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Über dieses Buch

This book explores the need to develop business strategies, organise and fund transformation projects and manage the transformation programme in order to further a circular economy. Circular Business Models outlines sustainable business models that can be used by companies to move transformation forward on a large scale. In addition to business models the book will cover and discuss a number of other factors necessary for a successful transformation, such as business and innovation strategy, entrepreneurship and change management. Including original interviews with circular economy practitioners, this book will be applicable to industries as diverse as manufacturing, food processing, transportation and mechanical engineering. Addressing the different challenges that meet circular economy visionaries, it outlines strategies and business models needed to gain momentum in these different sectors.



1. Mankind vs. Reality

Efforts to transform production and distribution to sustainable systems have started recently. Larsson argues that experts and politicians have not properly understood the magnitude of the challenges or the pressing time frame that governments and companies need to adhere to in order to succeed. Among the alternatives that are discussed, some are realistic and others, at close analysis, seem impossible. It will be the goal of the book to identify possible and realistic alternatives for progress and expose ones that are less realistic or even impossible. This chapter also relates aspects of decision theory and the theory on organization man and argues that experts need to better understand the tendency among humans to sometimes produce flawed arguments and make decisions without taking into account all the relevant information.
Mats Larsson

Business and Organizational Aspects of Circular Economies


2. Development as a Process of Organization

The chapter argues that the development of society at large, and the development of business and industry specifically, could be described as organizational processes. Every innovation, in order for it to contribute to the efficiency of production and distribution, gives rise to specialized companies that become part of supply chains and industries. Present-day society is more highly organized than any previous society in history and the organization processes that have formed production and distribution systems have been going on for more than one century. Transforming this highly organized society to circular business models will involve development in a large number of areas and it is not likely to happen automatically.
Mats Larsson

3. The Author’s Journey

Over the past thirty years, Larsson has engaged in organizational research and business and organization development as a consultant. For the better part of the past two decades, he has worked with issues related to the transformation of transport systems to renewable fuels and other attempts at implementing clean technologies. This chapter also contains a review of literature pertaining to the development of a circular economy, the peak of production of key resources, and the implementation of sustainable technologies and systems.
Mats Larsson

4. The Circular Economy and Business Challenges

Larsson argues that the transformation to a circular economy will involve the development of new industries with a large number of new companies in combination with the transformation of existing businesses and supply chains. New technologies tend to come at a higher cost compared to existing products and services. The higher cost of products and services with circular features is likely to limit the speed of transformation. It will be a challenge in many areas to sell circular products to large numbers of customers belonging to the category early majority, which is a prerequisite for volume growth. Slow growth will mean that prices of products produced within the circular economy remain high, which in its turn will limit the speed of transformation.
Mats Larsson

5. Complexity: The Tightly Woven Fabric of Society

The present society is not only well organized, organizations rely on people with highly specialized competencies that utilize highly specialized systems and machinery in order to achieve high levels of productivity. Research done by Tainter indicates that with increasing levels of specialization, the cost of administration in a society increases. According to Tainter, the increasing resource consumption caused by high levels of specialization has caused the collapse of advanced societies through history. This is one aspect of the challenge facing humanity as people will attempt to transform production and distribution flows on a large scale. The management of the transformation will be more resource consuming than experts and decision makers have yet realized.
Mats Larsson

6. Could Resource Shortages Cause Problems?

In this chapter the idea is put forward that resource shortages are likely to cause severe problems and hamper economic growth. When shortfalls of resources start to appear, it will take several years to initiate large-scale transformation efforts, a delay that is likely to cause severe disruptions to the global economy. Investments are focused on making the linear economy even more efficient and competitive and comparatively small investments are made in the development of the circular economy. The transformation will have to be approached through a number of successive steps that will develop increasingly complex and competitive businesses, supply chains, and entire industrial sectors. Different sectors are going to go through different sets of steps. In order to drive this development forward, there will be a need for large-scale investments in the new systems.
Mats Larsson

7. Multiple-Helix Collaboration for the Development of a Circular Economy

In order to drive the transformation forward, different types of organizations as well as individuals will need to identify and take on specialized roles. Based on the idea of a multiple-helix innovation system, this chapter identifies the roles that need to be taken by governments, universities, private companies, non-government organizations (NGOs), and civic society. Building customer demand will be critical to the development. It is likely that the government, companies, public sector procurement organizations, and NGOs will have to take on leading roles initially, as it will be more demanding in terms of resources to spread information to individual households regarding the changes in lifestyles and consumption practices that are going to become necessary in order to build a circular economy.
Mats Larsson

8. Managing Change

The chapter discusses the principles developed within the discipline of change management. The methods have been developed by large firms, their consultants, and researchers, in order to make sure that large transformation projects meet the goals of time, budget, and results. Among the aspects discussed are the psychology of change, where organizations often lose morale as employees realize the magnitude and complexity of the tasks facing them. Resource consumption is also likely to increase as the development of circular systems creates a set of new systems that are going to work in parallel with existing linear ones. The need to run two sets of systems will remain throughout the transformation. In order to realize savings, linear systems need to be dismantled as soon as possible.
Mats Larsson

Challenges by Industry and Business Sector


9. Local Production and Distribution Systems

In the following chapters, the transformation of particular sectors of society will be discussed. Each sector has a unique set of characteristics, and the opportunity to develop circular business models differs between sectors. The path of transformation in each sector will go through a number of steps that are likely to be unique. One of the most important steps in the development of circular models will be the transformation to local production and distribution systems. Transportation increases the need for resources in a number of different ways. In order to drive transformation forward, customers will have to change their preferences and select products and services based on a new set of values. Without large numbers of customers that demand products and services with circular features, it is unlikely that the transformation will take off.
Mats Larsson

10. Sharing and Extended Use

The implementation of sharing models has been described as a very promising step in the development of a circular economy. The successes of Airbnb and Ûber are often seen as examples of a rapidly expanding new sector. There may, however, be areas that show more promise for circular models than others. Sharing models are likely to grow faster in areas where the value of sharing is high, where use is infrequent, or where it becomes possible to utilize locations with a high flow of people that could pick up and hand back borrowed items. It is a further opportunity to extend the use of resources so that each item can be used for a longer period of time before it is sent to recycling or re-manufacturing.
Mats Larsson

11. Standardization and Modularization

The construction of products using standardized components or exchangeable modules represents a further opportunity that has come into focus in the literature on the circular economy. Standardization and modularization create opportunities to more easily repair products and repairs become less expensive. This is important in order to reimplement practices of repairing, instead of the present extensive practice of replacing items as they are damaged or break down. The practices have been used for a long time, providing advantages to the companies that have applied them. In order to expand the application of standardization and modularization, the practice needs to become a focal alternative for business development in a way similar to the way that Lean Production has been spread across the world.
Mats Larsson

12. Recycling and Upcycling

In some industries, such as steel and aluminium, materials recycling is applied to a large extent. There are also a number of countries where waste sorting has become the preferred practice. There are still substantial unused opportunities to increase waste sorting and recycling in many countries and industries. The practice of upcycling is intended to reutilize a larger share of the value that has been added to products through production and distribution. There are already examples of companies that apply principles of upcycling. Opportunities for upcycling are closely linked to customer choices. It turns out to be more difficult to develop profitable business models for the upcycling of low-priced products, compared to high-value items.
Mats Larsson

13. Biologically Based Materials

Plastics are increasingly used for all kinds of products. As the world is facing an impending decline in oil production, there is a need to rapidly adopt new materials on a large scale, based on renewable feedstocks. The process of adoption is, however, at an early stage in its development. The volumes of biologically based materials that are available are limited and the volumes of materials that need to be replaced are very large. Despite the urgent need to replace petroleum-based plastics and other materials, many companies that develop new ones find it difficult to find pilot customers. New materials tend to be more expensive and large investments often need to be made in processes in order to utilize the new and innovative alternatives.
Mats Larsson

14. Transportation Systems, Renewable Fuels, and Energy Efficiency

A circular economy does not generate emissions or leave behind waste that needs to be taken care of by future generations. Petroleum-based transportation systems generate substantial emissions, and oil seems to be a raw material that is imminently threatened by reduced production, following the event of Peak Oil. Efforts to build new transportation systems have been going on for decades, but systems are still at an early point in their development. Larsson argues that there is a need to view the transformation from a systems perspective, identifying all the relevant aspects of an implementation as decisions are made. Availability of raw materials for fuel production is one such aspect, as are the investments that will become necessary in order to build new systems on a large scale.
Mats Larsson

15. Construction, Infrastructure, and Digital Technologies

In this chapter, the challenges of transforming the construction industry and the use of digital technologies are discussed. Construction is the human activity that consumes the largest resources overall, and buildings and infrastructure are normally used for half a century or more. The need to transform the economy to circular flows is pressing, and the question is how much of the resources that should be dedicated to transformation activities with long lead times. Digital technologies need to serve functions as enablers of communication and improve the efficiency of administration, production, and distribution in the emerging supply chains of the circular economy. The main aspect that is likely to determine the speed of transformation is likely to be the change in customer preferences, rather than the use of digital technologies.
Mats Larsson

16. Life-Sustaining Resources and Technologies

A number of systems contribute to sustaining life in modern societies. Among them are health care, water supply, waste management, communication systems, and transport systems for goods and individuals. These systems depend on regular and timely supplies of consumables, maintenance and repair activities, and the ability of workers to perform their daily jobs. Resource shortages will put the operability of these systems at risk. In the case of a declining supply of oil, there is a risk that consumables made of plastics cannot be produced in the volumes needed, that maintenance technicians or spare parts do not arrive in order to perform repairs, and that employees cannot travel to work or that supplies of components do not arrive at production facilities in time to keep production running.
Mats Larsson

17. Financial Innovations

Throughout history, financial innovations have facilitated industrial and economic development. After the First World War, the Bretton Woods system was implemented, consisting of fixed exchange rates and a reliance on the gold standard. Among important financial developments to facilitate international cooperation, counterpart funding may be mentioned and micro-financing and complementary currency systems have arisen in different parts of the world as needs have driven financial innovators along innovative paths. Recently cryptocurrencies and crowd funding have seen the light of day. Larsson argues that, in order to drive the development of circular economic systems forward, there will be a need for financial innovations, especially at the level of the overall economy. With reduced supplies of resources, it is likely to become impossible to fuel ongoing economic growth, which will create a demand for an entirely new economic system.
Mats Larsson

18. General-Purpose Technologies as the Basis for Transformation

Larsson argues that general-purpose technologies have played an important part in the development of the present affluent society. Technologies tend to be expensive as they are invented, but decrease in terms of production cost and price. Over time, technologies gradually decline in cost and price so that they can be used for a multitude of purposes. In order to transform business to circular flows, the technologies and business models have to give rise to a number of general-purpose technologies that help circular offerings permeate the entire economy. It is also discussed that organizations sometimes give rise to unexpected and seemingly irrational patterns of behaviour and decision making, a fact that may make it difficult for decision makers to make rational decisions from the perspective of the society overall.
Mats Larsson

A Way Forward


19. Risks and Logical Fallacies

This chapter summarizes some of the conclusions. Despite a widespread belief that development will continue along the same path as in the past, the society is vulnerable. There is a high risk that oil production soon will start to decline, with shortfalls in one of the economy’s most important resources as the main consequence. Shortages are likely to cause economic disruptions. Experts and decision makers have failed to recognize the scale and the systemic aspects of the transformation. Due to the pressing timeframe, it is highly unlikely that the market automatically will allocate resources to the transformation activities that need to be prioritized. It is important to start preparations, but at present, little attention is paid to some of the most important issues.
Mats Larsson

20. Planning the Way Forward and Reality Check

In order to reduce the disruptive effects of an impending shortfall of resources, countries need to start preparations. However, due to the complexity of the issues and the lack of debate, it is unlikely that decision makers will implement strong measures ahead of adverse developments. Most probably, experts and decision makers will continue to avoid viewing the entire picture for as long as possible. Revisiting some of the key aspects, there are strong indications that the situation demands urgent attention. The increasing complexity of modern society makes transformation more complex; there are a few short-term incentives for people to start the change themselves, people lack experience of resource shortages, and it is difficult to see the roles of different types of player in the transformation.
Mats Larsson

21. Paradigms, at Last

There are at least three different paradigms that to a significant extent control people’s thinking regarding the transformation. The paradigm that guides economic development is based on the idea of the market as the key tool for resource allocation. This paradigm tends to exclude aspects of resource shortages. The paradigm guiding thinking on the circular economy is based on environmental knowledge, and the one dealing with issues related to oil production is often referred to as Peak Oil. The two latter paradigms tend to exclude the aspect of investments. All of the paradigms provide important insights into the challenges of the future, but all also tend to exclude important aspects that are necessary in order to build up a complete picture.
Mats Larsson


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