Entering into a new economic model might take decades, yet signs of resource depletion indicate that we haven’t got years before changing our consumption patterns while protecting our standards of living. With the circular economy, we are asked to move away from ownership of certain types of goods — mainly those losing their monetary value at the shop cashier stage — that are best accessed where and when needed. With a service-based economy, one could change our way of using (accessing goods then maintaining their value) over consuming things (using to throw), but not only. When one look at the diverse and endless angles that are offered in this virtuous model, aiming at including most of us within the economic model becomes possible. For instance, lowering economic barriers is one of the model that can be used to develop a more inclusive economy, but not the only one.
Optimizing Circular Value (OCV)
It is pointless to promote and implement a new model if it does not bring additional value away from the linear model and its school of thoughts. Optimizing value is therefore our ultimate objective when designing a circular service or experience for many more stakeholders, not just “ours”.
Contrary to the linear corporate strategy, where value was created from a one-off product sales tactic, a circular strategy is based on addressing several eco-systemic challenges when the re-selling services. They are what we call externalities (pollution, climate impact, resources gap, financial risks, etc.). By embedding them into new set of services, we not only generate value to the company and its shareholders, but also to every single entity gravitating within our stakeholder map — customers, suppliers, etc. — but also outside of it — the state, municipalities, associations, non-governmental organisations as well as other companies, other States and entities as part of the wider economy. Circular Value goes beyond the Shared Value (Porter, Kramer, 2011) concept because we multiply impact via multi-layered virtuous loops created within the supply chain beyond what is possible in a linear Shared Value approach.
In Circular Economy 2.0 the people are central to a model where value creation starts with implementing a well-balanced society for all, any societies, anywhere on the planet. Circular Economy 2.0 looks at poverty — in addition to waste — as two main externalities that are non-existent in nature. Both of them should therefore be designed out of our system at the same time in a very versatile system copying nature. To this extent one need to add some pillars to complement the current circular economic framework as we believe these are the missing elements to ensure the virtuosity of the model.
The 3 Pillars of a Circular Economy 2.0
Pillar 1: People’s Inclusiveness — where one can fulfill all their needs since ‘accessing goods’ no longer require owning them. By offering a service at a fraction of the product price, this would lift up many people excluded today from our economies, thus have a positive impact on inequality and/or inequity. Here the business strategy to implement is Equity. People would Pay-As-They-Need (PATyN) model i.e. the product is offered in a modular and adaptable fashion to fit with the needs of any range of customers — from a purchasing power perspective.
Pillar 2: People’s Value Creation — where one can access more with less since even with low income a decent life can still be possible. By accessing the economy with the objective of thriving (in opposition to blaming you for not being able to pay for a product thinking), this would create less dependency on financial credit, thus less indebtedness. Here the business strategy is Access. Customers and new prospects would Pay-As-They-Grow (PATyG) approach i.e. the focus is to help current customers expand further within the economy, or integrate new prospects in it. Any person is a potential customer with diverse growth-within potential. The aim here is to create loyalty through financial security.
Pillar 3: People’s Wellbeing — where one can access secured income given that in a Circular Economy ‘labour’ is being redefined. This could lead to the development of new jobs, micro-jobs and micro-tasks that do not exist yet. Labour could become this endless renewable resource and durable (W. R. Stahel). Here the business strategy is Ability. People and manpower are valued in an economy where they are Paid-As-They-Care (PATyC) approach i.e. the focus is to utilize humans as a critical actor within the new economy where they are considered the driving force behind maintaining both the biosphere (humans-as-a-resource model) and the technosphere (humans-as-a-service model) — read more about it in Humansphere Business Models.
With these three additional pillars, we reinforce the core circular principles of aiming at preserving and enhancing our natural capital […] (Principle 1), optimizing resource yields […] (Principle 2) and fostering system effectiveness […] (Principle 3) while ensuring we also design poverty out, in parallel to waste.
Based on the above approach, some socially inclusive circular business models could be but not limited to:
a. System managed Low-Income Solution (Access & Ability)
In this model, we will be aiming at a centrally managed system offering a solution as a service to its targeted population. The aim of this model is to grant access to a resource that is not widely available in a specific region ensuring it follows the principles of using renewables (endless energy), designing its product-of-services functionality according to people’s needs (versatility of services), and granting low-cost Pay-As-They-Need (at the beginning of the service), then Pay-As-They-Grow (increasing access to services according to people’s needs with adapted pricing schemes) financial package (affordability).
In East Africa, the solution M-Kopa provides solar energy as a service to over 250,000 households in Kenya, Uganda and Tanzania. Centrally managed the system of providing lighting as a service ensures that light is provided in an affordable manner to the wider population and according to their financial abilities. M-Kopa is accompanying its customers should they need additional connected devices, enabling them to be inserted into the economic system at no costs to the environment.
Source: Mkopa Kenya
b. Micro Feedback Loops (Access, Equity & Ability)
Based on the principle of system thinking applied at micro-economic level on societies, one could leverage on natural, affordable and/or ancestral solutions to address social/environmental/economic challenge(s) experienced by the people. By introducing one or more new elements into a system, they could create feedback loops that will increase its resilience, and often create a thriving context for the beneficiaries, previously locked-in in a one-way thinking. These new elements will provoke mutual benefits (endless energy, affordability, versatility, etc.) by generating positive ripple effects.
In the example of the Duck-Rice Farms of South East Asia, rice paddy farmers were facing food security issues as well as children malnutrition. With the integration of ducks in rice field a symbiotic relationship between rice and ducks yielding mutual benefits that have secured food supplies to farmers (ducks (high in proteins) & fishes) as well as increased the rice yield productivity by 20% and net profit to the farmers by 50% (no fertilizers and pesticides needed anymore).
Source: DIF Festival 2015
c. Ecosystems-based Collaborative Actions (Access & Equity)
Based on the principle of system effectiveness this model aims to rebuild the natural capital on which populations depend on for their survival. This is a bottom-up approach where communities address a specific natural capital challenge in a collaborative fashion. Concepts applied to improve livelihoods could be but not limited to permaculture, agro-forestry, biomimicry, and so on. Sources of innovation could come from traditions, cultures or lost know-how applied at community levels.
Source: Abreha Atsheba / FMNR
In Ethiopia, the community of Abreha Atsheba is known for restoring its originally harsh landscape conditions. With one hectare per household, vegetable production occurs two to three times a year (affordability), using a clever irrigation system made of fifty-one micro-dams collecting rain waters (endless energy). While there is no more soil erosion, there is no reported population migrating to larger cities of Ethiopia from this region. The restorative work of this community was recognized at the United Nations Rio+20 Conference.
d. Serial Access Services (Access & Equity)
In this model we look at how the principle of designing a product exclusively accessed as a customized service could be implemented in low-income communities with the objective of offering a product-of-services in a serial uses.
The serial uses approach aim at lowering economic entry barriers of our current linear model by maintaining a product-of-services at the highest quality level while constantly decreasing its access price as time goes by. High-end households will access product-of-services where products will have the latest features and functionalities, keeping up with the pace of technological advances. Two years later, the service provider will ensure a new machine is being used by the high-end households. That very same machine, maintained by the original equipment manufacturer will be offered at a lesser price to another household prioritizing functionalities over trends. And so on, until it reaches markets that could not afford such an equipment in a linear approach to our economy. Years after years, while the product is in an excellent product state (as new), the service becomes affordable to the needy. Machines are now designed using less to very little (or no!) electricity or water, while being function-based, i.e. you access the machine with the functions you will require.
Source: Circular Economy 2.0 / Alexandre Lemille
The economic model that takes into account the benefits of integrating new customers into the economic cycle makes sense: the machine has long been paid by the earlier users, while profits have been generated for years on a machine that was maintained under controlled servicing costs. At some point during the extended life time of the product, it can make business sense to grant access to the machine-as-a-service at an extremely low leasing price, even nearing zero. The long-time paid-for-machine remains the property of the manufacturer as available future stock of material. So, its value is still high. Gaining new customers would be a viable strategy here: loyalty (investing in future markets), access to behavioral data in unknown markets (competitive advantages), and so on.
At extremely low pricing schemes, the manufacturer and the potential future customers are in a win-win situation: the manufacturer through its pool of employees in a paid-as-they-care durable model, through a pay-as-they-grow approach for customers, creating long-term loyalty across the range of customers.
e. Modular Access Approach (Access, Equity & Ability)
A modular access is based on the Pay-As-They-Need, Pay-As-They-Grow and Paid-As-They-Care principles. You access a good (possible to own it too) designed in a modular way so that you only pay for what you need or what you can afford today. In case of a life accident, your product-of-services shrinks to the level you then need or can afford.
Typically, you may think of a home. Not only the house is made in such a way that all its components or materials are made to be reused or revalued in the future physical change of the house set-up, but it grows or shrinks according to people’s needs or level of affordability: you get married, you order a modular bedroom, you have a child, you add a new room and bedroom, you get divorced, you remove a room from your structure.
Here, the service provided is adapting itself to your life needs to the upper or lower levels, at no additional costs to the end customers, whichever their living standards.
f. Service-based Collaborative platforms (Access, Equity & Ability)
This is here your sharing economy whereby you access a good-as-a-service in a shared cost approach (affordability, versatility).
The typical example is Hello Tractor in Nigeria where tractors are proposed to small holder farmers according to the farmer’s ability to pay for the service. It not only unleash the access to all kinds of agricultural tools and equipment at a fraction of the price they use to pay, but increase yields thus reduces food insecurity. Payment of the equipment could be linked (not the case today in this example) to farmers’ successes (a “grow-within” approach based on accumulated benefits (embedded externalities)): a kind of insurance against food insecurity?
Source: Hello Tractor/USAID
Other business models can be created by using the “circular thinking” to address societal challenges using permaculture, traditional/ancestral knowledge, biomimicry, performance economy, Blue Economy, and Cradle-to-Cradle design to lower our system economic barriers integrating more people within it.
Source: Circular Economy 2.0 / Alexandre Lemille
This list is non-exhaustive! Which Socially driven Circular Business Models could you add here?
Over to you…