, to product design, and what happens to products when they reach the end of their life.
The retailer – who aims to only use renewable, recycled, or recyclable materials by 2030 – also has a “Buyback & Resell” service that allows customers to “sell” their old IKEA furniture back to the brand.
But one challenge Ingka has encountered is increasing its recycling rate, which has flatlined over the last few years.
Industry circular economy examples
The significance of designing products for durability, modularity and recycling is gaining ground in the tech industry.
Dutch electronics manufacturer Fairphone is helping to set industry standards around supply chain sustainability, says Miquel Ballester, co-founder and head of product management.
The business, which designs and produces smartphones and headphones, focuses on ensuring its products have a longer life span than the industry standard.
Its calculations suggest that, for its Fairphone 3 and 4 models, five years of use could reduce the smartphone’s annual carbon footprint by 31%.
However, Ballester says, there are some trade-offs when it comes to designing for long life. For example, the company wanted Fairphone 5’s IP rating to be IP67, which would make it waterproof and improve its longevity.
“Since it’s a modular phone, in order to make it IP67, you need to make it thicker,” he says. To keep it thin would have required glue, which would have compromised its repairability.
“We looked at the consumer data and saw that there is more frustration around the weight and the dimensions of the Fairphone 4 compared to the IP rating, so we decided to invest the extra in the OLED screen to ensure that the device is thinner,” Ballester says.
Fairphone has also focused on establishing a market for ethical electronics and showing the industry that things can be done differently.
“Consumers are slowly recognising the need to do things more sustainably, but they are still focused on getting the most out of their tech, which means buying high-tech devices with the latest specs,” Ballester says.
Consumers are slowly recognising the need to do things more sustainably, but they are still focused on getting the most out of their tech, which means buying high-tech devices with the latest specs.
Tom Meads, co-founder of Gomi, has also been wrestling with how to sustainably meet the needs of consumers’ demands. He wants to convey to consumers that the sustainable choice doesn’t have to mean compromise.
“Hopefully we can show consumers that they don’t have to sacrifice in aesthetics, that they can still buy what they desire,” he says.
But it’s been difficult communicating that a higher price point is justified, says Meads, who set up Gomi after becoming interested in the challenge of turning material with negative value into desirable material through design.
“It’s expensive to make these products at the beginning when you don’t have the buying power, and it’s harder to communicate with consumers that they last longer,” he says. “Some don’t understand that and some want to buy the cheap thing now.”
Mead is conscious that making an impact requires reaching out to a wider market than just those with high disposable income.
He’s overcoming this by keeping in frequent contact with customers to check in on their desires and values, and by adapting products to make them more affordable.
He has also struggled to communicate to consumers the safety of repurposed batteries.
Gomi began in 2018, and early on, Mead realised that CO2 emissions could be halved by repurposing existing batteries.
“It’s a huge challenge trying to test batteries, finding good supply chains, and communicating to people that, because we have to safety test them so much, if anything, they’re probably safer than new cells.”
He also hopes to inspire consumers to think differently about repairing products.
“A lot of power banks are glued together, which means there’s no consideration for when they break,” he says.
So instead of using glue, Gomi’s products contain screws and silicone pads that are easy to repair, and the cost of free repairs and upgrades for the first two years after purchase is built into the cost.
“There’s a lot of innovation needed now to try to stop disposable mortality,” Meads says. “We hope we can inspire a generation that, if they buy well, they can trust that it will last.”
It’s not just start-ups that have built circular ways of working into their core business model. While furniture company Vitsoe was established in 1959, it was founded on very similar principles, which Mark Adams says is much easier than retrospectively incorporating circular ways of working into a business.
“So much has come about over the last 10 years, regarding the circular econ, this is what we do anyway,” he says. “It came out post-war thinking of ‘How do we rebuild the world?’ There was a lot of innovative thinking in that era; we’ve been able to absorb that and carry it on.”
Adams says Vitsoe’s aim isn’t to maximise profits but to “do the right thing”. However, this doesn’t mean its raison detre is at the expense of limiting its customer base.
Adams puts Vitsoe’s success down to long-term thinking, which he says underpins every decision the company makes.
“We don’t do anything quickly, we think it through very carefully,” he says.
But the only way to make such long-term thinking work, he adds, is by focusing on doing one thing, and doing it well.
“If you’re constantly being distracted by doing lots of things, there’s no way you’d be able to do them at a high-quality level because you can only really achieve this by absolutely focusing and constantly refining the product, and gradually getting to a point where quality improves,” he says.
“Over the last 30 years, we’ve been able to refine our products, and the only way we’ve been able to do that is by long-term systems thinking, and making sure everything is compatible.”
Having this thinking embedded from the company’s inception means that the shape and size of Vitsoe’s products have never changed, because they’re part of a system where anything new or improved has to fit into those shapes and sizes.
This makes shipping a lot easier, too. Vitsoe has been using the same velcro bags to ship its cabinets across northern Europe for the last 25 years.
This long-term thinking extends to HR and recruitment, too, Adams adds. At Vitsoe, there’s no such word as “manager”, and solutions are worked out between teams.
“Nobody gets a colleague imposed upon them,” he says. “Everyone has got an equal voice.”
For Miele, long-term thinking means offering customers a “20 Years Promise”.
“This promise reflects our belief that appliances should be built to last,” says Helen Pyman.
The company designs and tests its products for a lifespan of 20 years, which, Pyman says, is significantly longer than the industry average. It tests for durability, but also that products will remain energy efficient throughout their lifespan.
“By focusing on longevity, we reduce the need for frequent replacements, thereby minimising waste and conserving resources,” she says.
It also means offering spare parts for at least 15 years after a product’s discontinuation.
“This policy is designed to ensure that our products can be maintained and repaired for as long as possible, extending their usable life and reducing the environmental impact associated with manufacturing new appliances,” Pyman says.
There are also huge innovations happening within the packaging industry. Packaging company Huhtamaki is designing its products to be recyclable, compostable or reusable, as well as promoting and piloting easy-to-use collection and recycling schemes.
Last year, 72.9% of its products were recyclable, compostable or reusable – and the percentage is growing – due to its innovative technologies.
“We invest in energy efficiency, renewable energy, reducing water consumption, and reducing waste to minimise the footprint of our operations,” says Salla Ahonen, executive vice president of sustainability and communications.
One example of this, she says, is flexible packaging solutions to overcome the substantial challenges of recycling the multi-material packaging structures often associated with flexible packaging.
“Our new packaging materials are designed to replace non-recyclable structures. We minimise the material needed and maximise recyclability while keeping critical packaging functionalities intact,” she says.
“For example, our technical team has reduced layers from three to two, or even two to one, without compromising quality.”
The benefits of circular ways of working
There are many environmental impacts to circular ways of doing business, including reducing carbon footprints, resource conservation, and minimising waste.
The environmental benefits of circular ways of working are countless, from helping to minimise waste and pollution, to helping to limit biodiversity loss.
“The circular economy is vital in achieving global sustainability goals,” says Pyman. “We believe that it offers a sustainable solution to the pressing environmental challenges we face today.
“It shifts us away from the traditional linear ‘take, make, dispose’ model to one that is regenerative by design, emphasising product longevity, resource efficiency, and waste reduction.”
By embracing circular principles, Pyman adds, companies can reduce their environmental footprint, conserve valuable resources, and contribute to the reduction of carbon emissions.
There are huge economic benefits of circular business models, too. Research by the Ellen MacArthur Foundation indicates that models, such as resale and repair, could generate $700 billion by 2030 and make up to 23% of the global fashion market.
Adopting a circular model can bring about cost savings associated with increased efficiency, reducing procurement costs associated with sourcing raw materials, and improving relationships with customers who value sustainable businesses, as well as better quality, longer-lasting products that are easier to repair. There are also wider social benefits, such as boosting employee morale.
In the construction industry, for example, the circular model can enable businesses to discover new revenue and opportunities with renewable and recycled materials.
It’s calculated that this could result in growth of up to 30% per year for the business.
The role of regulation in supporting circular economy initiatives
Many business leaders believe that the circular economy requires legislation.
“Real change is only really made by legislation,” says Meads, who is sceptical about how many businesses would have acted without the new Right to Repair legislation.
Ballester argues that Fairphone has helped to make supply chain sustainability a focus in the industry.
He says another challenge has been influencing the core of the economic system and has become much worse.
“The industry still relies on producing and selling more and more,” he says. “The life cycles are still very short and longevity is still not being addressed properly.”
This, he says, “will require a systemic change with help from government legislation to push companies to transition to more sustainable electronics.”
Ballester says Fairphone’s employees are curious to see what the consequences of the Ecodesign Directive will have when it comes into force in 2025.
This legislation will establish a framework for setting eco-design requirements on products including improving their durability, reusability, upgradability and reparability, and making them more energy and resource-efficient.
Challenges and opportunities of the circular economy
There are many common barriers to adopting circular economy practices, such as high upfront costs, consumer behaviour, and supply chain complexity.
A circular business model will only work if substantial economic value can be recovered from a product, experts say, which can be difficult to calculate.
One of the main challenges is making changes later on in a product’s design process, because, experts say, once a product’s specifications are complete, it’s usually only then possible to make minor changes later on.
This is certainly the case for implementing the product-as-a-service model, says Helen Pyman, home appliance retailer Miele GB’s marketing director.
“Organisations must ensure they have the infrastructure to support ongoing maintenance, repairs, and logistics, which can be more complex than traditional sales models,” she says.
“Additionally, there’s a need to build trust with customers, as they must feel confident that the service will be reliable over time”
Overcoming these barriers, she says, may mean investing in robust customer support systems and prioritising transparency in pricing and service terms.
“It’s also essential to consider the environmental impact and ensure that products are designed for durability, easy repair, and eventual recycling,” she says.
More widely, the infrastructure and mindset rooted in the traditional linear economy is one of the most common barriers to adopting circular economy practices, says Pyman.
“Many businesses still operate on a ‘take, make, dispose’ model, and shifting to a circular economy requires significant changes in product design, supply chains, and business models,” she says.
Another challenge is the economic model itself, she adds.
Many businesses still operate on a ‘take, make, dispose’ model, and shifting to a circular economy requires significant changes in product design, supply chains, and business models.
“Circular economy practices often require upfront investments in product design, technology, and reverse logistics, which can be a deterrent for companies focused on short-term financial returns.
“To overcome these barriers, businesses need to adopt a long-term perspective and recognise that circular economy practices can lead to cost savings, enhanced brand reputation, and new revenue streams in the long run.”
Pyman also advises cross-industry collaboration.
“By working together, sharing best practices, and supporting policy frameworks that incentivise sustainable practices, we can accelerate the transition to a circular economy,” she says.
Despite the potential challenges associated with adopting circular models, they also offer many opportunities for innovation and growth.
For example, implementing a model that allows for a sharing economy can maximise idle assets, while also improving relationships with customers looking for convenient and affordable solutions.
A circular model can offer more touchpoints with customers, experts say, including repairs and upgrades.
And because circular materials, products and components are designed to be reused and recycled, they can cost less, and the product’s service will be more cost-effective since it lasted longer.
Recovering and recycling components and materials will likely have more robust supply chains.
The future of the circular economy
For organisations big and small, new and established, embracing circular economy principles is increasingly important for survival.
Organisations in every industry are leading the way and setting the standards for circular ways of working.
Of course, for companies transitioning to models of circular working – as opposed to ingraining this from inception – it can require many substantial changes.
Not only do circular businesses contribute to lowering emissions and reducing harm to natural habitats, but in the longer term, they can strengthen supply chains, and allow opportunities to forge more sustainable and consistent relationships with customers.
There are many ways to integrate circularity within an organisation, depending on what works best for them – including product-as-service, or designing products intended for a longer lifespan, with repairs and returns in mind.
Encouraging and enabling customers to return and repair products can come in many different forms, depending on what suits any one organisation the best. Fashion retailer H&M, for example, is trialling four different repair models alone.
There is a growing attitude that traditional (linear) organisations can no longer afford to do nothing, and, to remain competitive, they must adapt to the next, circular, economy.
