We bring investments into the circular economy closer by presenting volume 2: CREATE a financeable circular business model in 10 steps. As an economic viable business model does not necessarily entail a financeable business model, we hereby propose 10 practical steps for circular businesses to attract financiers.
1. MASTER | 2. CREATE | 3. EMPOWER
Just starting your business’ journey to circularity? Read the volume 1 in the series:
1. MASTER Circular Business with the Value Hill
Companies can adopt various circular business models. The Value Hill provides companies with a tool to position their business in a circular context and to develop future strategies for doing business in a circular economy.
2. CREATE a financeable circular business
The circular economy is here to stay! Governments, companies and consumers are recognising more and more the economic advantages of circular strategies, in addition to their environmental benefits. New end-of-life solutions, chain collaboration and circular design principles are becoming inherently part of future-proof business models.
However, when deciding on which circular strategies to implement the financeability of a business is also affected. For example, product-service combinations are seen as a promising, future earning model, but they currently encounter considerable funding challenges. Challenges such as, securing stable cash flows, reducing risks and matching investments with payback periods, are important to address. Additionally, evolving business strategies including, changing value propositions and chain collaborations should be topics on the agenda. Enabling the transition towards these new business models is key to successfully implementing circular business strategies and future proofing our economy.
For Nederland Circulair!, the Sustainable Finance Lab partnered with Circle Economy, circular business managers and financiers to identify ways to fund circular business strategies, a key element they desperately need to achieve.
The result is our, latest publication: Create a Financeable Circular Business. The guide will empower businesses to secure funding for their circular ambitions and initiate strategic decision making with the help of 10 practical steps.
10 Steps to Financeability:
1. Decide on a logical starting point
2. Generate profit through multiple use cycles
3. Align incentives throughout the supply chain
4. Be transparent about the value proposition
5. Redefine the role of retail
6. Gradually transition to PSS by combining revenue models
7. Secure stable cash flows through a robust contract
8. Mitigate debtor risk
9. Match asset value, payback period and contract duration
10. Measure environmental impact on financial performance
“This 10-step framework is the first step to bridging the gap between what financiers need in order to invest and the strategic decisions circular businesses have to make. It’s not only about having a great new idea, it has to be embedded in a sound business model. This paper shows what it takes to increase financeability for businesses in the circular economy.”
– Aglaia Fischer, Project Manager / Researcher at Circle Economy and Sustainable Finance Lab
The 10 steps are illustrated with detailed case studies, making the various circular strategies and their corresponding financial challenges tangible while also providing a practical guide on how to overcome them. Take the 10 steps to creating a financeable circular business today!
3. EMPOWER financial decision makers for a circular economy
Coming soon! We plan to release this report in December 2016.
