Business Models: from Linear to Circular to Regenerative
In the 25+ years that I worked in regular companies in The Netherlands as Marketing and Business Unit Manager, I never knew what I am going to tell you now. But luckily the world is changing, we are innovating on all fronts.
Not only technologies are inspired by nature, but also the business models that drive our economy. And let me state some facts from the beginning:
- Economy and ecology share the same etymological root
- The economy is made by people, so people can change the basics
- Humans have a heart, so the economy should be driven by heart as much as by a fair money-system
- Humans are part of ecosystems, so we should take the complete web of life into account when (re)designing our economy
The good news is: it can be done! And it’s happening all over the world…
Linear Business Model, the Usual One
Let me start with the business model I knew for so long: the linear one. We take resources (creating pollution by mining, etc.), produce a product (often toxic, creating waste, pressure on people, pollution of air, water, soil, etc.), supply to a market (creating waste, pollution, unfairness between wealthy and poor countries, etc.) and in the end, all is waste. We can do better, so much better!
New Business Model: Circular
Now the business models are changing into circular. My own government in The Netherlands says we want to have a completely circular economy by 2050. Wonderful, I applaud the effort, it is a huge step forward.
The circular economy is easily explained in this picture made by the Ellen MacArthur Foundation, the butterfly model.
Explanation of the Butterfly Model Circular Economy
Materials are part of one of the two wings: left is the biological circle, right is the technical circle. Nowadays many products stick to recycling, but the more you go to the inside of the circle, the more product value will be preserved.
Example: a building is being demolished, you take out the walls, split the iron from the wood and recycle both materials. This takes place on the outside of the right wing: recycling. You will shift to the inside of the right wing if you would take out the walls, make sure they are preserved as a wall, including the added value that has been put into the product in the first place. You will revise the wall as a whole so that it is better than new and reuse it.
The Business Model of Use Instead of Own
In a circular economy, there are also new business models possible when you zoom out and go one step higher in functionality. You will not sell a lamp, you will sell the quality of light.
The lamp remains in the ownership of the supplier who is also responsible for the electricity use of the lamp. The user leases the lamp that gives the light. This business model will give the supplier a motivation to innovate, in this example on electricity use, material use, design for a better quality of light, etc.
When he has produced a lamp that gives at least the same quality of light with e.g. less electricity use, the lamp will be replaced by the better one and the old one will go back to the production process of the manufacturer as a resource.
Regenerative Business Models
However, sorry to say, but these business models will not save the world. In my opinion, we need regenerative business models to really make a difference.
Nature provides us with resources, we should give back to nature in our business models. And in my world view, ecosystems have intrinsic value and do not exist only for humans to exploit…
Entrepreneurship is mighty important for this change because governments will only take action when their people are starting to move. So I see my role in activating businesses, consumers, communities and all humans with a heart to embrace a regenerative way of thinking.
In this post I focus on business models, so how can we create the business models that make a real change?
Responsibility for Damage
The first step is the realization that a business model can and should be broader than just a product. Exit core business thinking! And for those who stop reading now, because they think there is nothing in it for them: bear with me, I will explain the entrepreneurial benefits as well.
But first of all, entrepreneurs should take responsibility for the damage they are doing while producing and consuming their products. And there are many more opportunities if you don’t just look at less damage. If instead, you focus on doing more good.
Why not create a business model where a carpet is circular in its material use ánd creates a healthy indoor climate because it purifies the air? Why not create a business model where textiles are not polluting the rivers with their synthetic microfibers when washed?
Why not instead the fabric will be biodegradable, made of fibers that grow abundantly without synthetic fertilizers and thus help restore healthy topsoil? Or contribute to healthy waters if you use a biodiverse ecosystem of algae as a resource?
Ecosystems Functions Included
Humans are part of nature, we should not rule and manipulate trying to do it better. Nature has been innovating for more than 4.5 billion years now and with an ingenuity that is incomparable. So it’s time to take nature into account and embrace all aspects in our business models.
So let’s have a look at the ecosystem services (or better-called ecosystem functions, they are not only designed for humans…) that can be included in business models.
Economies of Scope
What a world of opportunities! So how do we make sure we incorporate these benefits into our business models and make them viable? We change ‘economies of scale’ into ‘economies of scope’ and let synergy do its work.
The Montana beer brewery in the top picture is a good example of how to brew beer and make bread, healthy soil, clean water, energy, fish and algae in the process.
Wow! This business model will create more benefits for all ánd more income streams. Because the second product uses a waste stream of the first as a resource, the model as a whole will show multiplier effects. Such a business model creates abundance for all species!
Stranded Assets as Investments
Health and wealth for people can go hand in hand with health and wealth for our planet. The only thing we need to do is shift our thinking from scarcity to abundance, from competition to cooperation, from manipulation to emergence.
Regenerative business cases do sometimes need more investments upfront which will only be compensated by abundance later on when the synergy effect kicks in.
So how to bridge the gap? Here we need to be aware of stranded assets. Ask yourself who has the pain now and will benefit from the business model to solve that pain?
In our current system, many damages of business models are thrown over the wall of society. But still, someone will be paying for the damage. So who has the pain of unused buildings? Of unused waste streams? Of people’s bad health? Of polluted rivers wanted for drinking water? Of polluted air? Where there is pain, there might be money to invest in a regenerative business model.
Define the stranded assets and ask for investment. In this way, Novamont has found the investment for their biorefinery. The biorefinery on Sardinia has partly been financed by the oil refinery that wanted to close its factory and faced big costs of social plans, demolishing buildings, etc. It was much cheaper for them to help Novamont startup, so they did.
Regenerative business models can be applied within one business or within an area with cooperating businesses. I will give you an example of both.
Dycle, a Blue Economy Business Model
Blue Economy (and think tank ZERI) is a road to sustainability that works only with regenerative business models. One of their examples is Dycle from founder Ayumi Matsuzaka.
In this business case, compostable diapers are produced and used by communities of parents. The full diapers are collected and made into terra preta, a very fertile black soil as found in the Amazon. With the terra preta, the soil around a city will be regenerated, fruit trees grown and with the fruit babies can be fed.
This is not a business case of selling diapers with lots of plastics (super absorbent polymers) in them, not caring about the baby’s health, the mountains of waste or the polluted environment the family has to live in.
No, Dycle provides baby health, community building, awareness, healthy soil, fruit trees, and baby food. What an abundance!
El Hierro, the European example of Regenerating an Area
Another Blue Economy example is the smallest Canary Island, belonging to Spain. On El Hierro, they first made a decision about what they want to be. The answer was ‘an agricultural island with some eco-awareness-tourism’, so all businesses here know what they should contribute to.
They started by becoming self-sufficient in renewable electricity and desalinated, freshwater. Those are the top needs for sustainable agriculture. Not only is the electricity produced on the island, but the inhabitants also own the system and receive most of the income generated.
In eight years' time the agriculture (plants and animals) has been made organic with terra preta and permaculture principles, rest streams are reused and food for animals is produced locally.
There is a fish reserve where the fish and other sea life may grow old and the spillover effect (their increased fish egg production) regenerates the sea. The cooperation of fishermen has agreed among themselves that they will only fish with lines and not fish for more than can be regenerated.
Result: sustainable tuna, available first on El Hierro itself, then on the other Canary Islands and the excess goes to Spain. Every new project has a link to the others, making the community wealthier and creating lots of benefits for the environment ánd the people.
Because they now own their renewable energy, the current project focusses on electric mobility. They say no to extra costs, yes to extra benefits…
Conclusion
Regenerative business models exist and become more and more popular. Young people adopt them, create them and see their value more than ever. Awareness rises. The mind shift is happening.
And these business models are the stepping stones of a new, sustainable economy. The business models as described here can help us remain within the boundaries of our planet and create value in abundance. And there are many more we can think of.
A reminder of the main factors that are applicable to these models:
- stop limiting ourselves to core business thinking, take a broader view of solutions
- keep the basic needs of people and the planet in mind when creating a start-up. Products with purpose are what we need
- use materials that grow in abundance or waste streams designed to be a resource
- design the synergy business case with a broad mindset, including ecosystems services
- be aware of the damage your product is (not) doing, which you would normally (in a linear model) throw over the wall into society
- be aware of the good your product can be doing in restoring ecosystems functions
- be aware of the opportunities that stranded assets provide; here the money for investments can be found
- collaborate within a set bio-regional area to make the benefits of different companies touch each other and use the synergy, creating multiplier effects (of benefits ánd money) in the process
Be Inspired and Play Your Part
We need entrepreneurs who do business as unusual. We need explainers from all kinds of cultures, in all languages. We need educators who show our young people not to do as we did, but how to use their own observations and nature’s intelligence as their compass.
We need artists who think different and show us in heart-touching ways that we are on the wrong path and can do differently. We need scientists who realize that analytical thinking is not the master, but a servant of nature’s intelligence.
In short: we need you in whatever role you want to play to make this new, regenerative economy happen. The new world in which the planet and people work together and thrive! Be inspired and play your part.
Join our networks of innovators, whether it is within the blue economy, circular economy, cradle to cradle, the natural step, biomimicry, permaculture, organic farming, agroecology, ecosystem restoration, or other.
I would love to meet you along the way… And for now, if you want to connect, you can find me on LinkedIn, Facebook, Twitter or Instagram. Or in our food forest in progress, restoring ecosystems and producing healthy food…
Further reading:
I write about new business models, economic development based on qualitative growth, innovation, and personal development needed for the transition.
We have to explore together, learn from ecosystems and look for ways to fit our activities within the boundaries of our planet. We can make the transition from a destructive species to a restorative species.
Please look at my profile for further reading. Here are links to some articles that might interest you as well.
