Circular Business Model Risks Vary Significantly by Strategy Type
Category: Sustainability · Effect: Moderate effect · Year: 2023
The perceived risks associated with adopting circular business models (CBMs) are not uniform and are heavily influenced by the specific CBM strategy employed.
Design Takeaway
When designing products or systems for circular business models, tailor risk assessment and mitigation strategies to the specific circular strategy being implemented, as risks are not universal.
Why It Matters
Understanding these nuanced risks is crucial for designers and businesses aiming to implement circular economy principles. By identifying which risks are most prominent for different CBMs, organizations can proactively develop targeted mitigation strategies, increasing the likelihood of successful adoption and reducing potential setbacks.
Key Finding
The study found that while some risks like customer perception and economic factors are common to all circular business models, others are specific to the type of model. For instance, supply chain and technology issues are more prominent in models focused on circular supplies, while policy and regulation concerns are higher for models extending product life.
Key Findings
- Risks in CBM adoption are multi-disciplinary.
- Customer perception of circular products, economic cycles, and take-back systems are common risks across all CBM types.
- Supply and technological risks are prioritized for 'Circular Supplies' CBMs.
- Political and regulatory risks are prioritized for 'Product Life Extension' CBMs.
Research Evidence
Aim: What are the primary risk factors perceived by manufacturing industries when transitioning to different types of circular business models for composite-based products?
Method: Multiple-case study
Procedure: Seven organizations planning to transition to CBMs for composite-based products were studied across three CBM types: 'Circular Supplies', 'Product Life Extension', and 'Hybrid'. Risk factors were explored and disaggregated according to the CBM type.
Sample Size: 7 organizations
Context: Manufacturing industry, composite materials, circular business models
Design Principle
Contextualize risk assessment within circular economy strategies.
How to Apply
Before launching a new product or service within a circular business model, conduct a detailed risk analysis that differentiates between risks inherent to 'Circular Supplies', 'Product Life Extension', or 'Hybrid' models.
Limitations
The study focused on composite materials and a specific set of CBM types, so findings may not be directly generalizable to all material types or all possible CBM configurations.
Student Guide (IB Design Technology)
Simple Explanation: Different ways of making products circular have different risks. For example, getting materials back is risky in one way, while making products last longer is risky in another.
Why This Matters: Understanding that risks differ based on the circular strategy helps you focus your design efforts and anticipate potential problems more effectively in your design projects.
Critical Thinking: How might the identified risks for 'Circular Supplies' and 'Product Life Extension' CBMs influence the material selection and design for durability in a composite product?
IA-Ready Paragraph: This research highlights that the risks associated with adopting circular business models are highly dependent on the specific strategy employed. For instance, models focused on 'Circular Supplies' face greater supply and technological risks, while 'Product Life Extension' models are more susceptible to political and regulatory challenges. This understanding is critical for developing targeted risk mitigation plans within design projects aiming for circularity.
Project Tips
- When planning a design project involving circular economy principles, identify which type of circular business model you are aiming for.
- Research the specific risks associated with that type of model, not just general circular economy risks.
How to Use in IA
- Use this research to justify why a particular risk mitigation strategy is chosen for your design project, linking it to the specific circular business model being explored.
Examiner Tips
- Demonstrate an understanding that circular economy risks are not monolithic and vary based on the specific business model strategy.
Independent Variable: Type of Circular Business Model (Circular Supplies, Product Life Extension, Hybrid)
Dependent Variable: Perceived Risk Factors
Controlled Variables: Industry (manufacturing), Material type (composite materials), Organizations planning transition to CBMs
Strengths
- Cross-industrial case study provides a broader perspective.
- Disaggregation of risks by CBM type offers specific insights.
Critical Questions
- To what extent do these identified risks vary across different geographical regions or regulatory environments?
- How do the identified risks impact the economic viability and scalability of these CBMs?
Extended Essay Application
- An Extended Essay could investigate the correlation between specific design features (e.g., modularity, material choice) and the mitigation of risks identified for a particular CBM type in a chosen industry.
Source
Risks in circular business models innovation: A cross‐industrial case study for composite materials · Business Strategy and the Environment · 2023 · 10.1002/bse.3618