We are faced with the dual challenge of economic recovery and finding new business models that are more sustainable and long-lasting, not centralized in a few areas but redistributed within the supply chain. The Circular Economy and the principles of sustainability it reflects can be a model to be taken as an example to succeed in restarting companies, supply chains and entire industrial sectors that want to find new life in an economy that has long been stuck.
At a unique, complicated and difficult historical moment like the one we are living in 2020, being able to understand what the direction of the world economy will be is difficult to predict or even speculate. Surely we can analyze what went wrong when the global emergency highlighted the deficits of the economic model we have pursued in recent years: confusion in social priorities, a difficult relationship between the public and private sectors, waste of the country’s resources, disorganization of labor, and undervaluation of schools and research.
If recovery is difficult, sustainable recovery is even more delicate and complex. So what are the tools that managers of manufacturing and service enterprises need to know to meet the challenge? What are the real opportunities and what issues are still far from an organized solution?
The Circular Economy with its principles can provide answers and give concrete tools to those who want to change course within their companies.
Circular Economy: the changing regulatory environment
The European regulatory context that has emerged in recent years, had heralded 2020 as a pivotal year for the Circular Economy, given that already in 2015 the European Commission had defined an initial “Action Plan for the Circular Economy “
that envisages the adoption of initiatives on: allocation of the necessary funding, eco-friendly design of goods, quality of resources and secondary raw materials, reuse of wastewater, push on prevention of new waste production and recovery of those generated.
To continue the circular path it has embarked on, in 2018 the Commission published several regulatory instruments under the EU Action Plan among which four directives
(called the “Circular Economy Waste Package“) amending the main EU waste rules stand out, namely:
- Directive 2018/849/EU amending Directives 2000/53/EU (end-of-life vehicles), 2006/66/EU (batteries, accumulators and their waste), 2012/19/EU (WEEE, waste electrical and electronic equipment).
- Directive 2018/850/Eu amending Directive 1999/31/Eu (landfill of waste);
- Directive 2018/851/eu amending Directive 2008/98/eu (waste framework directive);
- Directive 2018/852/EU amending Directive 94/62/EC (packaging and packaging waste).
At the end of 2019, the new Commission presented the Green Deal for Europe with the ambition to become the first block in the world that was climate neutral by 2050. Several steps were planned to meet the program including a new Circular Economy Action Plan presented on March 11, 2020. In Italy, the Circular Economy Package is to be transposed into national law in 2020, making this a crucial year for companies to cope with new rules, targets and seize opportunities.
Companies will therefore be at the center of this impending regulatory, technological, economic and social change and will need to be able to meet the challenge before them.
The Circular Business Model Canvas
The first step in approaching the Circular Economy is to keep in mind that companies must be put at the center of their goals, seeing themselves as the pivotal point around which new business models are developed and from which new market opportunities arise. In order to be able to do this, one must first try to review the enterprise as a whole, trying to identify what its strengths are and assess whether it complies with the principles of Circular Economy that will be presented in the following Teaching Units.
One tool you can use is the CIRCULAR BUSINESS MODEL CANVAS, as it allows you to analyze and reshape your current business by including additional pivotal themes related to the Circular Economy.
STEP 1 – BUSINESS MODEL CANVASWe use the classic BUSINESS MODEL CANVAS (Figure 1) to represent the current business model by trying to answer the questions represented in each “block” of the canvas. In this way we get a representation of what one’s current business model is by already giving more attention to circular opportunities, and then perform a new circular modeling by adding additional parameters.
State the value proposition that one’s business model succeeds in giving customers. What problems I can solve, why customers choose my company over a competitor;
Examine what relationship I establish with customers, what I serve customers for, what customer relationships are aimed at (customer retention, gaining more customers, increasing sales), how much these relationships cost;
Specify which channels I use for which segments, how they operate, how they are integrated with each other. These are the points of contact with target customers: communication channels, distribution channels, sales channels. They have the function of stimulating awareness of our value proposition and how they help the customer evaluate it positively.
Indicate what market characteristics I want to reach, what markets are potentially reachable, the set of customers or business to which I aim to sell my product or service.
Indicate the economic flow my business generates from each COSTUMER SEGMENT and what kind of transitions they are (spot, project contracts, subscriptions, etc…). Then understand how they would like to pay, why they pay, how much each economic stream contributes to the total revenue of my business;
Report what are the main resources to be able to produce my product or provide my service in the business model set up. They can be human resources, technology, materials, knowledge, partnerships, etc.;
State the most important actions that the company needs to take to make its business model work. It can be production, marketing, R&D, etc.;
Indicate what is the network of suppliers and partners that enables my business model to function. How do I catalog my suppliers, partners, consultants (fundamental, strategic, basic, useless) and what is the relationship (equity vs. non-equity, equal vs. unbalanced);
Indicate what the costs are to implement the business model (salaries, suppliers, equipment, supplies, etc.);
STEP 2 – CIRCULAR BUSINESS MODEL CANVAS
The next step is to revise the business model analyzed in STEP 1, readjusting it to the principles of the Circular Economy thus responding to additional “building blocks” that will allow us to understand what changes need to be made and what less circular sectors need to be implemented.
One can use the CIRCULAR BUSINESS MODEL CANVAS (Figure 2) as a reference, which is also useful for building a new business model from scratch with the knowledge that my company will comply with circularity principles.
Describe what environmental benefits are generated and impacts avoided by my business: the value proposition of the circular business model must involve a reduction in the environmental impact generated;
State what circular economic actions will be used in the business model. They can be actions within the company such as in the production process, different sales methods, or other actions that reflect circular economy principles;
Indicate the resources recycled or reused in your business model: as with classical resources, they can be tangible or intangible
Examine what costs are saved by circular activities and the use of recycled or reused resources within one’s business model;
Indicate what are the social benefits for workers, partners, customers and the market you want to tap: e.g., generating new jobs, improving the working environment, using and supporting a km0 supply chain, etc;
Describe what is the relationship with customers: for example, indicate how it is essential to involve them in a network where the added value (social, environmental, economic) is distributed along the entire supply chain, or create industrial symbiosis with customers by not only providing a product but also a service;
Make customer acquisition and business channels as digital as possible, using dedicated platforms in order to increase traceability, transparency, customer loyalty, and interception of markets outside one’s own;
Indicate what is the added value that one’s business model can bring to the market, the positive externalities that promote the economic and sustainable growth of the territory, its partners, the market and its customers.
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