How to design a circular economy product into your business model

Introduction

Whenever I talk with sustainability professionals I regularly hear people saying that what we really need is new technology to help us transform existing industries to be more sustainable because we usually associate an industry’s transformation with the adoption of a new technology or innovation.

But although new technologies are often major factors, they have never transformed an industry on their own.

What does achieve such a transformation is a business model that can link a new technology to an emerging market need.

Sustainable business model innovation allows for delivery of large scale sustainability outcomes without the need for new technology development or high risk R&D.

Consider the following:

• Facebook is the world’s largest media company but creates no content;
• Bitcoin is the world’s largest bank, with no actual cash;
• AirBNB is the world’s largest accommodation provider yet owns no real estate;
• AliBaba is world’s most valuable retailer but has no inventory of its own; and
• Uber is the world’s largest taxi company yet it owns no vehicles.

What allows these companies to achieve such large-scale transformation is not a new technology or innovation, it is the business models upon which they are built.

A new business model combined with existing technologies, products or services can bring significant competitive advantages.

For sustainability solutions the right business model can deliver impact at scale.

Related: How to create circular economy outcomes with these six innovative business models

The Business Model Canvas

One of the best tools for helping you design a new sustainable product into your business is the Sustainable Business Model Canvas.

The Business Model Canvas is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model. This method from the bestselling management book Business Model Generation is applied in leading organisations and start-ups worldwide.

The folllowing video will give you an overview of the business model canvas.

Case Study – Turning Marine Pollution into Sportswear

In this example we are going to look at how to use the business model canvas to introduce a new sustainable product or service into your organisation.

And we are going to look at a business model based around circular supply chains. These types of models seek to close the loop on material flows.

Renewable, recycled, or highly recyclable inputs are used in production processes – enabling partial or total elimination of waste and pollution. Waste becomes an asset, not a liability that you pay to dispose of.

In these models products do not become end-of-life instead they become the end-of-current-usage loop.

A good example of introducing a new product using this business model is Adidas.

Adidas makes over 400 million pairs of shoes every year. Manufacturing that many shoes requires a lot of resources. But constantly creating new materials isn’t great for the environment. So Adidas is turning to a different source.

Experts predict that in 30 years, there will be more plastic in our oceans than fish. And one study estimates that 90% of seabirds have consumed some form of plastic waste. All that pollution on beaches and in the ocean is harmful to both marine life and humans.

So Adidas is trying to stop some of that plastic before it reaches the ocean.

In 2015, Adidas partnered with the environmental organisation Parley for the Oceans. Their goal? To turn marine pollution into sportswear. And they’ve made huge progress.

Since the beginning of the partnership in 2015, they have produced almost 50 million pairs of shoes made in part with Parley Ocean Plastic.

This video explains the how Adidas integrated this new product into their existing business model.

Adidas Case Study – Business Model Design for Ocean Plastic into Shoes

Lets quickly look at Adidas’ existing business model.

The customer segments are consumers and athletes who are participating in a range of sports.

Their value proposition is primarily high performance sports shoes and apparel.

Channels include brick and mortar stores, online, as well as retailers.

Relationships – this is how you find, keep and grow your customers – range from social media, advertising, to brand partnerships with top athletes.

Revenues come from the sale of shoes and apparel.

Key resources include the factories and manufacturing equipment, intellectual property like patents, as well as staff and so on.

Key partnerships might include various sports stars as brand ambassadors and material suppliers for the production process.

Key activities include marketing and sales, product design, and research and development.

And finally costs.

Now let’s look at how this new product made from ocean plastic waste would integrated into this business model.

It all starts at the beach. Parley and its partners collect trash from coastal areas like the Maldives. The waste is then sorted, and the recovered plastic is sent to an Adidas processing plant.

A new processing plant would be required in resources to crush, wash, and dehydrate the waste, leaving nothing but small plastic flakes.

New activities would be required to process the flakes into filament. The flakes are heated, dried, and cooled, then cut into small resin pellets. Normally, polyester is made from petroleum.

In this case Adidas melts these pellets to create a filament, which is spun into what they call Ocean Plastic, a form of polyester yarn.

Adidas uses Ocean Plastic to form the upper parts of shoes and clothing like jerseys.

Each item in the Parley collection is made from at least 75% intercepted marine trash.

And they still meet the same performance and comfort standards of Adidas’ other shoes.

Looking at the sustainability impacts the recycled polyester uses less water and fewer chemicals and helps prevent plastic pollution.

But this was just the first step. Adidas also developed a 100% recyclable shoe called the Futurecraft Loop. This shoe is made to be remade.

In this model once the shoes come to the end of their first life and are returned to adidas and therefore Adidas need to include a take back process which is a type of reverse channel where the product flows back from the customer.

Once they have the shoes back they are washed, ground to pellets and melted into material for components for a new pair of shoes, with zero waste and nothing thrown away.

With the help of a new circular business model Adidas is using readily available material to manufacture new products. Which is a big step towards a sustainable future.