Circular Economy regulation is pushing the appearance of circular business models. But what are these business models and which companies apply them. In this podcast accounting senior lecturer Heli Kortesalmi from Haaga-Helia Finland, Economics professor Oscar Montes from University of Alcala, Spain and Accounting assistant professors Loukia Evripidou and Alexios Kythreotis from European University in Cyprus discuss about the classification of circular economy business models.
Accounting in Circular Economy and Sustainability (ACES) project is funded by European Union Erasmus+ funding. The overall aim of the ACES project is to increase business leaders’, financial management accountants’, investors’ and policy-makers´ knowledge of current Circular economy accounting methods. This helps them to assess what to apply in their business, what metrics to be used to analyse investment potential and how to ensure the standardization of concepts in Circular Economy business models and accounting and Circular economy and managerial reporting. Please read more here: https://www.erasmusaces.eu/.
Interviewer 1 [00:00:05]: This is Haaga-Helia’s ACES Project’s podcast and today we talk about circular economy business models. I’m senior lecturer in accounting from Haaga-Helia, my name is Heli Kortesalmi, and I have here guests from the European University of Cyprus and University of Alcala, Spain. Welcome to Finland.
Speaker 1 [00:00:26]: Thank you for having us. My name is Loukia Evripidou from European University Cyprus. I’m an assistant professor and also here is my colleague.
Speaker 2 [00:00:35]: Hello to all. My name is Alexios Kythreotis. I’m from Cyprus as well, European University Cyprus, and I’m assistant professor in financial accounting.
Speaker 3 [00:00:46]: Hi my name is Oscar Montes. I come from Spain, the University of Alcala and I’m also a lecturer in the Department of Economics and Business Administration.
Interviewer 1 [00:00:55]: So, lovely to have you here. Welcome.
Speaker 3 [00:00:58]: Thanks.
Speaker 2 [00:00:59]: Thanks.
Interviewer 1 [00:01:01]: So, we’re all gathered up here to Finland, Helsinki, to talk about circular business and accounting, but what are the circular business models? What do you think Lugia?
Speaker 1 [00:01:11]: Due to the changes in the climate, greenhouse emission, waste disposal, and all this pollution and increasing consumption, there was a need to change the way that we do business. We need to move from linear economy to a more circular one where basically it involves reuse, leasing, repairing, refurbishing existing material products so as to extend the lifecycle of these products.
Speaker 2 [00:01:40]: In simple terms, Lugia, linear economy basically is take, make, and waste. So, the circular economy is exactly the opposite. So, how can we use less resources? How can we use resources for longer? And how can we use resources again and again? So, this is in simple terms the concept of circular economy.
Speaker 3 [00:02:10]: Yes, in fact there’s a growing body of literature emerging investigating this notion about circular business models and namely circular business models innovation. In fact, some authors have come to increase awareness about that circularity doesn’t rely only in recycling idea. So, we need to take into consideration different phases of the product in general, perhaps the production process. Therefore, thinking about this idea of circular business models, some authors have classified them or suggested that we can talk about recycling idea. This is the cycling within the system through the reuse, remanufacturing, refurbishing, or even recycling. But we can also think about, for example, extending. That means thinking about the long lasting in terms of the design, marketing, maintenance in the use phase, but also in terms of intensifying. For example, through the sharing economy solutions, so it’s public transport. Or even the idea of dematerializing. This means thinking about in the product utility provided without hardware or even substituting this stuff by service and software solutions.
Interviewer 1 [00:03:31]: Thank you. Really good definitions on this newish topic. And also if you think about the classifications, different organizations classify it differently. Some consulting companies have their own categories, but basically they all fall into those four categories that you mentioned. So, how do companies… do you have some company examples how they apply circular economy?
Speaker 1 [00:04:00]: We see many companies nowadays moving to a more circular business model, and we expect this trend to grow over the forthcoming periods. Many well-known brands utilize circular economy in their full production process or in part of their production process. For example, IKEA has a buyback scheme where it takes back old furniture, gives voucher for new one, not only furniture, but also other products of IKEA. Burger King uses reusable fast food packaging. The same stand for McDonald’s and Starbucks with the cups, they use the cups. Puma and Adidas use the recycled material for products, clothing, and shoes and everything. So, we see there is a trend moving towards circular economy.
Interviewer 1 [00:04:53]: Yeah, there is definitely a trend. And did you say earlier that you could even like rent sneakers from Adidas?
Speaker 1 [00:05:01]: Yes, Adidas has this notion that we practically don’t sell shoes. We rent the shoes for a particular period of time until the user…the consumer doesn’t want it. They bring it back so that we can reuse it in a new shoe for a new customer.
Interviewer 1 [00:05:18]: Fantastic.
Speaker 2 [00:05:19]: So basically, this is one way to implement the circular economy to expand the product life of a product by creating more than one product life cycles.
Speaker 3 [00:05:33]: Yeah, this is interesting, trying to shift from sectors or provide more examples. This is interesting, but like, for example, the technological industry. Think about Dell, but especially Apple, they have a mode, change their day-to-day activities in terms of trading in or buying back programs to customers for their product. That means if you have an old mobile you can really change it. But also thinking about in the food industries. For food companies like Danone or Nestle, they have implemented circular business models by reducing food waste in their operations using renewable energy sources or even designing packages for recyclability. Perhaps given that in the south part, I want to highlight a Madrid-based company called Ecoalf, which is a fashion brand that uses recycled materials to make its products, including not only clothing, but also shoes and all kinds of accessories. In fact, this company collects materials such as fishing nets or plastic bottles from the oceans and repurposes them into creating new products.
Interviewer 1 [00:06:41]: Wow. Very wise use of waste. Definitely. And I see that sometimes companies they might have a circular business model in use already, but they haven’t recognized it yet. So, we might have this sort of possibilities coming up as well. Like in Finland, we have this Valtra case, but now, of course, they know that they are very circular and their business case is good.
Speaker 2 [00:07:08]: Yes. So, there are a lot of examples. This is one of the aims that we are participating in this European project, ACES. So, if you want to know more about our results and probably examples and the underlying argument on how companies are integrating this concept of circular economy within their day-to-day activities, please visit us at our website, which is erasmusaces.eu.
Interviewer 1 [00:07:36]: Thank you. Great. Thank you for talking. It was lovely to have this discussion.
Speaker 2 [00:07:42]: Thank you.
Speaker 1 [00:07:42]: Thank you for having us.
Interviewer 1 [00:07:44]: Yeah. Thank you.