On the 13th of May the Get Business masterclass about finance took place. CE Booster used this opportunity to ask participating startups about their experiences with circular entrepreneuship and scaling up their businesses. What is the current state of affairs for the startups, which development did they go through, and what do they still aim to learn? Interviewees: Maarten Willers from Urban Mining Corp and Francien Eppens from Shop&Drop.
Challenges for circular entrepreneurs
Both Urban Mining Corp and Shop & Drop create impact on the circular economy by recycling waste in the areas in which they operate. Urban Mining Corp develops unique and patented MDS separation technology. This MDS (Magnetic Density Separation) technology makes use of fluids and specially designed magnets, and can be applied in the field of recycling (urban mining), mineral processing (mining) as well as other application areas that demand high-reliable sorting in a profitable way. Urban Mining Corp has the ambition to achieve the highest recycling percentage out of metals and plastics as possible. The mission of Shop&Drop is to collect more disposed consumer goods in order to re-use and recycle them, thereby connecting ‘shopping’ (buying new stuff) to ‘dropping’ (waste). This connection offers a surplus for consumer, manufacturer and retailer when it comes to the environment. Both startups try to find their way in the circular landscape, however, each of them is confronted with other challenges in scaling up their businesses.
Maarten explains what the biggest challenge is for Urban Mining Corp: “It is now time to not only further develop our technology, but to sell it. We are involved in longterm research trajectories that are rather expensive. We now have to become an operational company. That is one of the reasons we are participating in the CE Booster programme.”
Francien describes her particular challenge as follows:“Our main challenge is to bring retailers, waste processors and transport operators to the same table and to convince them of the economic value we can create for each of them with Shop&Drop. It takes time to learn to speak the language that they all speak, as well as to connect sustainability to sales.”
Hendrik Halbe (director SMO) likes to add to this that there is a difference between working in your company and working on your company: “A lot of entrepreneurs stick to all kind of tasks that take place within the contex of their company. However, if you want to make progress, there has to be a good balance between working in and working on your company. In other words, entrepreneurship – whether it may be circular or ‘regular’ – is hard work, taking risks and sometimes a little bit of luck.”
Benefiting from the CE Booster network and the Accountability Group Sessions
The masterclasses of Get Business support the startups in the development of their enterprises. Acccording to Francien, her business benefits a lot from the Accountability Group Sessions: “The Accountability Group Sessions, in which our focus plans are discussed, are very practical because we have to meet our own deadlines and to rapport about this to each other. In this way the sessions serve as a driving force to make you achieve your goals.” Maarten considers the CE Booster network as a great advantage. For example, Urban Mining Corp has benefitted from the connection with the RVO (Netherlands Enterprise Agency) to get the right funding, which has supported the company in scaling up. Although the startups do operate in totally different business areas, they learn a lot from each others experiences. For instance, startups in the retail sector are confronted with sales targets everyday, while other startups only have to buy their product once in three months to be profitable. According to Francien it is helpful to be in the programme with other circular startups, because you work and discuss in small groups and learn from each others experiences and challenges.
An economic or circular motive?
To conclude: if Maarten and Francien should give other starting circular entrepreneurs a valuable advice, what would it be? Maarten emphasizes that being involved in circular business is a very idealistic and humble ambition, but that it should be profitable in the end. Maarten: “I think that economic motives should count in the first place, you have to add more value than competitors if you want to be successful. But the good news is that it is very rewarding to be active in the recycling industry, since it is a growing market.” According to Francien, in the circular economy it comes down to good cooperation between different actors: “Cooperation in the entire chain is key, together you have to boost the transition from entrepreneurship to circular entrepreneurship. The main difference with the regular economy is that one has to stimulate long term transitions in the circular economy. This also means that the big profits will achieved on a more longterm basis.”
CE Booster is an initiative of SMO and Het Groene Brein. The aim of this collaboration is to make a faster transit to a circular economy. CE Booster is part of Nederland Circulair. Learn more about programmes.
The opportunities of circular business models
Increasingly, companies on the national and international level invest in circular products. These companies recognize that by circular entrepreneurship the value of products is preserved on the highest level and for the longest period of time possible. What can we learn from their experiences, and what are the options to get the right support for existing companies that want to contribute to the ‘Economy of Tomorrow’?
The paradox of the linear economy
On a global level we have become advanced in making money in the linear economy. Raw materials are extracted from the planet and processed in semi-finished products. Next they are distributed via a diversity of channels before they reach the consumer. The common theme running through this process is that in each stage value is added to the products. The main paradox of this process however, is that after the products are being used their value diminishes in a very fast pace: most products will be thrown away by their users. Indeed, most products do not have a sustainable design, which makes it attractive to throw the products away instead of to fix or re-use them. First we add value during the entire production process, subsequently we destroy it again. This results in the paradox of our value-added economy, which we refer to here as the ‘Value Hill’.
Avoiding the destruction of value
The essence of a circular business model is to design products and services in such a way that they can stay on the top of the Value Hill for a long period of time. This will result in less usage and waste of raw materials, which decreases the main downside of the Value Hill. This new way of thinking will urge companies to choose for multiple value creation in financial, ecological as well as social categories.
Circular business models can be roughly divided in the next three categories of the Value Hill:
‘Circular Design’ – to design products in such a way that value is preserved for a long(er) period of time;
‘Optimal Use’ – to extend the lifecycle of products as well as to make better use of products during their lifecycle;
‘Value Recovery’ – to create value by the refurbishment of products when their lifecycle has expired, or at least to re-use the raw materials and components of the product.
Within this model products are designed for a long-lasting lifecycle. An important part of the design is that products can be maintained, fixed, re-used or recycled with the lowest costs possible. That is, in the circular design process designers keep track of what happens with the product once it is at the other side of the Value Hill. In this phase, choices for materials and resources are made based on standards such as (infinite) recyclability, biodegradability and low material intensity.
An example of circular design concerns the Fairphone. When a component of the Fairphone is broke or the phone needs an upgrade, its user is able to deconstruct the phone him or herself. In this way the phone will not be thrown away whenever a component has to be replaced. The various components of the phone are sold in the webshop of Fairphone. By this means the company makes a profit out of the extension of the Fairphone’s lifecyle.
Optimal use business models are centered around product optimalisation during the lifecycle of products. This strategy is based on a shift from ownership towards utilization: ‘product-as-a-service’. The manufacturer remains the owner of the products and delivers his or her services in order to extend the lifecycle of those products. Consequently, the manufacturer makes a profit during the entire lifecyle of the product and remains to be the owner of the valuable resources the product consists of. This encourages enterprises to develop products with a long(er) lifecycle. It is not about the initial sales, but about the lifecycle of products.
This business model gives entrepreneurs a lot of opportunities. Schiphol Airport, for example, buys light (a service) instead of lamps (a product) from Philips. Since Philips has to make the switch from lamp to light, the company takes advantage of the development of lamps that do not only have a long lifecycle, but can also be re-used with preservation of their high value after replacement. This also stimulates stronger and longterm customer relationships.
Other circular business models that belong to his categorie encompass ‘Product Life Extension’, ‘Sharing Platforms’ (such as Peerby and Snappcar) and ‘Product as a Service’. These models require additional services and technologies that can trace and optimalise the usage of products. A revelatory example is the Wash-App of Bundles: the app gives an overview of smart use of energy, water and laundry detergent and suggestions for optimal use of the laundry machine in order to stimulate sustainable behavior, and to extend the lifecycle of laundry manchines.
Currently, only a very small part of the existing products do have a circular design. Enterprises in the category of ‘Value Recovery’ anticipate on this by focussing on the utilization of discarded products or their components and resources. Consequently, profit is created by the preservation of value in what now is labeled as waste on the other side of the Value Hill.
Coherence and cooperation
Although the developments in the above described categories are discussed seperately, it needs emphasis here that in the circular economy they are closely interrelated. Indeed, usage of only one of the business models does not result in a circular enterprise. For example, leasing a product is not circular if the company that owns the product does not take responsibility for the product when the lifecylce has terminated. In an ideal situation, company A should make products with a long lifecycle, company B should develop services that extend their lifecycle and company C – a recycling company – should process the discarded products into raw materials again.
For entrepreneurs it is essential to know where on the Value Hill the core of their company is located at and which partners are necessary to close the chain. Subsequently, through cooperation between parties within and without the chain new links will arise. It is a noticable situation that new enterprises and initiatives develop products or services that are beneficial for the circular economy. They take the chances that remain untouched by the established order of companies. Consider the companies that gather plastic waste to process them into new products like WASTED, based in Amsterdam North. This newcomer started in the Recovery-model, but now develops products that have a long lifcycle and reinforce the local economy.
Boosting the circular economy
Often it is said that the transition to a circular economy is a process, a slow tranformation of the system. Although that might be true, it should not be a reason for entrepreneurs to simply sit back. Indeed, the above described developments offer entrepreneurs new strategic opportunities. However, pioneering startups in sustainable business have to tackle a lot of obstacles on top of the obstacles they are faced with as startups. Experienced organizations and hubs that are dedicated to the development of sustainable startups might help to make the transit to a circular economy faster. One of these initiatives is the CE Booster that is initiated by ‘Het Groene Brein’, SMO and the Dutch Centres for Entrepreneurship. Their programmes to boost circular business are targeted at three groups. The first target group consists of (future) entrepreneurs who have a great idea but are struggling to turn their circular idea in valuable business. The second target group consists of entrepreneurs who have already made some flying hours but still face challenges to go from business model to good business results. The third targeted group consists of entrepreneurs that already have set up their startup but do not have the right connections or tools to really scale up their circular business. All these programmes are aimed at creating maximum impact and supporting the circular entrepreneurs to get good business results. For circular hubs and entrepreneurs, or entrepreneurs who have the ambition to make their business more circular, CE Booster offers a helping hand with their CE Support desk.
On the journey in becoming a circular enterprise, every entrepreneur should ask him or herself the next strategic questions:
- where are we located on the Value Hill?
- which category of circular business models does our company belong to?
- which parties from other parts of the Value Hill are we connected to, and what does our connection looks like?
- which position should we adopt on the Value Hill?
- which business model is relevant for us?
- what is the impact of this position on other parties on the Value Hill?
The opportunities of the Value Hill offers entrepreneurs orientation and inspiration to contribute to the circular economy with their enterprises. By seriously overthink and respond to the strategic questions above, they can position themselves, (re)develop their products and set up partnerships in order to achieve promising business results.
This blog is based on an article of ‘Nederland Circulair!’ written by Jeroen Hinfelaar, Elisa Achterberg, Johnny Kerkhof, Antoine Heideveld and Bart Ahsmann. ‘Nederland Circulair!’ is a cooperation between MVO Nederland, De Groene Zaak, Het Groene Brein, Circle Economy, Sustainable Finance Lab and CLICKNL|DESIGN, which is founded to share insights and experiences and to inspire and support companies with their first steps towards circular entrepreneurship. ‘Nederland Circular!’ is supported by the Dutch Ministry of Infrastructure & Environment.
TU Delft (Products that Last, 2014), Accenture (Circular Advantage, 2014), Ellen MacArthur (Towards the Circular Economy, 2013) and Jan Jonker (Radboud Universiteit, 2013, 2014 & 2015).