Keywords

Introduction

The circular economy has been put high on the policy agendas in various regions across the world. In the European Union, a Circular Economy Action Plan (CEAP) has been formulated (European Commission, 2023a), in China, Circular Economy has featured in its Circular Economy Promotion Law of the People’s Republic of China (UNEP, 2023). Japan released its Circular Economy Vision 2020 (WEF, 2022b) and Chile released a circular economy roadmap in 2021 (Ellen MacArthur Foundation, 2022), to name just a few examples. In many other regions in the world policies have been developed around waste management and recycling serving as a starting point for broader circular economy policies. At the same time, cities (e.g., Ellen MacArthur Foundation, 2019) and businesses have started putting circular economy high on their agendas seeing this as a potential solution to tackle the ‘joint crises of climate change and biodiversity loss by regenerating natural systems, keeping products and materials in circulation, and preventing waste and pollution’ (PACE, 2023).Circular economy is not a niche topic anymore and is being acted upon by business.

While companies have been innovating their products to increase durability and recyclability, which may be labeled as circular innovations (e.g., Bocken et al., 2016), circular business model innovations can be even more impactful with the potential to reach a factor 10 reductions in environmental impact compared to just selling a product when designed the right way for resource efficiency (Tukker, 2004, 2015). For example, for the more service-oriented models (e.g., pay per use or performance) the environmental advantage relates to the fact that the customer receives the outcome of the service (e.g., clean laundry) but the service provider can optimize the process and reduce the cost and resource usage behind the service (Bocken, 2023; Tukker, 2004; Tukker & Tischner, 2006). The service provider is incentivized to optimize the lifetime and resource intensity of the service to optimize cost and reduce environmental impact (Tukker, 2004).

Circular business models have become a new term next to the longer-established fields of sustainable business models and service business models (Lewandowski, 2016; Tukker, 2015). Circular business models focus on delivering superior customer value propositions while slowing resource loops by providing products that last longer (e.g., through premium pricing, services), closing resource loops, by recycling materials post-multiple consumer (re)uses, narrowing the loop by using less material per product and in manufacturing processes and regenerating resources through using renewables and creating benefits for the natural environment (Bocken & Ritala, 2022; Konietzko et al., 2020). Circular and sustainable business models have become a popular topic, perhaps because of their holistic perspective on how business is done (Stubbs & Cocklin, 2008), and the link to future competitiveness in mainstream business model innovation research (Chesbrough, 2010). Some even go so far as referring to sustainable and circular business models as a hype topic (Lüdeke-Freund & Dembek, 2017), which still needs significant validation for its impact on sustainability challenges in practice (Das et al., 2022).

The most common types of circular business models relate to delivering novel product-service constellations (product-service-systems), such as products with high levels of warrantees and services, rental, subscription and lease models, reuse platforms, and pay per performance and pay per use models, each with an intentional focus on resource issues (de Costa Fernandes et al., 2020; Tukker, 2015). Examples include secondhand platforms, bike and car sharing models, and companies offering products with lifelong warrantees. In addition, various companies have started recycling, refurbishment, and remanufacturing practices next to their regular manufacturing practices (Jensen et al., 2019).

Business model innovation is either about the process of transformation from one business model to another within incumbent companies, or after mergers and acquisitions, or the creation of new business models in startups (Geissdoerfer et al., 2016). Innovative circular business models might therefore originate from startups (Henry et al., 2020), as well as existing business transforming their dominant linear business models for the circular economy (Bocken & Konietzko, 2022; Frishammar & Parida, 2019). Henry et al. (2020) identify circular startup efforts focused on circular design, waste-management, platforms, services, and nature-based solutions. In large businesses, there are also many nascent examples to challenge dominant linear business models. IKEA, for instance, launched a furniture rental initiative to slow the loop and is involved in nature regeneration, H&M started experimenting with secondhand business (Bocken & Geradts, 2022), and Patagonia has a lifetime warranty on clothing facilitated by repair services (Bocken & Geradts, 2022). Yet, several studies found circular business initiatives to be of a niche nature in how widespread and ambitious they are (Ritala et al., 2018).

The fact that these examples are so nascent shows that the Circular Economy, while high on many policy and business agendas, is still in its infancy. At the same time, circular economy is not delivering on its potential ‘promises’ of resource conservation (Allwood, 2014; Blomsma & Brennan, 2017). Importantly, Elhacham et al. (2020) calculated that the global human-made mass, referred to as ‘anthropogenic mass’ has roughly doubled every 20 years and will soon surpass all global living mass. Shockingly, for each person globally, on average ‘anthropogenic mass equal to more than his or her bodyweight is produced every week’ (Elhacham et al., 2020, p. 442). Estimates by Bianchi and Cordella (2023) show that primary resource extraction linked to economic growth is roughly four times the resources saved by circular economy initiatives (currently largely recycling initiatives), annually. This suggests that recycling cannot outpace our unsustainable consumption patterns (see also Allwood et al., 2011; Fraser et al., 2023).

It is also evident that significant environmental damage has been done. Since the 1970s, population sizes of animals like birds, mammals, reptiles, amphibians, and fish have decreased by nearly 70%, and in some areas even by over 90%, due to the detrimental effects of climate change, pollution, overexploitation, and habitat loss (WWF, 2020, 2022). The impacts of climate change are clearly felt globally, with more extreme weather patterns, heating up of the oceans and coral bleaching, and a collapse of global ice sheets (IPCC, 2022). More than 1.4bn people live in water vulnerable areas and over 25% of the global population live in food insecurity (UN, 2020; UNICEF, 2021). Several authors and reports therefore conclude that a much more radical change is needed to the way we produce and consume to address these pressing challenges (Bianchi & Cordella, 2023; Fraser et al., 2023; IPCC, 2022).

The ‘circularity’ of resources in the global economy has even dropped (between the years of measurement, 2019 and 2022) suggesting the circular economy should be rolled out with greater speed and higher levels of ambition, while normalizing strategies higher up in the waste hierarchy like waste avoidance, and product reuse (Fraser et al., 2023). Based on their study on resource extraction, Bianchi and Cordella (2023, p. 1) conclude that ‘the circularity of economic systems should be approached from a systemic perspective that includes both production and consumption as well as waste management. In particular, complementary measures addressing behavioural consumption are needed if we want to achieve a sustainable development’. Incremental technological change is thus not the solution and more radical changes to consumption and production patterns are needed.

The circular business model perspective has the potential to bring together new sustainable production and consumption perspectives through the lens of business practices (Hofstetter et al., 2021; Tukker, 2015). This chapter addresses the following research question: what are new avenues and game changers for circular business model innovation? First, the topic of circular business model innovation as a game changer is discussed. This is followed by new avenues and game changers, including: the twin transition of digital and circular economies, the focus on slowing the loop and regeneration, collaborative business models, impact assessment and tools and methods, and finally concluding remarks on future research and practice.

Circular Business Model Innovation as a Game Changer

Business model innovation can be an important success factor for companies (Chesbrough, 2007), but also provide a key leverage point for achieving sustainability ambitions in companies (Geissdoerfer et al., 2016). A circular and sustainable business model is about taking a holistic perspective on the way business is done in relation to its stakeholders, explicitly including the society and the natural environment as key stakeholders (Stubbs & Cocklin, 2008). Business models can be a key driver for sustainability transitions, e.g., by normalizing practices like shared mobility, secondhand platforms, or refillable product offerings (e.g., Aagaard et al., 2021a; Boons & Lüdeke-Freund, 2013; Sarasini & Linder, 2018).

When pursuing a circular business model, the business purpose is focused on circular economy issues, and performance measurement is focused on measuring the impact of the activities (Stubbs & Cocklin, 2008). A circular business model conceptually brings together the circular value proposition (is it desirable?), value creation and delivery activities to create and deliver this circular value (is it feasible?), and value capture mechanisms to understand how a business might capture financial and other forms of value (is it viable and adding other value?) (Fig. 7.1). Importantly, the circularity of the circular business model should be an integral part of the full business model design: to what extent does the business model contribute to slowing, closing, narrowing, or regenerating resource loops? Slowing the loop refers to supporting longer product lifetimes, closing the loop is about post-consumer use recycling, narrowing is about using less resources per product, and regeneration is about improving the natural environment (Bocken & Geradts, 2022; Konietzko et al., 2020). See also Fig. 7.1 which brings the business model elements and circularity focus together within a circular business model canvas.

Fig. 7.1
An illustration. Circularity slows, closes, narrows, and regenerates resource flow. It includes feasible key stakeholders, activities, resources, capabilities, C R, segments, and channels, as well as desirable profit, people, and planet, with a viable cost structure and revenue streams.

Circular business model canvas. Developed from Osterwalder and Pigneur (2010), Bocken et al. (2018), Bocken and Geradts (2022) and Konietzko et al. (2020)

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Circular business models have become a powerful concept in business and research, perhaps because of their holistic focus on how business is done (Stubbs & Cocklin, 2008), more so than a product or technology innovation in isolation (Chesbrough, 2010). The business model itself may not only be a convener of new technology or products like electric cars but might also drive new practices in themselves like sharing or reusing products over time (Sarasini & Linder, 2018; Zvolska et al., 2019). In mainstream business strategy literature, it has been recognized that a successful business model can make or break a new technology or product, so business model innovation is a key source of future competitiveness (Chesbrough, 2010). But most importantly, ongoing research in the field of sustainability has suggested that tenfold environmental impact reductions are possible, in a sustainable or circular business model compared to just selling a product, in particular in the field of service-driven circular business models (e.g., rental, lease, pay per use or performance) (Tukker, 2004, 2015). The reason is that when the company retains the ownership of a product and is responsible for its product life cycle cost (repair, maintenance, energy use), the company is incentivized to reduce the product life cycle cost and impact (Tukker, 2004, 2015). Sustainable behavior may also be driven through new circular propositions when set up in the right way (Chamberlin & Boks, 2018).

There are many other business cases for sustainable and circular business models that might convince a company to pursue such business models (e.g., Schaltegger et al., 2011, 2012) but by far the most important case to pursue circular business models is ‘the planet’. Quoting conservationist David Brower and appearing on a plaque on the outdoor company Patagonia’s head offices as a daily reminder: ‘There is no business to be done on a dead planet’. Table 7.1 includes several examples of circular business model ‘business cases’ building on the work by Schaltegger et al. (2011). It should be noted that some of the business cases are mutually reinforcing, e.g., good reputation would also improve the attractiveness as an employer or as a collaboration partner.

Table 7.1 Circular business model ‘business cases’. Developed from Schaltegger et al. (2011)
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New Avenues and Game Changers

This section discusses new avenues and game changers for research and practice in the field of circular business model innovation, including: creating a twin transition of digital and circular economies, the focus on slowing the loop and regeneration, collaborative business models, tools, methods, and impact assessment in particular.

Creating a Twin Transition of Digital and Circular Economies

The original concept and use of the business model term has been linked to the advent of the Internet and technology-heavy companies (Osterwalder et al., 2005). Business model choices for managers increased substantially based on ‘cheap and available information technology’ (Osterwalder et al., 2005, p. 4). For example, Apple was able to create the iPod which allowed for digital music streaming using their iTunes platform (Osterwalder et al., 2005), and now digital streaming services are commonplace. So, while the business model concept is thought to have emerged already in the 1970s, it gained wider popularity in the 1990s following the surge of information and communication technology (Kanda et al., 2021).

It is also evident that many successful circular business models like rental platforms or bike sharing would not have been scaled to the extent they have done now without digitalization, enabled by apps accessible through a smartphone (Tunn et al., 2020, 2021). For example, whereas car sharing between individuals has existed for a long time, and neighborhood cooperatives have existed since the 1980s (Bocken et al., 2020), digitalization has enabled new business models to help scale up sharing and make it more accessible to the masses (Sarasini & Langeland, 2017). However, in more traditional sectors like the built environment, examples of digitalized circular business models are nascent but not yet common place (see Çetin et al., 2021).

Although the link between technology and business models has been there from the start of the business model concept, many important developments around circular economy and the digital transformation are occurring in parallel, and more synergies need to be sought by research and practice to address pressing global challenges. The European Commission (2023b) has described this (missed) potential as a ‘twin transition’ where the sustainability transition and the digital transition cannot succeed without one another.

Researchers have started to explore the linkages between circular business model innovation and digitalization (Çetin et al., 2021; Neligan et al., 2023). As noted by Tunn et al. (2021) digital innovations like smartphones and the wide availability of the Internet have paved the way for new circular business models to quickly emerge, also by startups with often limited resources. However, the strategic usage of digitalization by aspiring circular startups deserves further scrutinization. For example: how can startups pushing innovative circular business models best leverage digital technology to develop successful circular business models (Henry et al., 2020)? How can digital technology optimize the resource circularity of new business models? Important future research questions may also be formulated to address this topic in established organizations (see, e.g., Bocken et al., 2023; Bressanelli et al., 2022). As large-established businesses need to remain competitive while addressing resource challenges, they will need to think more strategically about the twin transition. How can digital technology help accelerate established organizations’ internal circular economy transition? How can digitalization help overcome barriers like the traceability of raw materials, or the quick testing of the desirability, feasibility, viability, and circularity of circular business models (see, e.g., Baldassarre et al., 2020)?

Furthermore, research in circular economy has been criticized for focusing on the Global North, largely ignoring the need for a circular economy transition in the Global South (e.g., Hofstetter et al., 2021). This is essential as research has suggested that circular economy could deliver clear economic, environmental, and social benefits in the Global South (Valencia et al., 2023). Digitalization might support ‘circular economy leapfrogging’, just like innovations such as mobile money service M-Pesa did creating an entire mobile banking industry and surpassing the need for traditional banks in Africa (Cilliers & Cilliers, 2021). This raises various research questions: How can digitalization enable ‘circular economy leapfrogging’ and accelerate the circular economy transition particularly in the Global South (see, e.g., Hofstetter et al., 2021; Muchangos, 2022)? What circular business models could be developed that leverage digital technology in the Global South (Cilliers & Cilliers, 2021)? Which new circular economy industries could emerge in the Global South, enabled by digitalization? Vice versa, how could these developments be leveraged again in the Global North?

Finally, it should be noted that digitalization has unintended consequences such as significant amounts of energy use (Bohnsack et al., 2022; European Commission, 2023b). Yet, the WEF (2022a) also estimates that, if brought to scale, digital technologies could reduce emissions by 20% by 2050 in some of the highest-emission sectors: energy, mobility, and materials. It is therefore important to accelerate the twin transition which may be supported by answering important research questions. On a sector-by-sector basis, where should digital technology be an enabler of the circular economy? Where should digitalization be avoided to prevent negative consequences for nature and society in the circular economy transition (see, e.g., Bressanelli et al., 2022)?

Slowing the Loop, Sufficiency, and Regeneration

We cannot recycle ourselves out of the environmental crisis (Allwood, 2014). Despite circular economy interest in business and policy, the global state of resource circularity is in decline (Fraser et al., 2023). This is mainly the case because recycling efforts cannot outpace the sheer amount of consumption of goods and the energy and materials needed for this (Allwood, 2014; Fraser et al., 2023). At present, ‘circular products’ are not widespread, and they do not always offer a direct alternative yet for their ‘linear counterparts’ adding to the total number of products being manufactured rather than replacing unsustainable varieties (Zink & Geyer, 2017). At the same time, significant environmental damage has been done (WWF, 2022) and societies are starting to feel the effects of climate change (IPCC, 2022). This means that a regenerative approach to business is urgently needed where companies do more ‘net good’ rather than ‘less harm’ (Hahn & Tampe, 2021; Konietzko et al., 2023; Polman & Winston, 2021).

Given these challenges and the fact that the circular economy is the future target in many country and regional policies such as the Circular Economy package by the European Union (European Commission, 2023a), it is evident that such a circular economy must be positioned as a comprehensive and ambitious concept, going beyond material efficiency and recycling. Figure 7.2 shows a broader perspective on the circular economy, where the focus might be on sufficiency and making do with less and consuming different to tackle unsustainable consumption (Alexander, 2012; Bocken et al., 2022) and net positive as well as a flourishing perspective to put environmental and societal well-being above a profit orientation (Ehrenfeld & Hoffman, 2013; Raworth, 2017; Upward & Jones, 2016). Next, future research areas for sufficiency and regenerative business models are described fitting these higher levels of ambitions in the circular economy.

Fig. 7.2
An onion diagram with 6 layers. The layers are labeled efficiency, net zero, circular economy, sufficiency-circular economy, net positive, and flourishing inside out. Each layer includes one characteristic.

Toward a sufficiency-oriented and flourishing circular economy. Developed from Bocken et al. (2022)

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Sufficiency Business Models

Sufficiency business models ‘aim to moderate overall resource consumption by curbing demand through education and consumer engagement, making products that last longer and avoiding built-in obsolescence, focusing on satisfying “needs” rather than promoting “wants” and fast-fashion, conscious sales and marketing techniques, new revenue models, or innovative technology solutions’ (Bocken & Short, 2016, p. 41).

Sufficiency-oriented businesses have developed a business rationale centered around moderate consumer demand which may be enabled through business models involving premium pricing, service models, and resale (secondhand marketplaces) (Bocken & Short, 2016). From a design perspective this would require product design for longevity, design for upgrading (e.g., dis- and re-assembly, software upgrading), design for multiple life cycles, and simpler classic design (Bocken et al., 2016). By integrating sufficiency into their business models, businesses may act as agents of change to transform unsustainable practices along the entire supply chain (Beyeler & Jaeger-Erben, 2022).

The concept of sufficiency in business is mainly operationalized as a key concept in affluent societies where generally, people have more than enough (Fuchs et al., 2021; Niessen & Bocken, 2021), whereas in emerging countries like Thailand sufficiency has been part of the economic and societal development agenda to ensure there is ‘enough’ available for everyone (Bocken & Short, 2016). Sufficiency may be relevant for all types of businesses (Niessen & Bocken, 2021) but is most commonly associated with durable goods that are at present largely replaced prematurely (before the end of their technical life cycle) like clothing and electronics (Beyeler & Jaeger-Erben, 2022).

Businesses pursuing sufficiency typically identify the continuous growth imperative and affluent consumption as the main drivers for environmental destruction and social injustice (Beyeler & Jaeger-Erben, 2022). They display a desire to break through path dependencies of abundance of consumption, exponential growth, in a quest for less materialistic, slower, and more local forms of production and consumption (Beyeler & Jaeger-Erben, 2022). In addition, outside the business context, initiatives to encourage free peer-to-peer exchange and to support do-it-yourself are examples of sufficiency practices that require deeper attention in research (Beyeler & Jaeger-Erben, 2022; Niessen & Bocken, 2021). It is the question what organizational forms and structures (e.g., family business, non-profit) are best suited to encourage sufficiency and engender the greatest reduction in material dependencies (Beyeler & Jaeger-Erben, 2022).

To operationalize sufficiency, Fuchs et al. (2021) describe the need for the definition of consumption corridors across sectors: the space between the lower limits of consumption that ensure minimal needs satisfaction for all and the upper limits to consumption above which others’ essential freedoms are being challenged. Having consumption corridors established in policy for the main products and services consumed like mobility, energy and even food (e.g., meat consumption) would lead to innovative sufficiency-business models to support sustainable behavior. Indeed, there could be important learnings between the fields of sustainable consumption and sustainable business. For example: How can companies operationalize the concept of ‘consumption corridors’ in their business practices to develop sufficiency-oriented business models (Fuchs et al., 2021)? Also: How can policies based on concepts like consumption corridors provide sector pathways for sufficiency-oriented business models?

More generally, as sufficiency in business is still a niche topic, there are still ample future research questions to help accelerate this topic in practice. How can companies in different sectors drive sustainable consumption through their business models (see Bocken & Short, 2016)? How can companies help normalize sufficiency through innovative business models and marketing practices? Degrowth is still a contested topic in particular in the business context where growth is the dominant paradigm (see, e.g., Khmara & Kronenberg, 2018). Hence: how might companies counteract affluent consumption and the dominant growth paradigm through novel sufficiency-oriented business models (see Beyeler & Jaeger-Erben, 2022)? How can the in-depth knowledge about marketing practices and psychology be used for successful sufficiency-oriented business models (see Chamberlin, & Boks, 2018)?

Finally, it may be the case that certain organizational forms are better suited for sufficiency practices, like family businesses, considering the next generations as part of their business practices, as well as benefit corporations, structured to cater for societal and environmental benefits (see, e.g., Beyeler & Jaeger-Erben, 2022). This still deserves ample future research as new organizational forms are still emerging: What organizational forms and structures are best suited to support sufficiency-oriented business models? What are the barriers to sufficiency in the most common organizational structures and how can these be overcome? Lastly, as sufficiency is not a typical manifestation originating from business, Beyeler and Jaeger-Erben (2022) suggest an exploration of the following: How might sufficiency be operationalized outside traditional market structures in other novel organizational, citizen, or stakeholder models?

Regenerative Business Models

Regenerative business models ‘focus on planetary health and societal wellbeing. They create and deliver value at multiple stakeholder levels—including nature, societies, customers, suppliers and partners, shareholders and investors, and employees—through activities promoting regenerative leadership, co-creative partnerships with nature, and justice and fairness. Capturing value through multi-capital accounting, they aim for a net positive impact across all stakeholder levels’ (Konietzko et al., 2023, p. 375).

The area of regenerative business models is rather new (e.g., Hahn & Tampe, 2021), and is related to topics like creating a ‘net positive business’ that aims to do more ‘net good’ rather than ‘less harm’ (Polman & Winston, 2021) and the concept of ‘doughnut economics’ that recognizes that business and the economy depend on society and which both need to operate within nature’s boundaries (Raworth, 2017). Perhaps unsurprisingly, the concept of regenerative business models is also closely linked to circular and sustainable business models but the focus in regenerative business models is mostly about planetary and societal health at the center of the business models (Konietzko et al., 2023).

Regeneration asks companies to look beyond minimizing harm toward thinking about areas of positive contributions to society and the natural environment (Polman & Winston, 2021). Questions companies may ask themselves are: Is the world a better place because our business is in it? Who should we collaborate with to achieve our regeneration goals (see Polman & Winston, 2021)?

For regenerative business, there are still several open future research and practice questions, as this is such a new field. For example: What does regeneration mean for a business? What areas of regenerative practice should companies in different sectors be strategically involved in to make it an integral part of the business (see, e.g., Polman & Winston, 2021)? Many circular economy issues, and in particular, regeneration, also go beyond individual company boundaries as noted by Konietzko et al. (2023). Hence, they require strategic decision-making about collaborations as noted in circular economy literature more generally (Brown et al., 2020; Velter et al., 2020). This raises questions like: What would strategic partnerships or open innovation processes for regeneration look like (Bocken & Ritala, 2022)? Which organizations or stakeholders should organizations collaborate with to achieve regeneration goals (Konietzko et al., 2023)?

Finally, connected to the digitalization research gaps, there are plenty of open questions. Çetin et al. (2021) and Nußholz et al. (2023), for instance, investigated the building sector and identified several cases of regeneration that could be supported by digital technology. This raises the following question: How can digitalization be used strategically by business to develop regenerative business model strategies? How can digitalization and the advent of new technology best support regenerative business models in different sectors?

Collaborative Business Models and Circular Ecosystems

The circular business model innovation process involves the development of new value propositions, value creation and delivery networks, and value capture mechanisms (Velter et al., 2020) to support strategies of product reuse, refurbishment, material recycling, and nature regeneration in the circular economy (Geissdoerfer et al., 2017; Konietzko et al., 2020). Many of the activities integral to circular business model innovation like recycling, refurbishment, remanufacturing, and nature regeneration, are not (yet) within the core capabilities of most still largely ‘linearly organized’ companies and their business models (Bocken & Konietzko, 2022; Frishammar & Parida, 2019). Furthermore, other stakeholders like the (local) government, NGOs, customers, or suppliers, might share similar goals of resource preservation or nature regeneration, or, they might have better competences to take on these activities. Hence, circular business model innovation often means that companies take a broad network perspective on innovation where they engage with a wide set of actors, including their customers, suppliers and partners, NGOs, and the government (Boons & Lüdeke-Freund, 2013; Brown et al., 2019; Velter et al., 2020).

The field of circular business model innovation has also been quite naturally linked to the field of open and closed innovation in academia (Brown et al., 2020). This link is not surprising seen the many strategic decisions a company would need to make on which activities to develop internally, and which ones to collaborate on in order to pursue circular business model innovation. For example, a company starting a rental service next to direct sales of its products would need to decide whether to handle the logistics and servicing of such a service themselves or with partners. Bocken and Ritala (2022) created a conceptual framework to support insight in these decisions by linking resource strategies (narrow, close, and slow the loop) in the circular economy to the open innovation strategies (open and closed; Chesbrough & Appleyard, 2007). An example of ‘closed-closing’ would be a company that through its own developed innovation processes, to recycle the materials used in its products. E.g., MUD Jeans (mudjeans.eu) collects used jeans through both a lease-a-jeans and a take-back model to recycle materials of the jeans. An example of ‘open-slowing’ would be a collaboration between a company and other stakeholders to reuse products. E.g., H&M partnered with secondhand online seller Sellpy for its new secondhand website (Bocken & Ritala, 2022). This still raises the following questions: In which cases of circular business model innovation would companies use a closed, or an open innovation process (see, e.g., Bocken & Ritala, 2022)? If organizations (e.g., business, NGOs, governments) decide to partner up to resolve circular economy problems, how can they make the right partnership choices to establish collaborative circular business models (see, e.g., the work by Brown et al., 2021 for an initial circular business model partnership tool)?

To make decisions on the future of the organization and the relevant circular economy activities, the concept of boundary work might be helpful (Velter et al., 2020; Velter et al., 2021). Circular business model innovation is about exploring and negotiating new organizational boundaries as the activities of a company and its value network of suppliers, partners, and stakeholders could drastically change when adding new activities (Velter et al., 2020, 2021). Boundary work related to circular business model innovation involves exploring, negotiating, disrupting, and realigning organizational boundaries (Velter et al., 2020), as well as boundaries related to organizational identity, power, competence, and efficiency (i.e., who might conduct which task best) (Velter et al., 2021). For example, when IBM’s business was in decline in the 1990s, it started experimenting with new business models. The result was a shift from selling technology toward selling IT services (Chesbrough, 2007). This led to new competences and eventually a new identity for the business (O’Reilly et al., 2009). Similarly, in the transition to a circular business model, companies are exploring the changes in boundaries of their physical organization, identity, and how they relate to others (e.g., performed tasks and power). This raises several open research questions: How can boundary work support the development of collaborative circular business models and ecosystems (see, e.g., Velter et al., 2020)? How might companies renegotiate their boundaries with suppliers, customers, and other (new) partners including the public sector and NGOs to develop new circular supply chains and business models (see, e.g., Bocken et al., 2023)?

A related area to collaborative business models is the field of ‘circular ecosystems’ for which various tools, methods, and frameworks have been developed (Aarikka-Stenroos et al., 2021; Kanda et al., 2021; Talmar et al., 2020). An ecosystem is about the ‘consideration of complex constellations of actors, technologies, and institutions that are bound together via loosely coupled interdependencies and co-evolutionary patterns’ (Aarikka-Stenroos et al., 2021, p. 261). Ecosystems consist of multiple locally, regionally, or globally distributed entities that are not part of a single organization, involve dynamic, collaborative as well as competitive relationships, imply flows of services, data, and money, often involve complementary products, services, and capabilities, and evolve as actors constantly redefine their capabilities and relations to other actors (Konietzko et al., 2020). In ecosystems, the interdependency between actors could originate from a joint purpose, value proposition, or platform, and the ecosystem would deliver greater benefits than an individual company could do alone (Aarikka-Stenroos et al., 2021; Thomas et al., 2014). An example of a circular ecosystem is the industrial symbiosis network like the Finnish Industrial Symbiosis System where ‘waste’ resources are exchanged between partners and are being used as an input for others’ processes (Patala et al., 2022). Areas for further work related to collaborative business models and circular ecosystems include: What could a successful business model of a circular ecosystem look like? How might novel circular ecosystems be developed or orchestrated by certain actors (see Bocken et al., 2023)? How might companies offer complementary products and services that can provide a superior and circular ecosystem value proposition (see Konietzko et al., 2020)?

Tools, Methods, and Impact Assessment

Tools and methods can broadly be categorized according to approaches for determining sustainability impacts and experimentation and scale-up tools to support organizational transformations.

First, to support the development of strongly sustainable business models that live up to the theoretical promise of a tenfold environmental impact reduction compared to just selling a product (Tukker, 2004, 2015), tools and methods to better support impact creation and assessment are needed. Research has found, for instance, that few organizations use formal methods (besides, e.g., rules of thumb) to assess the impact of their circular business model innovations (Das et al., 2022). However, it is known that circular initiatives lead to negative rebound effects (Figge & Thorpe, 2019; Zink & Geyer, 2017). For example, individuals might consume more, knowing the option is ‘greener’, or a seemingly sustainable business model (e.g., car sharing) might lead to unsustainable modal shifts with consumers from cycling or public transport toward driving a car (Das et al., 2023). More insight is needed to help companies develop a sustainable value proposition from the start (Manninen et al., 2018) and avoid future negative rebound effects (see Das et al., 2023 for an initial framework of rebound effects for circular business models). This leads to the following open research questions: Which tools and methods can help avoid negative rebound effects in the development of circular business model innovations in organizations, and how might positive impacts be anticipated and designed for (see, e.g., Das et al., 2023)? Which methods may be adopted to guide and measure positive impact in an organizational impact, related to the circular economy transformation (see Bocken et al., 2023)?

Second, many companies are still on a ‘linear pathway’ and would need to start challenging their linear business models, whereas new startups have the opportunity to start with a truly circular business model. Experimentation can be a way to support startups in developing novel circular business models (Aagaard et al., 2021b; Henry et al., 2020), and for existing businesses like small and medium-sized business and larger businesses multinationals to start challenging their existing business models (Frishammar & Parida, 2019). Research has unveiled a plethora of tools that may be used for circular and sustainable business model innovation (Pieroni et al., 2019). However, many have not been tested and iterated by business to focus on experimentation. One example of a tool tested with business is the circular economy workbench (see Bocken & Coffay, 2022), building on the popular experimentation approach lean startup (Ries, 2011) and effectual reasoning (Sarasvathy, 2001) using what resources and stakeholders might be available to support the innovation process. Moreover, tools could support scaling up of circular innovations, building on knowledge of successful circular scaling pathways (Han et al., 2023).

A deeper understanding of the tools and methods that academia could develop to support academia are needed. Although there is a plethora of circular business model tools (Pieroni et al., 2019), many have not been tested or trialed with the relevant users such as startups or incumbent businesses, which should be a tool design requirement (Bocken et al., 2019). Recognizing the differences in company sizes and needs, future research questions in this area include: Which tools, methods, and approaches can support startup companies in circular business model experimentation to develop the most sustainable circular business models? Which tools and methods can guide the corporate transition to a circular business model? Finally, knowledge on scaling up circular businesses successfully is still nascent (Han et al., 2023). Research may therefore investigate the following: Which approaches are suited to support scaling up of circular business models?

Conclusions

Pressing changes are needed to the way we produce and consume to restore the environmental and societal damage already done through unsustainable business practices, and to mitigate future negative impacts. Circular business models have the potential to bring about significant changes in the way we produce and consume.

Circular business model innovation is about innovating one’s business model to create superior customer value propositions, through slowing resource loops via products that last longer, closing resource loops, by recycling materials, narrowing the loop by using less material per product and in manufacturing processes, and regenerating resource loops through using renewables and creating benefits for the natural environment. Despite their potential and excitement about the topic, the area is still nascent in practice as many products and materials are not recycled, let alone repaired, or refurbished, which could be enabled through novel circular business models.

This chapter highlighted four key topics for future research and practice. First, this chapter highlighted the importance of the twin transition of circular and digital transformations. This requires research and practice to work across disciplines and learn and build on developments in both areas. Second, this chapter pointed out the focus on ‘less and more’ in the circular economy: less with respect to sufficiency and becoming more aware of the safe consumption spaces, and more in relation to doing more regeneration to restore and regenerate the nature and societal damages already done. Third, this chapter spotlighted the need for collaborative models and conscious choices about how to innovate and with whom to achieve circular economy targets. Finally, this chapter spotlighted the need for tools and methods that support experimentation, scaling up, and impact assessment.

As for the managerial implications, first, to leverage the twin transition, an integration of business functions and teams would be needed. The latest knowledge on digitalization and circular economy would need to be combined to develop the most promising business models and create potential ‘circular disruptions’ (Neligan et al., 2023) or breakthrough circular innovations. Second, sufficiency and regeneration both take mature perspectives on the operationalization of the circular economy. While sufficiency as a business practice is moving beyond a handful of companies toward a growing number of sufficiency-conscious businesses across different sectors, each company going on this trajectory will need a radical rethink of the business model, for example from volume toward value-driven models, or banning sales of ‘unnecessary products’ (Bocken et al., 2022; Niessen & Bocken, 2021). It will require a rethink of the corporate vision, mindset, and business functions such as product design and marketing and sales. As for regeneration, this topic is still quite new in the business context and requires companies to reconsider how they can best contribute positively to societal problems like health, biodiversity, or food provisioning, in a way that this adds positively to society and the natural environment rather than detracting from it (Konietzko et al., 2023; Polman & Winston, 2021). This needs to be done as an integral part of the business to avoid greenwashing. Third, as noted, many of the circular business models are collaborative or at least need strategic decision-making on what new ‘circular activities’ to integrate or what to outsource. Questions like: ‘What would our circular business ideally look like in 5- or 10-years’ time?’, ‘Who has complementary expertise?’, and ‘Who shares the same (circular economy) problem?’ could serve as important guiding questions (see also Bocken & Ritala, 2022). Finally, as for tools and methods, an empirical study on the circular business model innovation process in corporates showed that a mix of generic business and design thinking tools like visioning and creating minimum viable products, is currently coupled with circular economy-specific tools like guidelines and indicators (Bocken & Konietzko, 2022). Building on the generic innovation expertise and tailoring it through collaboration with circular economy and digitalization experts can help build the circular business model innovation capability in businesses.

In conclusion, circular business model innovation might provide a promising pathway to achieve significant improvement in a way a company might deliver environmental and societal value. However, significant work is still needed to transition toward a circular economy and society. In practice, this would require changes in curricula where circular economy would become an integral part of education programs across all levels, as well as collaboration across disciplines and business functions to accelerate knowledge development and advance the circular economy in practice.