Marco's page for Station Road: Station Road opens in September. Marco wants one page in the opening leaflet on how Lena's Bakery keeps things in use instead of throwing them away.
He starts with the most ordinary thing in any café: a takeaway coffee cup.
At a typical café the cup is made from new paper, lined with plastic made from oil. It holds a coffee for ten minutes, then goes in the bin.
That path has a name: a linear model (take, make, use, throw away). Each new cup needs new materials, and each old one becomes waste. In 5.3.4 you met the same path as cradle to grave.
Linear: a line
- Take new materials from nature
- Make the product and sell it
- Throw away what is left when it is used up or worn out
Circular: a loop
- Use renewable or recovered materials
- Keep the product in use longer, or used by more people
- Return what is left as raw material for something new
Circular business model: A way of running a business, and earning its money, that keeps products and materials in use for as long as possible, so fewer new resources are taken from nature and less ends up as waste.
The important words are business model: how the business makes its money. A circular business is not just being careful with the bins. It is paid in a way that rewards keeping things in use.
There are five circular business models. Each changes one part of the line.
The five circular business models
- Circular supply. What goes in: renewable or recovered materials instead of new ones.
- Resource recovery. What comes out: waste turned back into raw material.
- Product life extension. How long a product lasts: repaired, rebuilt, upgraded, resold.
- Sharing. How many people use it: one product, many users.
- Product service system. Who owns it: the customer pays for the use, not the product.
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Marco begins with what the bakery buys. Mill Lane runs on electricity from a 100% renewable tariff. And the takeaway cups are no longer paper lined with oil-based plastic: they are made from sugar-cane fibre, the part of the cane left over once the sugar has been squeezed out.
Circular supply model: Replacing inputs taken new from nature (virgin resources) with bio-based, renewable or recovered materials, so less new material has to be taken over time.
Now the other end. Every night Mill Lane is left with crusts, dough scraps and bread that even Second Helpings cannot use. It goes to a composting site on a Valley Grain farm, and the compost feeds the wheat fields that grow Lena's flour.
Valley Grain has turned Lena's waste into a raw material. That is a resource recovery model. (In 5.3.4 this was the nature loop of cradle to cradle.)
Resource recovery model: Recycling waste into materials that can be used again (secondary raw materials), so the waste does not go to landfill and replaces new materials.
| Circular supply | Resource recovery | |
|---|---|---|
| Which end of the line? | What goes in | What comes out |
| The question it answers | What are our inputs made of? | What happens to the waste? |
| At Lena's | Cups from sugar-cane fibre; renewable electricity | Crusts and scraps composted for Valley Grain's wheat |
| Elsewhere | Clothes made from recycled plastic bottles | Old carpets shredded into yarn for new carpets |
One practice, two models: A business that collects old products and makes new ones from their materials fits both: its inputs are recovered (circular supply) and it turns waste into raw material (resource recovery).
Either can be right. Name the model, say what that model does, and point to the line in the case that shows it.
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The oven that did not go to the scrapyard: The Mill Lane oven has baked every night for years, and its heating parts are wearing out. A new oven like the deck oven Lena has priced would cost $45,000.
Instead, Ovenworks rebuilds it for $6,000: new heating parts and new controls, in the same steel body, good for years more.
Ovenworks earns its money by keeping ovens going: it repairs them, rebuilds them and sells rebuilt ones. That is a product life extension model. Every year an oven stays in use is a year in which no new oven has to be made.
Four ways to make a product last longer
Repair
Fix what broke, so the product works again: a new part in the oven door.
Rebuild
Replace the worn parts and keep the rest (refurbish): the Mill Lane oven.
Upgrade
Swap in better parts, so an old product keeps up with new ones: new controls.
Resell
Pass a used product on to a second owner, as Ovenworks does with rebuilt ovens.
Now look at the clock. The oven works from 2 a.m. until the vans leave at 5. For the other 21 hours of the day it stands cold.
Celia's Cakes, a wedding-cake maker, now rents it from 10 a.m. to 4 p.m. on three days a week, at $25 an hour: 6 × 3 × $25 = $450 a week for Lena. Celia never has to buy an oven of her own.
Sharing model: Letting several users share a product that would otherwise stand unused (under-used), so fewer new products, and the materials in them, are needed.
| Sharing suits a product that… | Sharing does not suit a product that… |
|---|---|
| Lasts, so many users can take their turn: an oven, a van, a drill | Is used up by its first user: a loaf is eaten |
| Stands idle much of the time | Is fitted to one user or one machine: a tyre, a contact lens |
| Is safe to pass on | Is personal, for hygiene or safety: a toothbrush head |
Why a product does not suit sharing: Start from what sharing needs: one product, used by many people in turn. Then find the feature of this product that stops it: it is used up, fitted to one user, or unsafe to pass on.
Last on Marco's list: the coffee machine in each shop. The counter staff set one up every morning, but Lena's Bakery does not own any of them.
They belong to Brevo, which charges 12 cents for every cup a machine makes. Brevo services the machines, repairs them when they break and takes each one back when it wears out.
Product service system model: Selling the use of a product, or the result it gives, instead of the product itself. The business keeps ownership, so it has reasons to make products that last and use resources sparingly. Also called product as a service.
Selling coffee machines
- The seller is paid once, when the machine is sold
- Repairs are the café's problem
- A machine that wears out sooner sells the next one sooner
Selling cups of coffee made
- Brevo is paid 12 cents for every cup, for as long as the machine works
- Every repair is Brevo's own cost
- A machine that lasts, and uses little power, earns Brevo more
That change of incentive is what makes it circular. The seller keeps the product, so it wants it strong, easy to repair and worth taking back.
With five models on one page, the quickest way to tell them apart is to ask what each one changes.
| Model | What it changes | At Lena's Bakery |
|---|---|---|
| Circular supply | What the inputs are made of | Cups from sugar-cane fibre; renewable electricity |
| Resource recovery | Where the waste goes | Valley Grain composts the crusts and scraps |
| Product life extension | How long a product lasts | Ovenworks rebuilds the oven for $6,000 |
| Sharing | How many people use it | Celia's Cakes rents the idle oven by the hour |
| Product service system | Who owns it, and what is paid for | Brevo owns the machines; Lena pays per cup |
Renting is not always sharing: Brevo's machines each stay in one shop, with one user: that is a product service system. Celia's Cakes takes turns with Mill Lane's night bakers on one oven: that is sharing.
Ask who keeps the product, and how many people use it.
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How this comes up: A case describes what a business does with its materials and products, and asks you to explain two circular business models it uses. With six marks, each model is three: its name, how the model works, and where the case shows it. With four, each is two: the model, then the case.
A second part may ask why the product does not suit one of the models, usually sharing.
The pattern, twice
- Name the model. Its exact name: circular supply, resource recovery, product life extension, sharing, product service system.
- Say how the model works. One sentence from its meaning: product life extension keeps products in use for longer.
- Show it in the case. The practice from the case, in its own words and numbers.
- Then a second, different model. Two practices of the same model count once.
Three traps: No name. Describing the practice without naming the model stops each model short of full marks.
A model the business does not use. If nobody takes turns with the product, it is not sharing.
The case alone. Copying the case line without saying how the model works misses the middle step.
Explain two circular business models that Spokewise Cycles uses.
Model answer plan
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