What is a Circular Business Model?

What is a circular business model? 

At its core, a circular business model is one that decouples growth from resource consumption. Instead of following the traditional “take-make-dispose” linear economy, circular business models are designed to keep products, components, and materials in use for as long as possible. They aim to regenerate natural systems and eliminate waste by design. 

This isn’t just about recycling. It’s about rethinking how value is created, delivered, and captured across the entire lifecycle of a product or service. 

Circular business models typically fall into a few key types: 

• Product-as-a-Service (PaaS): Customers pay for access rather than ownership; think leasing, sharing, or subscription models. Companies retain ownership of the product, incentivising them to design for durability and reuse. 

• Product Life Extension: Businesses focus on maintaining, repairing, upgrading, or remanufacturing products to extend their usable life. This reduces the need for new resources and often strengthens customer relationships. 

• Resource Recovery: Waste becomes a resource. This includes turning by-products into inputs for other processes or recovering valuable materials at end of life. 

• Circular Inputs: Products are made from renewable, recycled, or highly recyclable materials. This reduces dependency on virgin raw materials and improves supply chain resilience. 

• Sharing Platforms: These enable under-used assets like tools, vehicles, or spaces to be shared among users, boosting asset productivity and reducing redundant consumption. 

Many businesses blend elements from multiple models depending on their sector and strategic priorities.

Why should you adopt a circular model? 

Circular business models are more than a sustainability initiative, they’re a smart business move. Here’s why: 

1. Resilience in uncertain times
   Volatile commodity prices, supply chain disruptions, and growing resource constraints make linear models increasingly risky. Circularity helps mitigate these by reducing dependency on virgin materials and diversifying revenue streams. 
2. Regulation and investor expectations
   From extended producer responsibility to eco-design rules and green finance frameworks, policymakers are ramping up pressure. Investors are increasingly scrutinising material risks and ESG performance. Circular models demonstrate proactive leadership. 
3. Cost efficiency and value creation
   Circularity can reduce input costs, unlock new service-based revenues, and increase customer retention. For example, product-as-a-service models generate recurring income while reducing churn. 
4. Meeting customer demand
   Consumers and clients are demanding more sustainable options. Circular models can differentiate your brand, build trust, and align with buyer values, especially in B2B procurement where sustainability is now a tender requirement. 
5. Innovation and competitive advantage
   Embracing circularity encourages fresh thinking about product design, logistics, partnerships, and after-sales services. It opens up space for collaboration, experimentation, and new business logic. 

Where do you start? 

Adopting a circular model doesn’t mean overhauling your business overnight. It starts with asking the right questions: 

• Where are we creating unnecessary waste or underutilising assets? 

• Can we shift from product sales to services? 

• What would it take to design our products for repair, upgrade, or reuse? 

• Are there materials or processes we can recover or feed into another value chain? 

Piloting new models in a targeted part of the business, whether a single product line or market segment, can help test viability, build internal buy-in, and demonstrate quick wins. 

The shift to circular business models is already underway across industries from fashion to electronics, construction to healthcare. Those who adapt early are more likely to shape the market, not chase it. As pressures on people, planet, and profit converge, circular business models offer a way to thrive, not just survive.