An integrated circular business model typology based on consolidated Circular Economy principles

The paper aims to contribute to the ongoing theoretical discussion on the classification of circular business models by linking systematically circular economy principles with associated business model strategies. By doing so, it opens avenue for future research on the different mechanisms inherent to each circular business models and allows specifying distinctive tensions attached to their development and implementation. The outcomes facilitate research on circular business model innovation based on a common understanding of circular business models underlying principles. Starting from circular economy definitions and its core features, we clarify generic principles associated with the concept, based on existing schools of thought. Taking a micro-level perspective focusing on business model innovation, we highlight recognized definitions on sustainable business models and frame circular business models as a subset of sustainable business models. The analysis shows that there is a gap between the current understanding of CE (definitions and principles) and subsequent circular business model emerging theory. In order to reduce this gap, we formalize a set of guiding principles which bridge general CE theory with circular business models. Seven guiding principles are identified: regenerating loop, narrowing loop, slowing loop, intensifying loop, dematerializing loop, cascading loop and closing loop principles. We also recognize that beyond these guiding principles, circular business models can be classified based on (1) the business model orientation (material – product – service) (2) the focus taken by the business model on the product lifetime phases (pre-use, use, post-use), and lastly (3) its circular value dynamics (retain value, optimize value, recover value). The development of these criteria allows us to build an integrated typology using existing categorization attempts from 19 publications and consolidate circular business models into five distinctive categories. The integrated typology describes five generic circular business models: (1) clean loops business models, (2) short loop business models, (3) access loops business models, (4) cascading loops business models and (5) long loops business models. Each business model is described with a focus on its value proposition and associated business model components (value creation, value delivery, value capture). The outcome of the article (consolidated typology and associated criteria) allows us to consolidate the definition of circular business models as the rationale of how a company creates, deliver, retain, optimize, capture, and recover superior sustainable value by regenerating, closing, narrowing, slowing, intensifying, dematerializing and cascading resource loops within its value network, thus supporting its stakeholders without undermining the functioning of the biosphere or crossing any planetary boundaries. This definition reinforces the links between circular business models and sustainable business models (the former being a subset of the latter, but sharing a similar overall objective) while at the same time characterizing the specific principles guiding the implementation of circular economy at business level.