- O Núcleo
centro de excelência na área de Gestão da Inovação, Inteligência Competitiva,
Prospecção Tecnológica e Monitoramento Tecnológico e Mercadológico
Companies around the world recognize the importance of innovation in their business models to survive in a constantly changing environment. On the other hand, conventional business models, under the linear economy model (TAKE-MAKE-WASTE), are characterized by “production chain and end life waste, excessive energy use and erosion of ecosystems” (Michelini, Moraes, Cunha, Costa, & Ometto, 2017). This is why they have proven not to be sustainable (Korhonen, Honkasalo, & Seppälä, 2018) and according to the Ellen MacArthur Foundation, “our way of doing things is reaching its limits” (Ellen MacArthur Foundation, 2017).
This issue explained above, added to my growing interest in the circular economy, led me to ask myself what are circular business models? What are their characteristics? And is there something of this circular economy in Colombia? And in 2018, I decided to investigate the development of the circular economy in green businesses in Colombia for my master’s graduating project. Below I will briefly explain what I discovered in this process.
Firstly, the term circular economy first appeared in the 90’ decade, when Pearce and Turner mentioned it as a way to create environmental awareness on the economic flows by closing the industrial flows (as cited in Prieto-Sandoval, Jaca, & Ormazabal, 2018). Later, the circular economy became a popular concept and there is a big research contribution with some differences in the definition. However, a study proposed 4 main key concepts related to the circular economy, which are:
“1) the recirculation of resources and energy, the minimization of resources demand, and the recovery of value from waste, 2) a multi-level approach (micro, meso, and macro), 3) its importance as a path to achieve sustainable development, and 4) its close relationship with the way society innovates” (Prieto-Sandoval et al., 2018).
Additionally, the Ellen MacArthur Foundation agreed the circular economy is based on three principles: “eliminate waste and pollution, keep products and materials in use and regenerate natural systems” (Ellen MacArthur Foundation, 2017).
Concerning resources, there are two types of material loops: technical and biological. The technical cycle is about keeping the value, so materials are kept within the cycle as much as possible. Meanwhile, the biological cycle is about keeping biological materials and ensure a safe return to the environment (Ellen MacArthur Foundation, 2019).
The circular economy within enterprises, also known as the micro level, is about integrating circularity on the business models. In other words, to achieve a circular economy all the components of a business model (value proposition, value creation, value delivery, and value capture) has to be circular (Geissdoerfer, Morioka, de Carvalho, & Evans, 2018)
In business terms, a circular business model makes economic sense, since it aims to have efficient use of resources, where the value of the products last longer through reuse, remanufacturing, and product updating (Korhonen et al., 2018).
Furthermore, in Colombia, the Ministry of the Environment defines green businesses as companies whose main activity contributes to a positive environmental impact (Ministerio de Ambiente y Desarrollo Sostenible, 2021). For this research, 7 enterprises, classified as green businesses, with different products and services were chosen and a survey was carried out focused on what principles of the circular economy they are applying, what are their limitations, how they manage their stakeholders, among other variables (Hurtado Tejada, 2018).
Company A is dedicated to the recycling of tires, steel and nylon to make other materials that can be used within industries like road paving and granules to make floors or synthetic courts. It implements recycling practices within the business.
Company B is a company that produces coffee implementing good farming practices, it also uses coffee pulp, which is seen as a waste in the first place, as an organic fertilizer. Additionally, they reuse the packaging from the fertilizer to recollect the coffee cherry from the crops.
Company C is an organization that produces coffee fuel resulting from upcycling coffee husk residue. Also, the waste resulted from the combustion of the coffee fuel, can be used as a fertilizer.
company D is dedicated to the design of accessories like bow ties or bags, through the remanufacturing of wood and leather waste.
company E is a hotel located in a natural reserve that offers agro-tourism and is aligned with the Sustainable Tourism Technical Standard. For instance, they recollect rainwater to do farming or cleaning, a big part of the food consumed is cultivated and they implemented biofilters to the treatment of water, and reuse packaging used by the guests.
company F recollects, transports, and treats used cooking oil to transform it into biodegradable detergent and they offer a quantity of money to encourage consumers to return packaging.
Lastly, company G, commercializes cosmetic products, offering sustainable solutions to skin problems and they have a refill service to avoid the unnecessary production of plastic for packaging (Hurtado Tejada, 2018).
All the companies interviewed make efforts to close the cycles of their business models by implementing reuse, remanufacturing, recycling, and industrial ecology. Additionally, 100% of the companies interviewed take into account environmental criteria to reduce water and energy consumption, and 71% offer post-sale and maintenance and refill services (Hurtado Tejada, 2018).
Likewise, all companies comply with at least two of the principles of the Circular Economy, mentioned above. However, there is little representation of other characteristics of the circular economy, such as the use of renewable energy. Meanwhile, the lack of financial resources and lack of support from government institutions are the two biggest limitations to be able to achieve a circular business (Hurtado Tejada, 2018).
It is important to mention that, although they are in the early stages of development of the circular economy, companies show great versatility. Such is the case of company F that produces detergents from used oil, were considering upgrading a waste that can be marketed as a foliar type of fertilizer and they are considering producing biofuel. On the other hand, company G creates cosmetic products derived from Colombian biodiversity, like sacha inchi (with origins in the Amazonian rainforest) and mud from the volcanic zone of the coffee triangle in Colombia. They boost the innovation on bioproducts and support indigenous communities in Amazonas and Putumayo (Hurtado Tejada, 2018).
Concerning recommendations, company C can make company B a supplier of coffee husk. Moreover, it is interesting to think that company D can implement after-sell services within its business model, like offering a renting service instead of selling products, or they can offer discounts when buying new products if the client returns an accessory. Similarly, company A should implement maintenance services to its customers, to ensure long-lasting materials. Lastly, all of the companies can educate their consumers on how they can use each of their products in a circular economy.
To conclude, the system of the service or product must be considered to affirm it is a company that implements a circular economy. Additionally, activities such as maintenance, reuse, remanufacture and recycling need to be done simultaneously. And most importantly, a sustainable and circular business is possible, however, a long-term vision must be taken due to higher initial investment is required. As one of the interviewees said: “If businesses that operate in a linear economy are profitable, circular business models are doubly profitable.”
Ellen MacArthur Foundation. (2017). WHAT IS THE CIRCULAR ECONOMY? Obtenido de Ellen MacArthur Foundation: https://www.ellenmacarthurfoundation.org/circular-economy/what-is-the-circular-economy
Ellen MacArthur Foundation. (2019). Circular economy system diagram. Obtenido de Ellen MacArthur Foundation: https://www.ellenmacarthurfoundation.org/circular-economy/concept/infographic
Geissdoerfer, M., Morioka, S. N., de Carvalho, M. M., & Evans, S. (2018). Business models and supply chains for the circular economy. Journal of Cleaner Production, 190, 712–721. https://doi.org/10.1016/j.jclepro.2018.04.159
Hurtado Tejada, D. (2018). THE CIRCULAR ECONOMY DEVELOPMENT IN THE GREEN BUSINESSES IN COLOMBIA.
Korhonen, J., Honkasalo, A., & Seppälä, J. (2018). Circular Economy: The Concept and its Limitations. Ecological Economics, 143, 37–46. https://doi.org/10.1016/j.ecolecon.2017.06.041
Ministerio de Ambiente y Desarrollo Sostenible. (2021). ¿Qué son los Negocios Verdes? Retrieved from Minambiente: https://www.minambiente.gov.co/index.php/negocios-verdes-y-sostenibles/negocios-verdes/que-son-los-negocios-verdes
Michelini, G., Moraes, R. N., Cunha, R. N., Costa, J. M. H., & Ometto, A. R. (2017). From Linear to Circular Economy: PSS Conducting the Transition. Procedia CIRP, 64, 2–6. https://doi.org/10.1016/j.procir.2017.03.012
Ministerio del Medio Ambiente. (n.d.). ¿Qué es la Evaluación Ambiental Estratégica? Retrieved from http://portal.mma.gob.cl/evaluacion-ambiental-estrategica/
Pearce, D.W., Turner, R.K., 1990. Economics of Natural Resources and the Environ- ment. Harvester Wheats, Brighton .
Prieto-Sandoval, V., Jaca, C., & Ormazabal, M. (2018). Towards a consensus on the circular economy. Journal of Cleaner Production, 179, 605–615. https://doi.org/10.1016/j.jclepro.2017.12.224