♻️ Linear vs circular business models
Big Idea: A linear model follows 'take, make, dispose' — resources are used once then thrown away. A circular model keeps resources in use for as long as possible through reuse, repair, recycling and regeneration. No waste! 🔄
- Linear: extract → produce → use → throw away (wasteful, unsustainable)
- Circular: design for reuse → produce → use → repair/recycle → use again (sustainable)
- The goal is to eliminate waste and keep materials cycling through the economy
Example: A furniture company designs chairs that can be disassembled, with parts recycled into new furniture instead of ending up in landfill.
🔑 Key principles
- Design out waste — products are designed so nothing is wasted
- Keep materials in use — repair, refurbish, reuse, recycle
- Regenerate natural systems — return biological materials safely to nature
- Share and lease models — customers pay for use, not ownership
- Use renewable energy and sustainable materials
Circular models link directly to cradle to cradle (Topic 5.3.4) and CSR. If you studied those, you already understand the core idea!
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♻️ The Five Circular Business Models
You MUST know all five models by name. The May 2025 exam asked students to explain two circular business models and explain why a third was unsuitable — worth 6 marks total.
1. Circular supply model
Using renewable, recyclable or biodegradable inputs that can be kept in a continuous loop. The raw materials themselves are sustainable.
A clothing company uses only organic cotton and recycled polyester, so materials can be composted or re-recycled at end of life.
2. Resource recovery model
Recovering useful resources or energy from waste or discarded products. Turning 'waste' into valuable inputs.
A tyre company collects used tyres from car repair centres and extracts rubber and steel to use as raw materials for new products. The 'waste' becomes an input.
3. Product life extension model
Extending the useful life of products through repair, refurbishment, remanufacturing or repurposing. Products stay in use longer instead of being discarded.
A phone manufacturer offers repair services and trade-in programmes, refurbishing old phones for resale instead of customers throwing them away.
4. Sharing model
Multiple users share access to a product, maximising its use. Ownership is replaced by shared access.
Car-sharing services (e.g. Zipcar) allow many people to use the same car instead of each person owning one. A power drill used 15 minutes per year could be shared among neighbours.
Exam trap: In M25, students had to explain why the sharing model was NOT suitable for tyres. Answer: tyres wear out with use (safety risk), are size-specific to vehicles, and cannot be meaningfully shared between users. Be ready to explain when a model does NOT fit!
5. Product service system (PSS) model
Selling the service or function of a product rather than the product itself. The company retains ownership and the customer pays for use.
Rolls-Royce sells 'power by the hour' — airlines pay for engine flight hours rather than buying engines outright. Rolls-Royce maintains and replaces parts, keeping engines running efficiently.
The five models: (1) Circular supply, (2) Resource recovery, (3) Product life extension, (4) Sharing, (5) Product service system. For each, know the definition + an example + when it might NOT apply.
✅❌ Benefits and challenges
- ✅ Reduces waste and environmental damage
- ✅ Can lower long-term costs (reusing materials is cheaper)
- ✅ Attracts environmentally conscious customers
- ✅ Builds brand reputation and meets regulations
- ✅ Future-proofs the business as resources become scarcer
- ❌ High initial investment to redesign products and processes
- ❌ Requires new supply chains and partnerships
- ❌ Customers may not value sustainability enough to pay more
- ❌ Complex to implement across the whole business