Module 3 Circular business models

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This project has been funded with support from the European Commission (Project 2017-1-BE01-KA202-024752)

AUTHORS:

This publication reflects the views only of the authors, and the Commission cannot be held

responsible for any use which may be made of the information contained therein.

Module 3 Circular business

models

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Module 3

Circular business models

Unit description

3.1. Principles and definitions of business models

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3.2 Circular business models as a subset of sustainable business model

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3.3 Principles and definitions of circular business models

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3.4 Circular business models strategies in the furniture industry 40

3.5 Circular business model case studies in the furniture industry

3.6 Mapping your circular strategy based on your existing situation

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UNIT 3.1 PRINCIPLES AND DEFINITION OF BUSINESS MODELS

Module 3, Unit 1

Content

What is a business model 2

Business model design 2

Examples of business models 7

Objective of the unit

The training unit aims at providing basic knowledge on business model

Learning outcome

Knowledge : understand the concept of business model Skills : recognize specific mechanisms to create, deliver and capture value

Pedagogical approach

Powerpoint Additional reading material

Hours

1.5 hours

Assessment methodology

Quizz

ECVET

0.06 credits (0.5 the whole module)

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1. WHAT IS A BUSINESS MODEL?

A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of business model construction and modification is also called business model innovation and forms a part of business strategy.

In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, business process, target customers, offerings, strategies, infrastructure, organizational structures, sourcing, trading practices, and operational processes and policies including culture.

Business models are used to describe and classify businesses, especially in an entrepreneurial setting, but they are also used by managers inside companies to explore possibilities for future development. Well-known business models can operate as "recipes" for creative managers. Business models are also referred to in some instances within the context of accounting for purposes of public reporting.

2. BUSINESS MODEL DESIGN

Business model design generally refers to the activity of designing a company's business model. It is part of the business development and business strategy process and involves design methods. Massa and Tucci (2014) highlighted the difference between crafting a new business model when none is in place, as it is often the case with academic spinoffs and high technology entrepreneurship, and changing an existing business model, such as when the tooling company Hilti shifted from selling its tools to a leasing model. They suggested that the differences are so profound (for example, lack of resource in the former case and inertia and conflicts with existing configurations and organisational structures in the latter) that it could be worthwhile to adopt different terms for the two. They suggest business model design to refer to the process of crafting a business model when none is in place and business model reconfiguration for process of changing an existing business model, also highlighting that the two process are not mutually exclusive, meaning reconfiguration may involve steps which parallel those of designing a business model.

Business model design includes the modeling and description of a company's:

• value propositions

• target customer segments

• distribution channels

• customer relationships

• partner network

• cost structure

• revenue model

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Business model frameworks: The Business Model Canvas

Developed by A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, the business model canvas is one of the most used frameworks for describing the elements of business models. Formal descriptions of the business become the building blocks for its activities. Many different business conceptualizations exist; Osterwalder's work and thesis (2010) propose a single reference model based on the similarities of a wide range of business model conceptualizations. With his business model design template, an enterprise can easily describe its business model.

Infrastructure

Key Activities: The most important activities in executing a company's value proposition. An example for Bic, the pen manufacturer, would be creating an efficient supply chain to drive down costs.

Key Resources: The resources that are necessary to create value for the customer. They are considered assets to a company that are needed to sustain and support the business. These resources could be human, financial, physical and intellectual.

Partner Network: In order to optimize operations and reduce risks of a business model, organizations usually cultivate buyer-supplier relationships so they can focus on their core activity. Complementary business alliances also can be considered through joint ventures or strategic alliances between competitors or non-competitors.

Offering

Value Propositions: The collection of products and services a business offers to meet the needs of its customers. According to Osterwalder (2004), a company's value proposition is what distinguishes it from its competitors. The value proposition provides value through various elements such as newness, performance, customization, "getting the job done", design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability.

The value propositions may be:

• Quantitative – price and efficiency

• Qualitative – overall customer experience and outcome

Customers

Customer Segments: To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on their different needs and attributes to ensure appropriate implementation of corporate strategy to meet the characteristics of selected groups of clients. The different types of customer segments include:

• Mass Market: There is no specific segmentation for a company that follows the Mass Market element as the organization displays a wide view of potential clients. e.g. Car

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• Niche Market: Customer segmentation based on specialized needs and characteristics of its clients. e.g. Rolex

• Segmented: A company applies additional segmentation within existing customer segment. In the segmented situation, the business may further distinguish its clients based on gender, age, and/or income.

• Diversify: A business serves multiple customer segments with different needs and characteristics.

• Multi-Sided Platform / Market: For a smooth day-to-day business operation, some companies will serve mutually dependent customer segments. A credit card company will provide services to credit card holders while simultaneously assisting merchants who accept those credit cards.

Channels: A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient and cost-effective. An organization can reach its clients through its own channels (store front), partner channels (major distributors), or a combination of both.

Customer Relationships: To ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments. Various forms of customer relationships include:

• Personal Assistance: Assistance in a form of employee-customer interaction. Such assistance is performed during sales and/or after sales.

• Dedicated Personal Assistance: The most intimate and hands-on personal assistance in which a sales representative is assigned to handle all the needs and questions of a special set of clients.

• Self Service: The type of relationship that translates from the indirect interaction between the company and the clients. Here, an organization provides the tools needed for the customers to serve themselves easily and effectively.

• Automated Services: A system similar to self-service but more personalized as it has the ability to identify individual customers and their preferences. An example of this would be Amazon.com making book suggestions based on the characteristics of previous book purchases.

• Communities: Creating a community allows for direct interactions among different clients and the company. The community platform produces a scenario where knowledge can be shared and problems are solved between different clients.

• Co-creation: A personal relationship is created through the customer's direct input to the final outcome of the company's products/services.

Finances

Cost Structure: This describes the most important monetary consequences while operating under different business models. A company's DOC.

Classes of Business Structures:

• Cost-Driven – This business model focuses on minimizing all costs and having no frills. e.g. Low-cost airlines

• Value-Driven – Less concerned with cost, this business model focuses on creating value for products and services. e.g. Louis Vuitton, Rolex

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Characteristics of Cost Structures:

• Fixed Costs – Costs are unchanged across different applications. e.g. salary, rent

• Variable Costs – Costs vary depending on the amount of production of goods or services. e.g. music festivals

• Economies of Scale – Costs go down as the amount of goods are ordered or produced.

• Economies of Scope – Costs go down due to incorporating other businesses which have a direct relation to the original product.

Revenue Streams: The way a company makes income from each customer segment. Several ways to generate a revenue stream:

• Asset Sale – (the most common type) Selling ownership rights to a physical good. e.g. retail corporations

• Usage Fee – Money generated from the use of a particular service. e.g. UPS

• Subscription Fees – Revenue generated by selling access to a continuous service. e.g. Netflix

• Lending/Leasing/Renting – Giving exclusive right to an asset for a particular period of time. e.g. Leasing a Car

• Licensing – Revenue generated from charging for the use of a protected intellectual property.

• Brokerage Fees – Revenue generated from an intermediate service between 2 parties. e.g. Broker selling a house for commission

• Advertising – Revenue generated from charging fees for product advertising.

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Figure 1: the business model canvas (source: Strategyzer)

The Business Model Canvas can be printed out on a large surface so groups of people can jointly start sketching and discussing business model elements with post-it note notes or board markers. It is a hands-on tool that fosters understanding, discussion, creativity, and analysis. It is distributed under a Creative Commons license[7] from Strategyzer AG and can be used without any restrictions for modeling businesses. The Business Model Canvas is also available in web-based software format.

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3. EXAMPLES OF BUSINESS MODELS

You don’t have to invent an entirely new business model to start a business. In fact, the vast majority of businesses use existing business models and refine them to find a competitive edge. Here’s a list of business models you can use to start your own business.

3. 1. Advertising

The advertising business model has been around a long time and has become more sophisticated as the world has transitioned from print to online. The fundamentals of the model revolve around creating content that people want to read or watch and then displaying advertising to your readers or viewers.

In an advertising business model, you have to satisfy two customer groups: your readers or viewers, and your advertisers. Your readers may or may not be paying you, but your advertisers certainly are. An advertising business model is sometimes combined with a crowdsourcing model where you get your content for free from users instead of paying content creators to develop content.

Examples: CBS, The New York Times, YouTube

3.2. Affiliate

The affiliate business model is related to the advertising business model but has some specific differences. Most frequently found online, the affiliate model uses links embedded in content instead of visual advertisements that are easily identifiable.

For example, if you run a book review website, you could embed affiliate links to Amazon within your reviews that allow people to buy the book you are reviewing. Amazon will pay you a small commission for every sale that you refer to them.

Examples: TheWireCutter.com, TopTenReviews.com

3.3 Brokerage

Brokerage businesses connect buyers and sellers and help facilitate a transaction. They charge a fee for each transaction to either the buyer or the seller and sometimes both.

One of the most common brokerage businesses is a real estate agency, but there are many other types of brokerages such as freight brokers and brokers who help construction companies find buyers for dirt that they excavate from new foundations.

Examples: ReMax, RoadRunner Transportation Systems

3.4 Concierge/customization

Some businesses take existing products or services and add a custom element to the transaction that makes every sale unique for the given customer.

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For example, think of custom travel agents who book trips and experiences for wealthy clients. You can also find customization happening at a larger scale with products like Nike’s custom sneakers.

Examples: NIKEiD, Journy

3.5 Crowdsourcing

If you can bring together a large number of people to contribute content to your site, then you’re crowdsourcing. Crowdsourcing business models are most frequently paired with advertising models to generate revenue, but there are many other iterations of the model. Threadless, for example, lets designers submit t-shirt designs and gives the designers a percentage of sales.

Companies that are trying to solve difficult problems often publish their problems openly for anyone to try and solve. Successful solutions get rewards and the company can then grow their business. The key to a successful crowdsourcing business is providing the right rewards to entice the “crowd” while also enabling you to build a viable business.

Examples: Threadless, YouTube, P&G Connect and Develop, Cuusoo

3.6 Disintermediation

If you want to make and sell something in stores, you typically work through a series of middlemen to get your product from the factory to the store shelf.

Disintermediation is when you sidestep everyone in the supply chain and sell directly to consumers, allowing you to potentially lower costs to your customers and have a direct relationship them as well.

Examples: Casper, Dell

3.7 Fractionalization

Instead of selling an entire product, you can sell just part of that product with a fractionalization business model.

One of the best examples of this business model is timeshares, where a group of people owns only a portion of a vacation home, enabling them to use it for a certain number of weeks every year.

Examples: Disney Vacation Club, NetJets

3.8 Franchise

Franchising is common in the restaurant industry, but you’ll also find it in all sorts of service industries from cleaning businesses to staffing agencies.

In a franchise business model, you are selling the recipe for starting and running a successful business to someone else. You’re often also selling access to a national brand and support

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services that help the new franchise owner get up and running. In effect, you’re selling access to a successful business model that you’ve developed.

Examples: Ace Hardware, McDonald’s, Allstate

3.9. Freemium

With a freemium business model, you’re giving away part of your product or service for free and charging for premium features or services.

Freemium isn’t the same as a free trial where customers only get access to a product or service for a limited period of time. Instead, freemium models allow for unlimited use of basic features for free and only charge customers who want access to more advanced functionality.

Examples: MailChimp, Evernote, LinkedIn

3.10 Leasing

Leasing might seem similar to fractionalization, but they are actually very different. In fractionalization, you are selling perpetual access to part of something. Leasing, on the other hand, is like renting. At the end of a lease agreement, a customer needs to return the product that they were renting from you.

Leasing is most commonly used for high-priced products where customers may not be able to afford a full purchase but could instead afford to rent the product for a while.

Examples: Cars, DirectCapital

3.11 Low-touch

With a low-touch business model, companies lower their prices by providing fewer services. Some of the best examples of this type of business model are budget airlines and furniture sellers like IKEA. In both of these cases, the low-touch business model means that customers need to either purchase additional services or do some things themselves in order to keep costs down.

Examples: IKEA, Ryan Air

3. 12 Marketplace

Marketplaces allow sellers to list items for sale and provide customers with easy tools for connecting to sellers.

The marketplace business model can generate revenue from a variety of sources including fees to the buyer or the seller for a successful transaction, additional services for helping advertise seller’s products, and insurance so buyers have peace of mind. The marketplace model has been used for both products and services.

Examples: eBay, Airbnb

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3.13 Pay-as-you-go

Instead of pre-purchasing a certain amount of something, such as electricity or cell phone minutes, customers get charged for actual usage at the end of a billing period. The pay-as-you-go model is most common in home utilities, but it has been applied to things like printer ink.

Examples: Water companies, HP Instant Ink

3.14 Razor blade

The razor blade business model is named after the product that essentially invented the model: sell a durable product below cost to increase volume sales of a high-margin, disposable component of that product.

This is why razor blade companies practically give away the razor handle, assuming that you’ll continue to buy a large volume of blades over the long term. The goal is to tie a customer into a system, ensuring that there are many additional, ongoing purchases over time.

Examples: Gillette, Inkjet printers, Xbox, Amazon’s Kindle

3.15 Reverse razor blade

Flipping the razor blade model around, you can offer a high-margin product and promote sales of a low-margin companion product.

Similar to the razor blade model, customers are often choosing to join an ecosystem of products. But, unlike the razor blade model, the initial purchase is the big sale where a company makes most of its money. The add-ons are just there to keep customers using the initially expensive product.

Examples: Apple’s iPod & iTunes, and now MacBooks & Pages, Numbers, and Keynote

3.16 Reverse auction

A reverse auction business model turns auctions upside down and has sellers present their lowest prices to buyers. Buyers then have the option to choose the lowest price presented to them.

You can see reverse auctions in action when contractors bid to do work on a construction project. You also see reverse auctions anytime you shop for a mortgage or other type of loan.

Examples: Priceline.com, LendingTree

3.17 Subscription

Subscription business models are becoming more and more common. In this business model, consumers get charged a subscription fee to get access to a service.

While magazine and newspaper subscriptions have been around for a long time, the model has now spread to software and online services and is even showing up in service industries.

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Examples: Netflix, Salesforce, Comcast

This is by no means an exhaustive list of all business models that exist—but, hopefully, it gets you thinking about how you might structure your business.

They key thing to remember is that you don’t need to invent a new business model when you’re starting your business. Using existing models can help lead you to success because the model has been proven to work. You’ll be innovating in smaller ways within that existing business model to grow your business.

A new business model could be extremely lucrative but also brings with it higher risk. You don’t know if customers will accept the model or not.

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UNIT 3.2 CIRCULAR BUSINESS MODELS AS A SUBSET OF SUSTAINABLE BUSINESS MODEL

Module 3, Unit 2

Content

Definition of sustainable business

model 14

Archetypes of SBM 15

Objective of the unit

The training unit aims at clarifying the connection between sustainable business models and circular business models

Learning outcome

Knowledge: Recognize sustainability as a driver for business model innovation Skills: position circular economy business models within sustainable business models

Pedagogical approach

Powerpoint Additional reading material

Hours

2 hours

Assessment methodology

Quizz

ECVET

0.08 credits (0.5 the whole module)

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1. DEFINITION OF SUSTAINABLE BUSINESS MODEL

A sustainable business model is ‘a business model that creates competitive advantage through superior customer value and contributes to a sustainable development of the company and society’ Lüdeke-Freund (2010).

Sustainable business models use both a systems and firm-level perspective, build on the triple bottom line approach (People – profit – planet) to define the firm's purpose and measure performance, include a wide range of stakeholders, and consider the environment and society as stakeholders.

Extending this, a sustainable business model aligns interests of all stakeholder groups, and explicitly considers the environment and society as key stakeholders.

Business model innovations for sustainability are defined as: Innovations that create significant positive and/or significantly reduced negative impacts for the environment and/or society, through changes in the way the organisation and its value-network create, deliver value and capture value (i.e. create economic value) or change their value propositions.

The level of ambition of business model innovations needs to be high and focused on maximising societal and environmental benefits, rather than economic gain only.

One of the key challenges is designing business models in such a way that enables the firm to capture economic value for itself through delivering social and environmental benefits. While efficiency and quality improvements of the past may have readily translated into profits, it is not always so clear how delivering social and environmental value might translate into profit and competitive advantage for the firm.

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2. ARCHETYPES OF SUSTAINABLE BUSINESS MODELS

Sustainable business models can be organized and grouped into specific archetypes (Bocken, 2014) as shown in the figure below.

Figure 2 : The sustainable business model archetypes (source: bocken, 2014)

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Maximise material productivity and energy efficiency

Definition: Do more with fewer resources, generating less waste, emissions and pollution.

In practice:

Lean manufacturing is a well-established philosophy that identifies and seeks to minimise waste in production processes. Waste in this context is not only seen in the physical waste materials and waste energy, but also in over-production, materials handling, over-processing, inventory, defects and rework. The focus of lean has achieved substantial improvements in energy and material efficiencies and productivity improvements. Examples such as the Toyota production system epitomise the integration of lean thinking throughout the business. Cleaner production concepts build on this, and specifically focus on waste and emissions reductions from production processes.

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Create value from ‘waste’

Definition: The concept of ‘waste’ is eliminated by turning waste streams into useful and valuable input to other production and making better use of under-utilised capacity. This is the archetype that fits most of the business models operating with circular economy in mind.

In practice:

Industrial symbiosis is a process orientated solution turning waste outputs from one process into feedstock for another process or product. One of the most well-known examples of industrial symbiosis is the industrial park Kalundborg.

Closed-loop business models include products and business processes designed in a manner that enables waste at the end of the use phase of a product to be used to create new value. An example of moving towards closed loop business model is the Interface Flor providing office floor carpet tiles.

Cradle-to-Cradle incorporates the idea of a closed loop technical nutrient cycle with a biological open-loop cycle. The latter acknowledges that it is not always possible to recapture materials lost during the production and use phase, and in such instances these waste streams and emissions should be designed so that they are benign to the environment and preferably contributing positive nutrients to the natural environment, creating positive value for the environment.

Under-utilised assets and capabilities as a form of wasted value might be re-captured through sharing – shared ownership, and collaborative consumption approaches. Examples of collaborative consumption approaches being used to radically reduce material throughput are emerging such as peer-to-peer car sharing and local community peer-to-peer electrical power tool sharing schemes.

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Substitute with renewables and natural processes

Definition: Reduce environmental impacts and increase business resilience by addressing resource constraints ‘limits to growth’ associated with non-renewable resources and current production systems

In practice:

Substitution with renewable (non-finite) resources: This spans options from substitution of finite materials with renewable materials, such as replacing metals with natural and fibre-based materials, through to system-level renewable power generation systems. In many cases, these technologies and systems already exist, yet are currently not economically viable, or cannot be made efficiently at volume. As production systems evolve or regulations and incentive structures change, such technologies and systems may become more affordable, which may open up business model innovation opportunities (e.g. recent widespread uptake of solar photovoltaic panels).

Local renewable energy solutions: This includes solutions such as solar electricity provision in developing markets (e.g. for light, cookers), and using onsite windmills and solar to generate electricity for manufacturing processes

Environmentally benign materials and production processes: This is a broad area of innovation from replacing chemical dyes with organic/benign dyes in textile production, through to more radical change such as the emerging field of ‘green chemistry’ that seeks to utilise naturally occurring processes in place of traditional industrial processes. For example, seeking to replicate how spiders weave exceptionally strong webs using only organic materials and ambient pressure and temperatures, rather than the typical industrial processes that involve high energy inputs to deliver temperature and pressure, and environmentally damaging chemicals and acids.

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Deliver functionality, rather than ownership

Definition: Provide services that satisfy users’ needs without having to own physical products.

In practice:

On famous example is the Xerox document management system which is based on customer payment per print or copy, which could dis-incentivise printing. Another example is car sharing (e.g. lease) while maintenance contracts and extended warranties are examples of product oriented PSS.

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Adopt a stewardship role

Definition: Proactively engaging with all stakeholders to ensure their long-term health and well-being

In practice:

Upstream stewardship examples include the Marine Stewardship Council (MSC, 2012), the Forestry Stewardship Council (FSC, 2012) and the Better Cotton Initiative. Features of such business models are often a supplier accreditation programme that drives more ethical or sustainable business practices at the grass-roots level (often in developing nations). The programmes might deliver environmental and social sustainability initiatives such as: Employee welfare and living wages, Community development: Education, health, livelihoods; Sustainable growing and harvesting of food and other crops, minimising chemical fertilisers and pesticides, water consumption, and top soil erosion; Environmental resource and bio-diversity protection and regeneration.

Downstream stewardship examples include proactively tackling the health issues of consumers. This is particularly relevant in the food, beverage and tobacco sectors, where health issues are arising due to modern diets and over-consumption, combined with increasingly sedentary life-styles.

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Encourage sufficiency

Definition: Solutions that actively seek to reduce consumption and production

In practice:

Energy Saving Companies (ESCOs) optimise energy consumption of companies and public buildings and in return get paid by part of the savings achieved. In the household energy sector, utility providers are incentivised through subsidies to assist consumers in reducing their energy consumption: both producer and consumer are financially incentivised to reduce consumption.However, the benefits to a firm for actively engaging in demand-side management could be numerous - reputational benefit, risk reduction, avoiding scale-up costs.

Product durability and longevity through product redesign potentially slows product replacement cycles. Furthermore, a change in the culture of fast fashion could significantly reduce excessive consumption and premature disposal of useful products. Companies such as Vitsoe already disassociate themselves with fast fashion but this business model is not yet widespread.

Market places for second-hand goods create an incentive for owners to take more care of products to ensure higher second-hand value. Second-hand markets in automobiles are well developed, but platforms such as e-bay have extended this significantly. Patagonia clothing for instance, have recently established an e-bay based store to facilitate second-hand clothing trade rather than discarding the products, or leaving them unused in. Likewise, manufacturers and retailers can also go further in encouraging greater sufficiency in the use phase of products and services by providing information on how to minimise usage impacts. Unilever's for instance advises consumers of the benefits of using washing detergents at low temperatures and encourages consumers to take shorter showers.

Frugal business models typically focus on provision of products and services to low-income markets, often in extreme poverty. The business models take complex product concepts and redesign them to pare down to their base functionality. This involves eliminating superfluous or overly complex functionality and cosmetic features, to provide products that use minimal materials and energy at minimal costs.Given their target markets, such models are often conceived within social enterprise solutions, but this need not be the case.

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Re-purpose the business for society/environment

Definition: Prioritizing delivery of social and environmental benefits rather than economic profit (i.e. shareholder value) maximisation, through close integration between the firm and local communities and other stakeholder groups

In practice:

Social enterprises. The distinction of social entrepreneurship is in the value proposition itself, or in other words, the core of the business model. Social enterprises exist to fulfil a specific social mission. They are ‘for-profit’ enterprises, but the profit motive is secondary to delivery of the social mission; hence they are not generally profit-maximising.

Business models for social enterprises must fulfil the following conditions as a minimum: Driven by a social mission, Generate positive externalities (spill overs) for society; Recognise the centrality of the entrepreneurial function; Achieve competitiveness on markets through effective planning and management.

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Develop scale-up solutions

Definition: Delivering sustainable solutions at a large scale to maximise benefits for society and the environment.

In practice

Collaborative models to rapidly scale up include peer-to-peer models, crowd-sourcing and open innovation. These all seek to bring like-minded individuals, firms, and investors, together to drive adoption of business ideas and have the potential to radically change consumption patterns across the world, and radically influence production models. The Internet is proving to be a powerful enabler of such new innovative scale up approaches

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Main takeaways

Business model innovations for sustainability are defined as: Innovations that create significant positive and/or significantly reduced negative impacts for the environment and/or society, through changes in the way the organisation and its value-network create, deliver value and capture value (i.e. create economic value) or change their value propositions.

They can be organised according to 8 archetypes

The eight archetypes developed are:

1. Maximise material and energy efficiency

2. Create value from ‘waste’

3. Substitute with renewables and natural processes

4. Deliver functionality, rather than ownership

5. Adopt a stewardship role

6. Encourage sufficiency

7. Re-purpose the business for society/environment

8. Develop scale-up solutions

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UNIT 3.3 PRINCIPLES AND DEFINITION OF CIRCULAR BUSINESS MODELS

Module 3, Unit 3

Content

Circular business model 26

CBM principles 30

CBM categories 32

Objective of the unit

The training unit aims at defining and characterising circular business models

Learning outcome

Knowledge: understand what constitutes a circular business model Skills: being able to understand the value creation mechanisms in circular business model innovation

Pedagogical approach

Powerpoint Additional reading material

Hours

2 hours

Assessment methodology

Quizz

ECVET

0.08 credits (0.5 the whole module)

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1. CIRCULAR BUSINESS MODEL DEFINITION

Circular Business Models are considered a subset of the broader group of sustainable business models.

Several definitions of circular business models can be found in the recent literature but currently no consensus has emerged on a generic definition.

Mentink (2014) defines circular business model as “the rationale of how an organization creates, delivers and captures value with and within closed material loops” while Linder and Williander (2015) define a circular business model as “a business model in which the conceptual logic for value creation is based on utilizing the economic value retained in products after use in the production of new offerings”.

Surprisingly, definitions generally take an economic focus when looking at the value creation delivery and process, omitting the sustainability goals generally found in sustainable business models definitions (Boons and Lüdeke-Freund, 2013, Schaltegger et al., 2012, Stubbs and Cocklin, 2008, Evans et al., 2014).

Some definitions offer descriptions on the strategies behind the value creation process, with a clear focus on resource flows and the goal to maintain products and materials at their highest value for a longer time while other remain at a very conceptual level, framing the rationale within closed material loops. Only Geissdoerfer et al. (2018) definition directly links CBM to SBM. Table below provides an overview of recent definitions found in the literature.

Table 1:Selected circular business models definitions

Source Definition Aim Value creation focus

Strategy/ principles

Roos (2014) “A circular value chain business model (or green business model) is one in which all intermediary outputs that have no further use in the value creating activities of the firms are monetised in the form of either cost reductions or revenue streams.”

Monetarisation of resources through Cost reduction and extra revenue stream.

Economic value of underused assets

Not mentioned

Mentink (2014)

“A circular business model is the rationale of how an organization creates, delivers and captures value with and within closed material loops”

Not mentioned Generic economic value

Focus on closed material loops

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Linder and Williander

(2015)

“A business model in which the conceptual logic for value creation is based on utilising the economic value retained in products after use in the production of a new offerings. Thus, a circular business model implies a return flow to the producer from users, though there can be intermediaries between the two parties [...and] always involves recycling, remanufacturing, reuse or of their sibling activities (e.g., refurbishment, renovation, repair).”

Not mentioned.

Economic value of product after use.

Focus on Reverse flow of resources

Principles: recycling, remanufacturing, reuse or of their sibling activities (e.g., refurbishment,

renovation, repair).”

Den Hollander and

Bakker (2016)

“A circular business model describes how an organization creates, delivers, and captures value in a circular economic system, whereby the business rationale needs to be designed in such a way that it prevents, postpones or reverses obsolescence, minimizes leakage and favours the use of ‘presources’ over the use of resources in the process of creating, delivering and capturing value.

that it prevents, postpones or

reverses obsolescence, minimizes

leakage and favours the use of

‘presources’

Economic value

No principles integrated

Nußholz (2017)

A circular business model is how a company creates, captures, and delivers value with the value creation logic designed to improve resource efficiency through contributing to extending useful life of products and parts (e.g., through long-life design, repair and remanufacturing) and closing material loops.

Improve resource efficiency

Generic economic value

Extending useful life of products and parts and closing material loops

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Smith-Gillespie, 2017

A circular economy business model is one which creates, delivers, and captures value in a manner that is compatible with and enables regeneration of finite natural resources, and keeps products, components and materials at their highest value and utility within a relevant system boundary.

Enabling regeneration of finite natural resources

Generic value

Keeping products, components and materials at their highest value and utility

Geissdoerfer et al. (2018)

CBMs can be defined as SBMs specifically aiming at solutions for the Circular Economy through a circular value chain and stakeholder incentive alignment.

Solutions for circular economy

Not mentioned

Circular value chain, stakeholder incentive alignment

How do CBM differ from traditional business models?

Adopting a circular economy strategy requires several organizational and strategic shifts. Looking at the business model architecture including value creation, value proposition, value delivery and value capture, the following changes are required, according to Mentink (2014) cited in Lewandowski (2015).

In the Value Creation (1) component, products have to be made in specific processes, with recycled materials and specific resources, which may require not only specific capabilities but also creating reverse logistics systems and maintaining relationships with other companies and customers to assure closing of material loops (Wrinkler, 2011).

In the Value proposition (2) component :products should become fully reused or recycled, or firms should turn towards product-service system (PSS) and sell performance related to serviced products activities, processes, resources and capabilities.

In the Value delivery (3) component: selling “circular” products or services may require prior changes of customer habits or, if this is not possible, even changes of customers.

Last, in the Value capture (4) component: a shift would be required to sell product-based services charged according to their use. These general normative requirements however lack the precision needed to tackle business model innovation in each distinctive circular business model.

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Characteristics supporting CBM categorizations

Circular business models can be characterized taking a product lifetime perspective (Den Hollander, 2017). Product lifetime can be defined as the timespan between the moment a product starts being used after manufacture, ending at the moment the product becomes obsolete beyond recovery at product level. Using this perspective, circular business models can be classified according to their position on three distinct phases: creating value prior to the use of the product (focus on the quality of materials to be used in the manufacturing process), during the use of the product (in one or several use cycles if the product is reused) or creating value following the use of the product (by recovering materials for future purposes).

The position of these business models according to the product lifetime also has consequences on the value dynamics being unfolded. During the pre-use and the use phases, circular business models primarily aim to retain value: in the pre-use phase, by designing long lasting products or products in which materials can easily be recovered and reprocessed for future use; in the use phase by offering services aiming at prolonging the use lifetime of the products. During the use phase, circular business models may also focus on strategies aiming at optimizing value, by maximizing the usage of the product (i.e. through sharing practices). Finally, during the post-use phase, circular business models may focus on Recovering value – that is developing operations to reverse material obsolescence.

Circular business models can also be classified based on the importance stressed on materials, products, or services associated to the product.

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2. CIRCULAR BUSINESS MODELS PRINCIPLES

Several authors (Stahel 2016, Bocken, 2016, Geissdoerfer et al, 2018) have focused on translating the generic circular economy principles into more applicable principles guiding circular business model innovation.

At the core of a CBM is the aim to create value from the (re) circulation of product and material flows. Researchers in circular economy often describe this goal taking a loop perspective – that is a structure, series, or process, the end of which is connected to the beginning (Oxford definition) – to clarify how value is created, as illustrated by the now famous Butterfly diagram (EMF, 2013).

Stahel (2016) distinguishes two fundamentally different types of loops: reuse of goods, and recycling of materials. “Circular economy business models fall in two groups: those that foster reuse and extend service life through repair, remanufacture, upgrades and retrofits; and those that turn old goods into as new resources by recycling the materials”.

Building from Stahel (2016) and Braungart (2002), Bocken’s (2016) classification approach distinguishes circular resource loops based on the speed of circulation of material flows, the closing features of material flows and the volume of materials flows circulating:

(1) Slowing resource loops: Through the design of long-life goods and product-life extension (i.e. service loops to extend a product’s life, for instance through repair, remanufacturing), the utilization period of products is extended and/or intensified, resulting in a slowdown of the flow of resources.

(2) Closing resource loops: Through recycling, the loop between post-use and production is closed, resulting in a circular flow of resources.

(3) Resource efficiency or narrowing resource flows, aimed at using fewer resources per product.

Geissdoerfer et al (2018) extended this approach further and emphasized the importance of two additional loops:

(4) Intensifying loops: strategies leading to a more intense use phase.

(5) Dematerializing loops: the substitution of product utility by service and software solutions.

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These five loops however fail to incorporate two main circular economy principles as recognized in the CE literature: the use of bio-based, biodegradable, compostable, or renewable resources to regenerate natural capitals - (6) the regenerating loops – and the – (7) cascading loops – which maximizes resource effectiveness by using biomass in products that create the most economic value over multiple lifetimes. These two core characteristics are therefore integrated in our conceptual approach to support the categorization of circular business models. Table below summarizes the distinctive characteristics of circular economy principles as opposed to linear economy.

Table 2:linear vs circular economy principles

These seven loops constitute the guiding principles from which circular business models can be designed.

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3. CIRCULAR BUSINESS MODEL TYPOLOGY

Five generic business models can distinguished, each adopting specific circular economy prinicples as shown in figure below.

Figure 3:circular business models and associated guiding principles

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Clean loops business models

In these generic circular business models, value creation is designed around the use of materials that are renewable, recyclable or biodegradable. Clean loops business models focus on the regenerative feature of the circular economy definition (EMF, 2012) and adopt the regenerating loop principle. By using renewable and recyclable inputs, the business model rationale enables materials to be returned to either the technical or biological cycle and enables 100% closed material loops (Braungart, 2002). The central circular value dynamic is to retain value of the materials used while maintaining the quality of the materials for many consecutive cycles (Nguyen, Stuchtey and Zils, 2017). The value creation mechanism is based on the integration of materials in products during the manufacturing/production stage, prior to the use phase. The value proposition in these business models focus on the benefits attached to a product made of renewable/recyclable materials, which may appeal to target customers, whether they are quality-conscious customers or green customers. Value delivery is generally not differentiated on these business models (use of traditional distribution systems). Value capture is generally associated to additional product revenues (price premiums) associated to intrinsic quality of the product (i.e.: organic, fully recyclable and recycled).

Table below provides an overview of the level 2 categories in the clean loop business model.

Table 3: Clean loop business models

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Short loops business models

In these generic circular business models, value creation is designed around products manufactured for an extended life time and additional value is created through services supporting the maintenance of the product for the same customer (Repair, upgrade), or different customers (reuse, remanufacture). As the circulation of resources remain in the form of a product in Short loop business models, the loop between product provider and users is considered “short” as opposed to Long loop business models (see below) in which the loop is focusing on materials which inherently extends the length of the loop, including the participation of additional agents (waste processing and material manufacturers) in the cycle.

Short loops business models adopt two Circular Economy principles: the narrowing loop principle and the slowing loop principle (Bocken, 2016). On one hand, by producing long-lasting products these business models eliminate the need to extract additional virgin resources in order to replace existing products, thus reducing the amount of resources in circulation. On the other hand, by providing a full range of services aiming at extending the useful lifetime of products, they reduce the speed of circulation of materials and products. The central circular value dynamic is to retain value in the existing products for as long as possible during the use phase as well as in the post-use phase when recovering products to be remanufactured/refurbished. The value creation mechanism in place is based on designing long lasting products and on the other hand on using skills and competences supporting the maintenance, repair or upgrading of products for existing customers, or refurbishing/remanufacturing capabilities to recirculate products to new customers. The value proposition in the short loop business models focus on one hand on offering customers long lasting quality products, and on the other hand on a set of solutions supporting the sustainable functioning of these products by offering services such as repair, maintenance, upgradability. Value delivery presupposes on one hand the introduction of take-back systems in order to link existing customers to repair centers back and forth, as well as dedicated distribution centers delivering reused/remanufactured/refurbished products. Value capture is generally associated to payments related to the service offered (repair/upgrade), or to the costs savings associated to resource savings when refurbishing/remanufacturing new products using recovered products/components.

Table below provides an overview of the level 2 categories in the Short loop business model.

Table 4: Short loop business models

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Access loops business models

In these generic circular business models, value creation is designed around offering access to a solution through leasing/hiring/renting products without necessarily a change of ownership (Product-Service systems), or through a platform allowing multiple users to maximize the rate of utilization of products (Platform business models).

Access loops business models adopt two circular economy principles, the dematerializing loop and the intensifying loop (Geissdoerfer et al (2018). On one hand by focusing on the functional results rather than on the product associated to the solution, these business models dematerialize value creation through a focus on servitization. On the other hand, product use is intensified through an optimization of the value delivery, allowing multiple users to access one single product, therefore maximizing the use rate of the products. The central circular value dynamic is to optimize value during the use phase.

The value proposition in these business models focus on providing the functions and benefits of the product instead of the physical product itself (Beltramello et al., 2013). The users’ needs are met without them having to own physical products. On the other hand, these business models facilitate the sharing of overcapacity or underutilization, increasing productivity and user value (Accenture, 2014) Value delivery is performed through long-term contractual agreement between provider and customer (PSS) or through a market-place based approach allowing the sharing of goods and services (Platform). Value capture is generally associated to payments for function or results or payments per unit of service. In this approach, product longevity, reusability, and sharing are perceived are perceived as drivers of revenues and reduced costs (Accenture, 2014). Other value capture mechanisms include service fee or membership fees to access the associated platforms.

Table below provides an overview of the level 2 categories in the Access loop business model

Table 5: Access loop business models

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Cascading loops business models

In these generic circular business models, value creation is designed around a multiplication of uses of materials to create new value from coproducts in multiple value chains within and between industries.

Cascading loops business models adopt the cascading loop principle. In these process-orientated solutions, waste outputs from one process are turned into feedstock for another process or product line (Bocken et al., 2016). The central circular value dynamic is to recover value.

The value creation mechanism is based on recovering materials and energy from internal processes either to be reused internally or to be exchanged for the benefits of another industry. Cascading loops business models are inspired by the ecological principle called “waste is food” by Braungart and al. (2007). In order to be implemented, skills and competences are required to reprocess waste and recover value from energy and material flows. The value proposition in these business models focus on providing used resources to feed in another industry process or new products made from used resources to final consumers. Value proposition is considered multiple as with one set of resources, multiple customers from different industries and sectors can benefit from the solutions developed. Value delivery focuses on one hand on providing used materials, components or waste to be reprocessed by a third party, and on the other hand on taking back used components or materials to feed into own processes. Value capture is generally associated to additional revenues generated from the sale of materials or energy to be reused in other industries processes, as well as cost reductions from reusing materials and energy. Using the resources available in cascading systems, the waste of one product becomes the input to create a new cash flow (Pauli, 2010). Table below provides an overview of the level 2 categories in the Cascading loop business model.

Table 6: Cascading loops business models

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Long loops business models

Long loops business models are built on “Create value from waste” (bocken,2014), “Extending resource value” (Bocken, 2016), “Resource Recovery” (Accenture, 2014), “IS-based business oriented to product generation” (Albino and Fraccascia, 2015 ), “Waste regeneration systems” (Beltramello et al., 2013), “life-cycle models” (Bisgaard et al., 2012), “Closed-loop productions” (Clinton and Whisnant, 2014), “Recycling and waste management” (Kiørboe et al., 2015), Recycling (Mentink, 2014), “Resource recovery” (Smith-Gillespie, 2017), “Recycling” (Lüdeke-Freund et al.,2018) categories. In these generic circular business models, value creation is designed around recovering already used-resources from discarded products in order to extend the value of resource through recycling.

Long loops business models adopt the closing loop principle (Bocken, 2016). Materials are recovered to be reprocessed into new components or products. Long loop business models can provide downcycling solutions or upcycling solutions. In the latter, materials are reprocessed into higher-quality and value products, while downcycling generally decreased the embodied value of the recovered material (McDonough and Braungart, 2013). The central circular value dynamic is to recover value in the post-use phase, focusing on the recovered materials.

The value proposition in these business models focuses on offering new products based on recycled waste /recovered materials, or developing higher-level competences to support customers in handling and processing recovered waste. The value creation mechanism is based on adopting waste handling and processing capabilities as well as reverse supply chains logistics allowing to take back used products or materials and recycle them for another lifecycle.

Value delivery in long loop business models is focusing on connecting suppliers of discarded material (companies or consumers) with new customers Value capture is generally associated to the generation of additional product revenues. Table below provides an overview of the level 2 categories in the Long loop business model

Table 7: Long loop business models

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Main Take aways

Circular business models can be defined as the rationale of how a company creates, deliver, retain, optimize, capture, and recover superior sustainable value by regenerating, closing, narrowing, slowing, intensifying, dematerializing and cascading resource loops within its value network, thus supporting its stakeholders without undermining the functioning of the biosphere or crossing any planetary boundaries.

Circular business models can be classified based on (1) the business model orientation (material – product – service) (2) the focus taken by the business model on the product lifetime phases (pre-use, use, post-use), and lastly (3) its circular value dynamics (retain value, optimize value, recover value)

Figure 4: circular business models and orientation

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Figure 5: Value dynamics and product use lifetime

Circular business models can be organised according to five generic circular business models: (1) clean loops business models, (2) short loop business models, (3) access loops business models, (4) cascading loops business models and (5) long loops business models.

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UNIT 3.4 CIRCULAR BUSINESS MODELS STRATEGIES IN THE FURNITURE INDUSTRY

Module 3, Unit 4

Content

Clean loop strategies 41

Short loop strategies 45

Access loop strategies 48

Cascading loop strategies 51

Long loop strategies 54

Objective of the unit

The training unit aims at providing an overview of CE strategies within the furniture industry

Learning outcome

Knowledge: have an exhaustive view on circular economy strategies Skills: identify starting points and value creation mechanisms specific to the industry.

Pedagogical approach

Powerpoint Additional reading material

Hours

2.5 hours

Assessment methodology

Quizz

ECVET

0.1 credits (0.5 the whole module)

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This unit introduces key strategies to be implemented in the furniture sector based on the different existing business models for the circular economy. The main strategies are illustrated with business case examples.

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1. CLEAN LOOP STRATEGIES IN FURNITURE INDUSTRY Strategy: Business model is designed around fully renewable, recyclable or biodegradable inputs.

Biosourced loop Value creation through the use of renewable materials

Recylable loop Value creation through the use of fully recyclable materials

Recycled loop Value creation through the use of recycled materials

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Business case: Natural Mat (source: Rebus)

Figure 6: Natural Mat

Naturalmat is an international, award-winning business that offersa huge Range of organic,natural and luxury mattresses, toppers,bedding and beds for babies. Handmade and bespoke, you can find mohair, cashmere, bamboo, cotton and natural latex in the range, and their luxury beds can be found in hotels all over the world. Naturalmat aims to: • Source sustainable And biodegradable raw materials . • Utilise local supply chains. • Guarantee its products are chemical-free. • Re-use materials wherever possible. • Extend product durability. Naturalmat was keen to introduce a circular offer that would give customers a better deal, improve its waste footprint, and disrupt the market into not throwing as many mattresses away . It introduced new materials into the construction of its mattresses, to facilitate deconstruction for recycling at end of life, and also introduced a take back scheme for customers . The aims were to: • Increase reuse of the mattresses at end - of - life. • Inform customers who were interested in reducing waste. • Develop marketing literature. • Provide reduce waste at site. • Increase orders. • Provide positive publicity and improved public relations.

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Naturalmat has 7,000 mattresses in use; A pilot project in the framework of a European project (ReBus) helped the company to think about how it could make the business more sustainable in the future. It resulted in the following changes:

- Mattress construction has changed to incorporate a 50% reduction in the use of adhesives. This makes mattresses easier to deconstruct at end-of-life.

- Customers can now take advantage of a free mattress recycling take-back service.

There is also an ‘upcycling and replacement programme for beds’ service available. This is an incentivised return offer where the returned mattresses would be deconstructed and the materials reused, recycled, or up-cycled.

- Hotel chains have been offered a specifically closed loop leasing model where the

materials will be taken back. This will operate on a speculative basis, to find out how this might work in the future.

- Messaging on care advice has changed, to promote the availability of a B2B refresh

service and emphasise that the mattresses are recyclable / bio-degradable. The 2016 results show that trade-in or take-back would create an extra 81 tonnes of recycling, and an extra 89 tonnes of material for re-use. Based on 1,800 sales, take back would also generate estimated extra revenue of £35,000. Due to market and business feedback, a number of the initial ideas changed and developed as the project developed. Initially, the idea was to focus on a technical solution. However, this developed into a market service solution. Now that customer offers are in place, Naturalmat is once again reviewing technical solutions. The company has grown in output and business acquisition and developed understanding of circular – for example, it is now able to offer a closed loop service to hotels, which is beyond the initial aims of the scheme. Naturalmat is currently working on a B2C mid-term refresh, repair and service support offer. This has yet to go into production and needs to be carefully thought through and communicated. An extra cost exclusive membership model, to extend product life, sell extra services and refresh is also being considered, as well as a drive for additional sales margin and repeat and new business. “All raw materials that we use, come from 100% renewable and sustainable sources, so that they can be recycled once they have come to the end of their product life.” States Peter Tindall, Founder of Naturalmat. This example illustrates the choice of clean loop business models.

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Skills needed

- Knowledge on sustainable sources, natural materials

- Design skills to use natural resources into long-lasting quality products.

- Marketing skills to support the sales on natural products meeting specific customer

needs

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2. SHORT LOOP STRATEGIES IN FURNITURE INDUSTRY Strategy: Business model is designed around products manufactured for extended life time and additional value is created through services supporting the maintenance of the product for the same customer (Repair, upgrade), or different customer (reuse, remanufacture)

long life Value creation based on manufacturing high-quality, long-lasting products

Extended life (single user) Value creation based on additional services extending the life of the product for the same user (maintenance, repair, upgrade)

Extended life (multiple users) Value creation based on processes extending the life of the product for other users (reuse, remanufacture, refurbishing)

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Business case: Rype Office (Source: Ellen MacArthur Foundation)

Figure 7: Rype office

Rype Office is changing how companies think about their office furnishings. Three options are available to customers; purchase new furniture and return it in a buy-back scheme, purchase remade furniture from existing feedstock or have existing furnishings refreshed and returned to an as-new condition.

While ownership may still be favoured for some items such as a classic car, guitar or teddy bear, companies and individuals may readily lease functional products such as washing machines or power tools. Office furniture is also ripe for such disruption, and UK company Rype Office is leading the way in changing how companies think about their furnishings.

The resulting company, Rype Office, offers three furniture options for customers: New, Remade or Refreshed, each appealing to different client preferences and openness to new business models and remanufactured products.

For customers who desire brand New furniture, products can either be purchased outright with the option of a buy-back offer (the model used by Caterpillar for its engines), or leased for a monthly fee. Both allow Rype Office to recover the furniture for remanufacturing at the end of its first life, while saving customers money. The furniture offered by Rype Office in this model has been chosen for its quality and ability to be remanufactured, reducing the cost to renew it.

For their Remade offering, Rype Office applies interior design expertise to provide a made-to-order service that creates beautiful, productive offices, drawing from a range of feedstocks. Rype Office sources the appropriate cores and remakes them to suit the sizing, colours and materials specified by the client, who once again can lease or purchase the order with a buy-back offer. Customers benefit from substantial cost savings and reduced lead times as the furniture does not have to be made from scratch.

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For their third offering, Refresh, the company takes a customer’s existing furniture and remakes it to as-new condition. Remanufacturing is currently locally outsourced by Rype Office to ensure sufficient capacity and skills to serve large orders and diverse furniture types.

This range of service offerings enables customers to take big or small steps towards the savings available from the circular economy, depending on their level of acceptance of the new business model. Rype Office has found that while there are many success stories, barriers remain to circular business models. The most significant of these is perception; customers often confuse remanufactured products with second hand, used, cleaned, repaired or repainted. By definition, remanufactured products should be returned to as-new or ‘better than new’ quality, and many working examples of this exist, from photocopiers to engines and other car components.Their supply chain combines latest equipment with traditional furniture mastercraftsmanship. Refreshing provides a large cost saving for customers and has also proven attractive to companies struggling to replace furniture pieces no longer in production.

The second main barrier is that pay-per-use is a relatively new concept, often accompanied by preconceptions of being more expensive or creating inconvenience through lack of ownership. In reality, the opposite may be true, as circular leasing models incentivise better maintenance and support by the manufacturer throughout the life of the product. Many encouraging examples exist, and the range of products that businesses and individuals are willing to access rather than own is growing all the time, with houses, white goods and even clothes now available through pay-for-access models.

While Rype Office has been designed with ambitious circular economy principles at its core, these are blended with more conventional approaches to meet the market where it is today, and help customers to understand the further savings available. In this sense, the company is playing a crucial role in identifying business models that work for the transition to a circular economy.

Skills needed - Design skills to refurbish/remanufacture products easily.

- Repairing skills

- Networking and collaboration skills (in this case, outsourcing remanufacturing

processes)

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3. ACCESS LOOP IN FURNITURE INDUSTRY Strategy: Business model is designed around offering access to a solution through leasing/hiring/renting products without necessarily a change of ownership or through a platform allowing maximisation of utilisation.

Product service system

Value creation through delivering a function/result rather than a product.

Products are used by one or many customers through a lease or pay-for-use or functional results value capture mechanisms

Platform

Value creation through a platform connecting product users (B2B or B2C),

providing access to a product/service which allows to maximise product utilisation

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Business case: Furnishare (Source: Ellen MacArthur Foundation)

Figure 8: Furnishare

Alpay Koralturk set up Furnishare in 2014, after the stressful and frustrating experience of moving house six times in as many years. Each time he moved, like other citizens, he would try and sell some furniture that was no longer needed, but being against the clock and juggling other jobs, lots of good quality furniture ended up being thrown out. Some items find a new owner in this way, but Koralturk decided to investigate the scale of this loss to the economy.

In the United States alone 15 million tonnes of furniture is wasted annually, and only 2% recovered for recycling. The actual potential in the used furniture market has been estimated as $10 billion per year.

Koralturk saw an opportunity for something new and unique in the market - an offering that could be more convenient for consumers and better for the city. It could also benefit manufacturers and designers. There’s not much of an incentive to create furniture that stands the test of time when customers buy and use cheap products that get the job done for a while, but then throw them away. Koralturk believes that a different model, one that keeps furniture in productive use for longer, could influence designers and manufacturers to create products that last.

The Furnishare model has a number of components but revolves around a central concept - to keep high-quality furniture in use, thereby creating additional value for previous owners and more flexible access options for future 'users'.

When someone has an unwanted piece of furniture, they can contact Furnishare who reviews the item and collects it from the current owner. The item is then placed on the Furnishare platform, where people seeking furniture can view it and lease it. This is done through a subscription service at a price Furnishare claims is a ninth of traditional rental stores. Similar to other sharing economy platforms, the leasing revenue is split between Furnishare and - for an agreed period - the person who donated the item.

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The model gives people a chance to monetise a burdensome or underutilised asset rather than simply disposing of it, a process that might itself cost money. When items are returned to Furnishare after the lease period they are repaired and cleaned, something the founder says is far more effective when well-designed, well-built items are cared for by professionals.

With a proposition based on convenience, choice, affordability and quality, it’s a wonder a similar model doesn’t already exist in the furniture industry. Koralturk thinks this is because the most important strength of Furnishare is its capabilities in logistics - an area a typical furniture manufacturer isn’t eager to get into.

Another advantage is its focus on maintaining quality; a marketplace doesn’t worry about the quality or type of listings, just the volume. As a platform, Furnishare wants to get smarter in its interactions with those who donate and lease furniture, using data to tailor inventory to reflect what people want and need in their homes, and ensuring furniture is kept at the highest level of utility and value at all times.

The team behind Furnishare say that the biggest challenges they have faced are the same as those facing any new logistics company. However, they also have the task of changing people’s perspectives about a traditional industry, and bringing the public around to their way of thinking: that ownership is overrated, and experience is far more valuable.

The next few years are going to be about getting the word out about the Furnishare proposition, and for Alpay Koralturk, the wind is blowing in the right direction. The entrepreneur says that he’s seeing companies in different sectors making changes that favour access and better utilisation of resources and from Zipcar to Rent the Runway, the response is often in favour of owning less.

Skills needed

- Skills to design value proposition following leasing models

- Customer-oriented skills to define needs and strategies to meet those needs

- Platform development skills, including logistics partnerships

- Marketing skills

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4. CASCADING LOOP IN FURNITURE INDUSTRY Strategy: Business model is designed to diversify the use of materials to create new value from coproducts in multiple value chains within and between industries

Waste exchange

Value creation is based on reusing Waste produced by a given production process as input by another production process internally or externally, allowing for multiple value creation from the same material source

Waste as coproduct

Value creation is based on a business enlargement strategy since new products are added to the ones currently produced by the company.

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Business case: Mani Pine , Denmark

Figure 9: Mani Pine

In the spring of 2015, after a rapid success, Mani Pine lacked high-quality recycled wood for the manufacture of their handmade sustainable furniture. Through NBE (Network for Sustainable Business Development NordDanmark)), the company came into contact with Salling Entreprenørfirma A / S, which has special competencies related to the careful demolition of old buildings, with a focus on ensuring the recycling of as many materials as possible. From here, Mani Pine was able to acquire sustainable recycled wood. During the development of the cooperation between these two companies, NBE also brought Desmi into the project.

Desmi, together with NBE, has had a great focus on sustainability. Large quantities of steel bolts had been identified - intact, operational, and used only once - from packaging of delivered pump parts. The steel bolts could not be used by Desmi, and had so far only been disposed of as scrap iron. It turns out that it is just such bolts that Mani Pine could use to assemble its furniture.

Mani Pines' ambition is to create sustainable designer furniture that is adapted to the individual customer's home, using recycled materials. For a long time, Desmi has had a great focus on sustainability, and is interested in making their production as sustainable as possible. Salling Entreprenørfirma had a great desire that their recycled wood be used as far as possible for the production of new products - thus supporting the idea of resource optimization, circular economy and upcycling.

The identification of the potential synergy between these three widely differing companies, through their focus on circular economy and upcycling resources, was the first step on the road. This required close collaboration and dialogue, and often an outside facilitator with a sharp focus. By bringing the three companies together, a new value network has emerged, and since then the companies themselves have driven the project further.

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The collaboration led to new relationships and expansion of networks between the three companies that otherwise operate in widely different industries.

The waste of one company became the raw material of the other company. There was thus financial gain both for Desmi and for Mani Pine.

Environmental gains appeared in the form of materials - both old wood from demolished houses and bolts used in packaging - getting new value and being upcycled instead of being simply thrown out for downcycling.

Skills needed

- Collaboration and networking skills

- System view

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5. LONG LOOP IN FURNITURE INDUSTRY Strategy: Business model is designed based on recovering already used-resources from existing products in order to extend the value of resource through recycling

Resource Recovery Value creation through recovering resources from discarded products, and integrating these inputs into new products

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Business case: IKEA (source: Rebus) IKEA’s vision is to create a better everyday life for the many people. Our business idea is “to offer a wide range of well- designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”. IKEA works hard to achieve quality at affordable prices for our customers through optimizing our entire value chain, by building long-term supplier relationships, investing in highly automated production and producing large volumes. IKEA’s vision is to create a better everyday life for all people impacted by our business, and are committed to having an overall positive impact on people and the planet. IKEA has an ambition to become a circular retailer, with a goal that by 2025 IKEA will take back everything they produce. They currently take back sofas, beds, mattresses and appliances in the UK&IE. Textile take-back for re-use in the local community • IKEA UK & Ireland has launched a new textile take-back scheme at its Cardiff store, encouraging customers to recycle unwanted textiles and help the local community. • In-store workshops help customers learn a new skill, breathe new life into old textiles, or turn them into something new. • All of the textiles donated to the Cardiff store are collected by YMCA in Roath, Cardiff. • IKEA will take back anything YMCA cannot re-use or recycle and recycle through IKEA’s own waste streams. The scheme will provide a range of textiles for people in the local community, including the homeless and low-income families. IKEA’s aim is to revive old textiles and keep them out of landfill, but also ultimately to bring textiles back into the supply chain; for the customers to learn new skills that can help to keep textiles out of landfill and in-use; for the charity partner YMCA, to ensure textiles are re-used by those in need in the community or resold in their stores; To test and develop a scalable model. Benefits of the service Recent research by WRAP reveals that textiles are one of the least recycled commodities in the waste sector. Each year, WRAP estimates that the UK consumes 1.7 million tonnes of textiles, with almost a third (620,000 tonnes) ending up in landfill or incineration. The service highlights ikea’s ethos that everyone has some responsibility to better the lives of the everyday people. Customers are able to bring their old textiles that will either benefit the local community or be responsibly recycled. The role of our store in society/community is a very important theme. IKEA undertakes a wealth of circular economy initiatives globally through its People, Plant, and Positive approach. The new partnership with YMCA has allowed the Cardiff store to better support individuals in the local community as well as keeping textiles out of landfill and in use. IKEA worked with WRAP as experts in development of circular business models. The team provided specific support, including: • Coaching the IKEA team through a range of circular business model ideas and developing each idea until they found the most feasible to pilot. • Working with the IKEA Sustainability team to develop the outline business case. • Supporting the IKEA team with research and ideas to make the service work and highlighting what other organisations are already doing in this space. • Facilitating partnerships for the service. • Developing the metrics to measure the progress of the service. The Pilot

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IKEA ran the pilot at their Cardiff store primarily to understand what customers thought of the service and how they would like it to be developed. “We recognise as a retailer we have a responsibility to seek ways to use more of the resource available rather than using virgin material. Through this pilot we have been able to facilitate the return of textiles to our stores and are looking to the future to take product back into the supply chain with the aim to make these into new products, thereby supporting our aspirations to create a circular economy.” Lynn Maxwell, Sustainability Developer West, IKEA. Results The IKEA pilot has demonstrated a range of qualitative benefits such as: • Receiving enthusiasm and praise from customers and from the Welsh Government which in turn motivated Cardiff co- workers. • Winning the Business in Community Award in Wales. • High attendance and positive feedback at the ‘revive your textiles’ workshops, including from one member of the community who attended as part of her therapy for mental health issues. Based on the results of the three month pilot, over 12 months at the Cardiff store the service could deliver the following results: • Collection of 4.4 tonnes of textiles; • Diversion of 1.1 tonnes from landfill; • Prevent 20 tonnes of waste arising in the supply chain; • Prevent the use of 8,400 m3 of water; • Prevent 20 tonnes of Carbon emissions; • Generate £6500 revenue from resale of textiles for YMCA; and • Create 580 volunteer hours for YMCA. Next steps It is intended to roll the textiles take back service out across the UK and Ireland in a phased approach. The roll out across other stores will be based on the learnings from the Cardiff pilot. The pilot has allowed a template to be created which can be replicated across other stores. It specifics the contractual agreement with partners, logistics, the design of the collection area, messaging, promotion and advertising, workshop programme, success metrics, etc. It is intended that the service will be rolled out to a number of stores in early 2018, with full roll out across the UK and Ireland later on in 2018. Lessons learned Getting the message out to customers was key. Greater volume and higher quality textiles were collected in the first half of the pilot most likely due to the amount of publicity and advertising the service received in local media. As this was just being offered in the Cardiff store national advertising, for example, on IKEA main website, was not possible. Regular publicity and the correct messaging will be key to long term success of the service. “Making sure the right people were involved. It took a long time to get to that point, but the right people who understand the “why” we are doing it, gave the rest of the team energy and it felt easy as a result.” Allyn Burford, Marketing Manager, IKEA Cardiff Skills needed

- Marketing skills to explain the “why” of the initiative and to convince customers to

participate

- Partnership and collaboration skills (for recycling the collected items)

- Logistics skills

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UNIT 3.5

CIRCULAR BUSINESS MODEL CASE STUDIES IN THE FURNITURE INDUSTRY

Module 3, Unit 5

Content

Case studies 59

Objective of the unit

The training unit aims at providing an indepth understanding of circular business model cases in the furniture industry

Learning outcome

Knowledge: know best-of-class examples of circular business models in the furniture industry

Pedagogical approach

Powerpoint Videos

Hours

2 hours

Assessment methodology

Quiz

ECVET

0.08 credits (0.5 the whole module)

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Green furniture – Sweden

Figure 10: Green furniture

Green Furniture Concept makes sustainable design for public interior areas. Configurably winding, seamless seating and acoustic lighting from Green Furniture can be found in places like Dublin Airport, Topanga Mall (LA) and Stockholm Central Station.

Green Furniture Concept was born out of a deep desire to be a leader in sustainable furniture design and production. Sustainability has guided the development of the company and is part of its soul as a company. From early on, the management has committed to integrating environmental sustainability into its business processes and continuously improve its environmental work.

Green furniture aims to be ecologically sound in all aspects: in its everyday mission and through its products. The company strive to keep its products integrated in the natural cycle or in a technical cycle free of waste. The Nordic Ecolabel is used as a base standard for each product development. Those standards are exceeded by, for example, using natural hard wax oil instead of varnish and upcycled instead of virgin materials.

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“When I started making furniture I was shocked by how smelly furniture manufacturing was, literally, with glues and coatings, and I decided to make a difference. The Green Furniture brand was introduced at the Stockholm Furniture Fair in 2010, based on the idea of creating sustainable modern classics. Furniture with heart and soul, pieces that say something about both your taste and your sense of responsibility. Design that is better because it is made according to sustainable principles, made to the highest standards of quality, so that your piece can be with you for a long time. Furniture made using strong emotional language that forges a relationship between the piece and people.” Johan Berhin, Founder.

Green furniture philosophy is that eco-friendliness should also make better furniture in terms of function and aesthetics. Hard wax oil is not only equally resistant to varnish, it imbues the wood surface with an utterly different feel and scratches can be easily touched up, just like shoe polish, to keep your furniture always-like-new. Upcycled wooden planks not only provide good solid wood, they carry a story of origins and the wise use of resources while adding life and uniqueness to the design.

More info: www.greenfc.com

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L’ESTOC - Spain

Figure 11: l'estoc

L’Estoc designs, produces, and sells furniture made from recycled materials and disused objects. Its goal is to improve and dignify the life of people with intellectual disabilities, fostering development through work. The combination of materials is the house trademark: From wooden blinds the company makes benches or screens, a door can become a table, and a crib is turned into a child desk.

A social lens to the circular economy

“We believe that a sustainable economy can be obtained not only from the environmental point of view, but also from the social one. For this, we transform recoverable materials into a valuable resource through a unique creative process that helps normalize the lives of people with disabilities.’”

In Catalonia there are 378.000 registered people with disabilities, 10.6% of which are of the intellectual type. Almost 55% of them are of working age, but only 78.000 actively work. L'estoc offers a wide range of possibilities for labour integration. The worker gets involved from the beginning in the whole process with a piece: Fixing, treating, polishing, painting, and varnishing. The activity is stimulating, fosters creativity, and gives visibility to the skills of people with disabilities.

L'estoc has been awarded the programs for Social Entrepreneurship of Momentum Project by BBVA and Esade (2015), La Caixa Foundation (2012) and the Generalitat de Catalunya (2011).

More info: http://lestoc.com/en/estoc/

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ARCADIA DESIGN – Italy

Figure 12: Arcadia

“We embraced the circular economy principles because we believe that objects should never be thrown away, but always transformed,” explains Massimo Germani., co founder of Arcadia Design, an Italian innovative start up based in Central Italy. The company designs EASYDiA + EASYoLo a set of modular chairs and tables for children from 18 months up to 10 years, which offer space to customization and are designed under circular economy principles. Their modular structure stimulate reuse, transformation, customisation and imagination,that adults and children can share: assembling the pieces when they get the pack, customising or replacing modules over time, disassembling their chair or table when no longer needed and giving them a new beginning, making one new suggested products or invent new ones.

“Rather than fix interiors, we prefer to conceive objects that you can modify and make of them exactly what you want. So a chair and a table become a toy for children, a photo frame for the family, an armchair for young people”.

The product is entirely made in Central Italy and based on a careful research on sustainability criteria, partly in collaboration with University Milan Bicocca: all solid wood, a limited edition in local chestnut again from Central Italy, to cut transports and support the maintenance of local woods, finishings that are totally water-based, non-toxic and certified for food contact.

More info: https://www.arcadiya.net

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BRÜHL - GERMANY

Figure 13: Brühl

With their range of durable, sustainably manufactured furniture made from eco-friendly materials, Brühl contribute to the conservation of our planet’s finite resources.

The company intend to make furniture “more rescource-friendly” in terms of overall resource consumption and wants to make sure that it “can be used for longer and in a better way”. All manufacturing steps throughout the entire product life-cycle take ecological, sustainability and health-related aspects into account. For example, values lie far below the legally permitted employee exposure values for adhesives; in fact, they are almost below the detection threshold. All of the materials used are also carefully examined with regard to their environmental compatibility and durability to ensure that the furniture has a particularly long life-span. Some of the designs are fully recyclable, and leftover materials are recycled. Brühl sources the renewable resource wood from certified sustainably managed forests (FSC), and wherever possible locally.

Leather suppliers use salt-free preservation techniques that save water. Oliva leather, for example, consists of hides that have been tanned with the aid of plant-based methods and therefore almost completely without the use of chemical substances. When it comes to the textiles used, Brühl is also always on the lookout for even more environmentally-friendly solutions in cooperation with sustainability-focused suppliers. All of the fabrics used comply with the Oeko-Tex® standard or bear the EU-Flower eco-certificate. Due to the high quality of the fabrics and the careful and precise finishing of the covers, the seating furniture is exceptionally durable and has a particularly long life-cycle. Much of the furniture also features removable covers, which more or less doubles its life-span.

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In 2002, the company’s environmental commitment earned brühl the Bavarian Environmental Medal for special contributions towards environmental protection and regional development. In 2009, brühl was the first furniture manufacturer in Germany to be awarded the “Blue Angel” eco-label for particular eco-friendliness. brühl has also been a certified carbon neutral manufacturer since 2017.

More info: https://bruehl.com/

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NNOF – Belgium

Figure 14: NNOF

Nnof stands for 'nearly new office facilities': office furniture that is almost new. The Vilvoorde company design offices with mostly recycled material, which usually comes from the customer's previous interior. Chairs are re-upholstered, tables are given a new top layer, cupboards are disassembled and transformed into new furniture. The end result does not look like a thrift store, but simply as a new interior. How did they get there? “Around the turn of the century I started to read a lot about climate change, our handling of raw materials and all the problems that awaited us”, explains managing director Didier Pierre. 'That was not fun. Our group already had a moving company at that time, and another company that offered furniture management for offices. We measured our climate impact and showed that we reduced our emissions every time we repaired office furniture. It made us think: could we not go much further? We knew very well how much office furniture was simply thrown away. Often we had to dispose of a whole interior for the same customer with our moving company, and then to install brand new furniture with our furniture management company. It was absurd. We decided to invest much more in repairs. In the last two years we have also committed ourselves to re-working: we now use tablets from old tables to make seating furniture, for example, or we design a rack system made from used table bases. If customers leave us somewhat free, we can reuse a very large part of their interior. Why is it working so well? Nnof is more sustainable and cheaper. “That is surprising, but actually it makes sense, because we do not buy raw materials, only for the final layer. And I have no illusions: our customers choose us mainly because of the price advantage. But they do agree that they choose sustainably. And that is good.”

More info: www.nnof.be

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HERSO – The Netherlands

Figure 15: Herso

The Dutch wood working company Herso uses reclaimed wood to make new products, from furniture to floors.

Herso uses wood from old floors, furniture, cut offs from carpenters and of course their own. They select good pieces of wood, even small ones, to use in their designs. Iron pieces, such as nails, are also reused, while sawdust is use to make bio-alcohol, cat litter, and compost. In the rare case they need to use new wood, it is always FSC approved.

Rather than just selling their products, Herso has a sort of deposit money arrangement. In essence, you rent the products. During its use, the product keeps a value that is determined beforehand. At the end of use the product can be handed in, so that Herso can use it again to make new furniture and floors. All Herso’s tables are solid and made by hand. They only use biodegradable glue. The company also takes on various projects, such as the no-waste floor of Circl, a circular pavilion in the Netherlands. The floor is the size of a football field and made from wood from all sorts of sources, such as a villa from the 50s, old furniture, a hardwood terras, window-frames, and an old door. All this waste wood is turned into a beautiful wooden floor. And Herso promises that when the pavilion is deconstructed in 25 years, that they will make new products from the floor.

More info: www.herso.nl

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FIGUERAS INTERNATIONAL SEATING - SPAIN

Figure 16: Figueras international seating

The Figueras Group is the global specialist in the design and manufacturing of high-end fixed seating and movable seating solutions for public spaces, crafted through design, innovation and engineering since 1929.

Figueras wants to make a significant contribution to improving the environment and believes in eco-design and taking a sustainable approach to manufacturing. That’s why the company has complied with ISO 14001, the global, officially-recognized, voluntary standard that certifies Figueras’ exemplary environmental performance.

In 2017, Figueras Seating also obtained certification, in accordance with international standard UNE-EN ISO 14006. This certification applies to product design and encompasses environmental aspects such as the integration of product sustainable materials, eco-friendly production processes, non-toxic materials use and. All considering the complete lifecycle of the products.

More info: https://www.figueras.com

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MOBLES 114 - SPAIN

Figure 17: mobles 114

Mobles 114 editions specialises in producing contemporary furniture and fittings and is based in Barcelona. The m114 brand, founded in 1973, is committed to improving the quality of public places and homes with unique, timeless designs.

Mobles 114, an agent of change towards a sustainable model.

Aware that 70% of the environmental impact of products and services is determined during the design stage, Mobles 114 sees design as a means of bringing about paradigmatic changes towards a sustainable model. Committed to better products, from the design stage through to manufacturing, distribution and marketing, the company strives for environmental coherence in its final product. Mobles 114 brings history and stories to life, turning them into good quality furniture, long-lasting, sustainable and of great beauty. In many of its projects it collaborates with designers who are sensitive towards the environmental issue, who look for functionality and aesthetics using natural, local materials with a comprehensive view beyond the item of furniture itself. The company applies various eco-design strategies in its production: 100% recycled and recyclable materials; locally sourced or produced materials or natural materials; designs that are easy to assemble and dismantle; products made from a single material whose components can be recycled at the end of their life cycle, and minimal volumes to reduce consumption as a result of transport; as well as a design that emphasises high quality and durability in the final product. Products that never go out of fashion, that last because they offer something more than just a mere function, because they remain coherent in each phase of the process of design, manufacture, distribution, use and useful life. These are well-designed items of furniture, well-made and well-conceived from the beginning to the end.

Mobles 114 thereby becomes an agent of change towards a more sustainable and responsible consumption, influencing its chain of suppliers and also its clients with a sustainable, competitive proposal: a benchmark in finding eco-innovative solutions in the furniture industry.

More info: http://mobles114.com

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SANCAL – Spain

Figure 18: Sancal

SANCAL, one of Spanish leaders on upholstery furniture, is dedicated to the production of sofas, chairs and any upholstery furniture possible to be developed. Their products are well-known for the effort and passion that the company put in the design procedure. For Sancal design should be “a source of: Innovation, to develop new concepts and improve existing products. Simplicity, to make our lives easier. Closeness, to make the new familiar. Creativity, to thrill us”.

Quality and sustainability

“We reject the premise of the throw-away society, carefully designing pieces that will stand the test of time”

Sancal have both the ISO 9001 and ISO 14001, yet its concern goes beyond the requirements of any norm. Within its manufacturing process Sancal starts with wood from renewable sources and carefully separate their residuals for recycling. In addition, solar panels on their two factories with near 15.000 m2 produce all the necessary electricity.

Design towards a circular economy

“Our premise is to design products which go forward with us, which bring value and allow us to create personal, singular spaces.”

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Sancal has a particular design far from the conventional and without the limitations of the perfectly-matched environment; a contemporary style, timeless and eclectic with which it evolves. Since the first steps all products are designed thinking in the future with an environmental point of view, thinking in their efficiency, durability and reusability.

One of the best examples is the “rock” table. A Life Cycle Analysis was done to re-design this product with minor environmental impacts. Thus, new environmental friendly materials were introduced, as well as the materials used for packaging. Due to this new “rock” table design it has been optimized the use of raw materials, decreased polluting waste, and improved the efficiency of product transport.

More info: https://sancal.com

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ARTEK – 2ND CYCLE - FINLAND

Figure 19: Artek - 2nd cycle

Artek was founded in 1935 by four young idealists: Alvar and Aino Aalto, Maire Gullichsen, and Nils-Gustav Hahl. Their initial goal was “to sell furniture and to promote a modern culture of living by exhibitions and other educational means.” Today, the company manufactures furniture, lighting, and accessories designed by Finnish masters and leading international designers. It stands for clarity, functionality, and poetic simplicity.

Artek's current management believes that the values instilled by Aalto during the 1930s - good quality, sourcing local materials and using them economically - tick many of the boxes required of sustainable manufacturers today. "Aalto and his circle wouldn't have used the word 'sustainability'," says Tom Dixon, the British furniture designer who became Artek's creative director in 2004. "But if you look at what they did at Artek with modern eyes, it has all of the underpinning characteristics."

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In 2006, Artek began collecting used Aalto chairs and stools, searching them out from flea markets and old factories, schools and shipyards. This led to the founding of the Artek 2nd Cycle initiative, which offers these re-discovered pieces for sale, beginning a second cycle in their lives. Today, Artek 2nd Cycle is Artek’s platform for pre-loved furniture. The brand offer re-discovered furniture and lighting for sale, beginning a second cycle in their lives. Artek 2nd Cycle store, in the heart of Helsinki, is a meeting point connecting collectors, customers, and designers. The store invites visitors to browse, buy a beautifully aged piece of furniture, discover a rarity, or simply learn more from Artek experts. Artek 2nd Cycle not only showcases the longevity of Artek furniture, it also promotes conscious consumption – the idea that what we buy should be carefully chosen, cherished rather than disposed – and seeks to honour the natural materials that have gone into producing these enduring designs. As Alvar Aalto once said, “Nothing is ever reborn, but neither does it totally disappear. And that which has once been, will always reappear in a new form.” Circular thinking?

More info: www.artek.fi/2ndcycle

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UNIT 3.6 MAPPING YOUR CIRCULAR STRATEGY BASED ON YOUR EXISTING SITUATION

Module 3, Unit 6

Content

Value mapping exercice 74

Objective of the unit

The training unit aims at integrating knowledge of the module in a case study exercise

The training unit aims at providing basic knowledge on business model

Learning outcome

Competences: Apply circular knowledge in a real-case situation

Knowledge : understand the concept of business model Skills : recognize specific mechanisms to create, deliver and capture value

Pedagogical approach

Case study exercise

Powerpoint Additional reading material

Hours

2 hours

1h 2h reading

Assessment methodology

quiz

Quizz

ECVET

0.08 credits (0.5 the whole module)

75

1. VALUE MAPPING TOOL EXERCICE

The ‘‘value mapping tool’’ helps companies create value propositions to support sustainable and circular business modelling. The tool adopts a qualitative approach to value analysis.

The tool has the following specific aims:

• Understand the positive and negative aspects of the value proposition of the value network (i.e. the network of stakeholders involved in creation, delivery and receipt of value associated with provision of a product/service);

• Identify conflicting values (i.e. where one stakeholder benefit creates a negative for another stakeholder), so that action can be taken to tackle these; and

• Identify opportunities for business model redesign and realignment of interests to reduce negative outcomes and improve the overall outcome for the stakeholders in the value network – especially for society and the environment.

Approach

Four representations of value facilitate a systematic value assessment, representing the forms of value in Figure below. Identifying them separately encourages a more thorough exploration of the current business model, and assists in identifying areas requiring change or improvement.

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At the core of this portfolio is the value proposition of the network, which represents the benefits delivered to stakeholders for which payment or another value exchange takes place.

In delivering the value proposition, individual stakeholders and networks collectively may destroy value. Value destroyed can take various forms, but in the sustainability context is mostly concerning damaging environmental and social impacts of business activities (e.g. pollution).

Missed value opportunities represent situations where individual stakeholders squander or fail to capitalise on existing assets, resources and capabilities, are operating below industry best practice, or fail to receive the benefits they seek from the network. This might be due to poorly designed value creation or capture systems, failure to acknowledge value, or inability to persuade others to pay for the benefit. New value opportunities help expand the business into new markets and introduce new products and services that offer enhanced benefits to stakeholders. Beyond customers, this might involve seeking to enhance employee wellbeing or making positive contributions to the environment.

Stakeholder segments to facilitate a multiple stakeholder view of value. Current business modelling processes and tools focus on the customer value proposition. The proposed tool seeks to expand the range of stakeholders or recipients of value, including the environment and society. Each segment represents a stakeholder group.

A network-centric rather than firm-centric perspective to encourage the optimisation of value in a network (i.e. considering all actors involved in the design, production and distribution of a

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product or service). The firm is represented as ‘‘employees and shareholders’’ to facilitate a network perspective.

How to use to tool

Define the unit of analysis as the product or service, or portfolio of products and services offered by a business unit, firm, or industry. For large companies a focus on individual business units or product lines can make the process more manageable.

Stakeholder groups are identified and placed in each segment of the Tool

Clarify the purpose: top-level description of why the organisation is in operation (e.g. fairtrade intends to improve the living standards of workers and communities in global supply chains). The focus is on the offering, rather than the firm, to support a network or system perspective.

brainstorming to populate the tool

Each stakeholder segment is populated in turn with the various forms of value generated for that stakeholder, starting at the centre of the circle and working outwards: from purpose and value proposition, to value destroyed and missed, through to exploring new opportunities for value creation.

By following this progression each step builds upon and is informed by each preceding step facilitating ideas for transformation, as illustrated in Figure 1. For instance, missed value can be explored for opportunities to create new value.

After this core part of the process, select the most promising ideas for further brainstorming.

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Case study exercise

Read the following website

https://www.theenglishbedcompany.co.uk/

Questions using tools

1. What is the unit of analysis eg product, service, company, industry?

2. Who are the stakeholders for the unit of analysis?

3. What is the purpose of the unit of analysis?

4. What is the current value captured?

5. What is the value missed and/or destroyed?

6. What is the value surplus and/or absence?

7. What are the new value opportunities?

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2. TABLES AND FIGURES List of figures Figure 1: the business model canvas (source: Strategyzer) ............................................. 7

Figure 2 : The sustainable business model archetypes (source: bocken, 2014) ............ 15

Figure 3:circular business models and associated guiding principles ............................ 33

Figure 4: circular business models and orientation ....................................................... 39

Figure 5: Value dynamics and product use lifetime ....................................................... 40

Figure 6: Natural Mat ..................................................................................................... 44

Figure 7: Rype office ....................................................................................................... 48

Figure 8: Furnishare ........................................................................................................ 51

Figure 9: Mani Pine ......................................................................................................... 54

Figure 10: Green furniture .............................................................................................. 60

Figure 11: l'estoc ............................................................................................................. 62

Figure 12: Arcadia ........................................................................................................... 63

Figure 13: Brühl .............................................................................................................. 64

Figure 14: NNOF ............................................................................................................. 66

Figure 15: Herso .............................................................................................................. 67

Figure 16: Figueras international seating ....................................................................... 68

Figure 17: mobles 114 .................................................................................................... 69

Figure 18: Sancal ............................................................................................................. 70

Figure 19: Artek - 2nd cycle ............................................................................................ 72

List of tables Table 1:Selected circular business models definitions ................................................... 26

Table 2:linear vs circular economy principles ................................................................ 32

Table 3: Clean loop business models .............................................................................. 34

Table 4: Short loop business models .............................................................................. 35

Table 5: Access loop business models ............................................................................ 36

Table 6: Cascading loops business models ..................................................................... 37

Table 7: Long loop business models ............................................................................... 38

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3. REFERENCES Bocken, Nancy, et al. "A value mapping tool for sustainable business modelling." Corporate Governance 13.5 (2013): 482-497. Bocken, Nancy MP, et al. "A literature and practice review to develop sustainable business model archetypes." Journal of cleaner production 65 (2014): 42-56. Business model canvas : https://strategyzer.com/canvas/business-model-canvas Ellen MacArthur foundation : http://ellenmacarthurfoundation.org/ LACY, P., KEEBLE, J., MCNAMARA, R., et al. Circular advantage: innovative business models and technologies to create value in a world without limits to growth. Accenture: Chicago, IL, USA, 2014. REBUS Life project: www.rebus.eu.com/

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Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License