Finding business ideas that are both sustainable and profitable can be challenging, but with a systematic approach you can increase your chances of finding an idea that both responds to the climate crisis and is financially attractive. As legislation and consumer behavior are rapidly shifting towards sustainability, a window of time opens up for the companies and entrepreneurs who can deliver sustainable solutions in an innovative way.
Here we go through a structured method for creating circular business models.
1. Start by analyzing profitable, but not yet disrupted industries
The first step is to identify profitable industries where circular offers are still uncommon. Traditional, resource-intensive industries such as furniture, clothing, technology and building materials are examples of areas with great potential for circular business models. Starting from a stable, already profitable industry increases the chances of a successful transition to a circular economy.
2. Focus on high margin products or share underutilized resources
Find products or services with high margins, which often also mean a higher willingness to pay from the customer. Another possibility is to focus on resources or products that are underutilized – a cornerstone of the sharing economy. By offering a model for sharing or renting these products, you can maximize the use of resources, while reducing the need to produce new ones.
3. Choose a circular business model – match with one of the five principles
Once you have found a product or service suitable for circularity, choose a suitable circular business model from the five principles:
- Rental – The customer uses the product for a certain period of time and then returns it.
- Sharing – Multiple users share the same product or service to maximize usage.
- Services instead of products – Sell the product as a service, for example leasing or subscription.
- Recycling – Products and materials are recycled and reused.
- Biological circularity – Products are made from materials that can be returned to nature.
4. Combine multiple business model principles for maximum value
A strong circular business idea can grow even more by combining several of the above business models. For example, you can offer a rental model where the customer also gets access to repair and maintenance, which extends the life of the product. Another strategy is to combine circular economy with new sales, but to specifically design the new products so that they can be reused or recycled in the next step.
Also consider whether you can collect and report sustainability data from your circular model, for example reduced carbon dioxide emissions or saved resources. This data can have value in itself and potentially be sold to other companies or actors who need environmental data or want to collaborate on sustainability. In this way, data can become an additional revenue stream in your business model.
5. Identify a clear target group that is ready to act
To ensure the success of your circular business model, it is important to define a target group that is both aware of sustainability issues and willing to act. Focus on a target group that has shown interest in sustainable solutions and is prepared to invest in them. A well-chosen customer segment makes the launch easier and increases the possibilities for rapid growth.
Example: Young consumers, such as Millennials and Gen Z, are often more likely to spend money on sustainable products and services. This makes them an attractive target group for circular offers.
6. Get paid the right way – Think about the payment model and communication
The choice of payment model can affect how attractive your service or product is perceived by the customer. Consider which payment method best suits your business model and target group. A rental service can, for example, be based on a subscription, an insurance-like solution where maintenance is included, or a deposit system where the customer gets money back upon return. At the same time, it is important to think about how the costs are communicated – using familiar terms and concepts can help the customer understand the offer and feel comfortable with the arrangement.
Example: If you offer a furniture rental service, a monthly subscription fee can include costs for delivery, maintenance and collection, creating a one-stop solution. By communicating this solution as a “furniture subscription”, the customer can quickly understand the benefit without having to fundamentally change their behavior.
6. Be inspired by circular offers in other industries and apply them in new areas
Be sure to stay up to date on successful circular business models in various industries and consider whether their approach can be applied to your area. If a business model, such as reuse or sharing, works well for a certain type of product, it can often be adapted and applied in completely different contexts.
Example: For example, the fashion industry has introduced clothing rental services where customers rent garments for a short period. This concept may inspire other industries, such as consumer electronics or sports equipment, to offer rental services for rarely used products.
Why the time is right for new circular ideas
A structured approach to finding circular business ideas can lead to new and profitable opportunities. By following these steps, business owners and entrepreneurs can develop ideas that are both financially sustainable and meet consumers’ demands for environmental friendliness. In today’s climate where both laws and consumer behavior change rapidly, a window of time opens up for those who dare to be out early. As the circular economy grows, those companies that already have established models will have an edge.
Creating a profitable business model with circularity at the center is both a step towards financial success and a contribution to a sustainable future. The time is ripe for circular business ideas – so why not start today?
