Circular business models help companies make money without just selling new things. Instead of throwing old items away, businesses now offer repairs, rentals and second-hand sales. Just take fashion as an example. Brands keep clothes in use longer to save resources and create new income. The money proves it works. In 2024, the second-hand marketplace Vinted grew its revenue by 36%. Experts say Europe’s circular markets could reach €1.5 trillion by 2040.
By using Circular Business Models, you can reduce waste, find fresh income streams and build better customer relationships while protecting the planet.
What Are Circular Business Models?
Usually, when we buy something, use it and throw it away, its value often gets wasted. Circular business models work differently, as these models say that you don’t have to throw things out instead of that you can keep products and materials useful for as long as possible by repairing things when they break, reusing them, reselling second-hand items and remanufacturing them into something new. You can also make money by selling brand-new products, businesses can make extra money by helping products last longer. This reduces waste, uses fewer raw materials and creates new ways to do business.
You might be thinking about “How these models are different from the Linear Business Model”.
The traditional linear model is simple and takes raw materials to produce a product, which is then sold and disposed of. The new circular economy focuses on waste reduction, repair, retention and resale of products. It moves beyond recycling and changes how a business creates value and makes money.
Three Principles Behind Circular Business Models
Circular business models are built around three main principles that help businesses cut waste, make better use of resources and protect the environment. Come and check how you can put these principles into practice in your business.
Eliminate Waste and Pollution
This simply means cutting out waste. To cut out waste, you can start by using more durable materials. You can also design long-lasting products and improve your processes. If you replace single-use plastics with reusable packaging, you will help to reduce waste.
Circulate Products and Materials
Why throw away a product when you can reuse it? Businesses can extend a product’s life with the famous process of 4Rs, which is repair, resale, refurbishment and reuse. Once a product reaches the end of its useful life, its materials can be recovered and used to make new products.
Regenerate Nature
Circular business models also focus on supporting natural systems. You can do this by using renewable biological materials and returning suitable organic waste to nature safely through composting. This approach goes beyond recycling. It helps reduce the need to extract new resources while allowing nature to thrive.
Types of Circular Business Models
Circular business models generally fall into a few main types:
Product-as-a-Service (PaaS)
The first type of circular business model, Product-as-a-Service (PaaS), means that instead of buying a product, customers pay to use it. For example, businesses can rent power tools, lease equipment, or offer subscription-based services. Since companies often retain ownership, they’re encouraged to make products that last longer and are easier to repair or reuse.
Product Life Extension
Businesses extend a product’s useful life through repairs, maintenance, upgrades, refurbishment, resale, or remanufacturing. This helps you get more value out of existing products while reducing the need for new raw materials.
Resource Recovery
Waste and by-products are turned into useful resources. Businesses can recover valuable materials from discarded products or use leftover materials in other manufacturing processes.
Circular Inputs
Businesses use renewable, recycled, or recyclable materials to make products. This reduces their dependence on virgin raw materials and can make supply chains more resilient.
Sharing Platforms
These platforms let multiple users access underused assets, such as vehicles, tools, or workspaces. Sharing helps businesses make better use of existing assets and reduces the need to produce more items.
You will be shocked to know that many businesses combine different circular business models depending on their products, industry, and goals.
Real-World Examples of Circular Business Models
Several companies are already putting circular business models into practice and finding ways to make them work.
Fashion: Resale, Rental and Repair
Take Patagonia’s Worn Wear programme, for example. Customers can trade in eligible used clothing, and the company helps keep garments in circulation through repairs and resale. According to the Ellen MacArthur Foundation, Patagonia’s circular business models generated $5 million in annual revenue.
Consumer Products: Repair and Refurbishment
IKEA gives customers the option to return eligible used furniture through its Buy-back and Resell service. In FY2025, more than 686,500 items found a second life through the programme.
Packaging and Materials: Reuse and Recovery
Lush encourages customers to return empty product containers through its packaging-return programme. Initiatives like this help recover packaging materials and reduce dependence on single-use alternatives. An example of a circular model in packaging and materials is Recykal, which turned waste into a ₹1,498 crore business.
These examples show how businesses can keep products and materials in use for longer while creating additional value.
Make Circularity Part of the Business Model
Running a business isn’t always about making new products and selling more. Sometimes, you can create more value by making better use of what you already have. That’s exactly what circular business models are about. Get started by fixing items, reusing packaging or selling second-hand items. This is simple and will help reduce your waste, save you resources and allow you to think outside the box and make extra money. Take some time to look at your business and identify ways that you can improve resource usage. Even making a small change now can open up more opportunities for you.
FAQ:
1. What are the Five Pillars of the Circular Economy?
The circular economy is often explained using the 5 R hierarchy (Refuse, Reduce, Reuse, Remanufacture/Repurpose, and Recycle) or a structured five-pillar framework that brings together different fields of study.
2. Who is the CEO of Circular Services?
Ron Gonen is the CEO of Circular Services
3. What is a B2B Business Model?
A B2B (business-to-business) model is when one company sells products, raw materials, or services to another business instead of directly to individual customers. For example, a manufacturer might supply parts to an automaker, while a software company provides cloud tools to a retail chain.
