The Circular Economy Needs a New Language— The Language of Business
Many circular innovation projects fail not because of technology, but because of communication. Engineers, designers, and sustainability leaders discuss material cycles, user experience, and carbon footprints, but in the boardroom, margins, risk, and return are the primary considerations. As a result, good ideas get stuck in the concept phase.
Yet the circular economy offers exactly what companies need: preserving value once created and using it for as long as possible. To benefit from this value retention, however, managers need to rethink the role of their companies.
Value is retained whenever a product is repaired or, better yet, improved. This can happen digitally (e.g., loading new software features or enabling access to marketplaces) or physically (e.g., installing higher-quality components).
The problem: If circular products are defined solely by emissions reduction, a crucial dimension of business model innovation is overlooked.
For many companies, product take-back is one of the biggest hurdles. It’s expensive; product whereabouts are often unknown, and it’s unclear how to motivate customers to return them.
A system-level view can help. The take-back cost component may be easier for other players to handle—especially those whose core business is logistics.
Therefore, the business model cannot simply net costs and revenues after the fact; it must be part of the innovation process. To this end, we use business-model prototyping. By analyzing the ecosystem and developing solution options, we quantify— parallel to this—the potential impact on both the bottom line and the environmental footprint.
In doing so, we identify market participants who can take on specific tasks at a fraction of the cost, or for whom a waste stream becomes a valuable feedstock.
The outcome is not only a circular innovation but also a quantified approach that demonstrates market potential and return on investment.
And if the market does not appreciate sustainable products and is less and less willing to pay a premium for them, they may be valued as a luxury brand, as one of our customers does with a circular innovation in the field of personal care.
We can’t repeat the same mistakes made with highly technology-driven products – overloading with features that excite engineers but leave the market cold.
Our approach to the Circular Experience, which considers both the business perspective and the needs of stakeholders within the circular network, as well as the needs of users and thus the market, has consistently proven to lead to success.
For a circular product to succeed, the decisive question is: which partners in the market can turn friction points into advantages? Consider the typical value curve: investment in R&D, brand, and manufacturing builds value; once a product is sold, its value usually declines. For instance, in the case of cars, depreciation can reach approximately 50% within three years. The depreciation phase continues until the end of life—often with disposal costs. Circular business models aim to interrupt this curve and capture additional value.
There are familiar circular principles—the 10R strategies referenced by the EU and DIN standards. Products can be repaired, rented, or shared, and augmented with digital services, among many options.
Even more important than tactics is a strategic view: what role should the company play in a circular economy?
- Efficiency first: close internal loops (e.g., return production scrap to production).
- Smart procurement: unlock secondary sources, such as urban mining or the take-back of used devices, to access high-value components like computer chips.
- Ecosystem orchestrator: enable others’ models—take-back, refurbishment, sharing—and open new revenue streams across the extended network and global markets. Manufacturers can monetize services, supply parts, or process materials; the avenues are numerous.
The key is to identify partners for whom the system’s “hard parts” are genuine advantages rather than hurdles—take-back logistics, repair/refurbishment, and product upgrades, to name a few.
A note on recycling: it often destroys the most value; treat it as a last resort when higher-value options are exhausted.
Framed this way, circular systems also reduce exposure to volatile raw-materials markets—clear risk mitigation. A medical-technology manufacturer, for instance, deliberately takes back specific devices. Benefits include:
- Brand protection: qualified refurbishment prevents harm and reputational damage from substandard third-party repairs.
- Supply security: durable chips can be reused in new devices, strengthening supply-chain resilience.
- New segments: selling warrantied refurbished devices opens an entry-level customer base that can later trade up to premium.
This is the essence of our Circular Experience: it aligns the interests, needs, and agency of all stakeholders (including the environment) around four principles:
- User Experience: products must be sustainable and desirable.
- Business Needs: circularity has to pay off—for everyone in the loop.
- Systemic Thinking: loops live in the ecosystem, not just in the product.
- Impact by Design: sustainability is integral to value creation, not an add-on.
These principles pay off. Philips’ pay-per-lux model shifted lighting from products to service: the company retains ownership, handles maintenance and take-back, and benefits from durable, repairable design.
Schneider Electric applies modular, deconstructable systems in power distribution; targeted take-back and second-life concepts extend product life and reduce reliance on primary raw materials—yielding lower material costs, more resilient supply chains, and higher customer loyalty.
The circular economy is not a green fig leaf. It is a strategic instrument for securing the future.
Michael Leitl, Executive Director
Another compelling example is the collaboration between Freitag, Covestro, and Freudenberg Performance Materials on a fully circular truck tarpaulin. Based on thermoplastic polyurethane (TPU), it’s PVC-free, durable, repairable, and—crucially—recyclable as a single material. After use, it can be returned and processed into new tarpaulins, closing the loop while reducing disposal costs, material dependency, and unlocking new value from used products.
Closing Words
The circular economy is not a green fig leaf. It is a strategic instrument for securing the future. However, for that to happen, their advocates need to understand how CFOs think – and how to translate circular ideas into compelling business cases. Only then will sustainability become a competitive advantage.
Michael Leitl
Circular Strategies
Business Model Development
AI Concepting
