In a linear economy, raw materials are extracted and converted into products that are used and then discarded as waste. In contrast, a circular economy focuses on retaining the value of products, materials, and resources for as long as possible through reuse, repair, refurbishment, and recycling.
However, the deeply ingrained linear economy often makes it challenging for circular enterprises to develop a profitable business model. Without a solid business model, circular initiatives struggle to take off.
Last year, Invest-NL explored this issue in practice and published an initial report. In recent months, in collaboration with ScaleUp Practitioners and Het Groene Brein, they delved deeper into the success factors and prerequisites of circular entrepreneurship in theory.
Given the complexity of practice, this year Invest-NL has explored several theories that can contribute to the development of an underlying Theory of Change. They spoke with ten scientists from various disciplines: transition theory, macroeconomics, innovation strategy, sustainable business models, market development, financial models, and consumer behavior.
Each offered a unique perspective on the circular transition. Invest-NL brought this group together to explore whether a joint methodology for developing the field of Circular Venture Building is possible.
Financing for Circular Enterprises
Out of discussions and analyses, several key observations emerged. For the effective development of circular enterprises, integrating knowledge from fields such as innovation, financial models, and consumer psychology is essential. Circular enterprises can only be successful in well-functioning ecosystems. Collaboration and co-creation with various partners are crucial to realizing value.
Traditional linear business models are unsuitable for circular enterprises, according to Invest-NL. New structures are needed to share risks and returns within circular chains. For instance, the financing model for circular enterprises must be approached differently, focusing on long-term and shared value creation instead of short-term profits.
Ultimately, the shift to a circular economy requires a broad societal change that affects not only businesses but also policymakers and consumers.
In the fourth quarter of this year, Invest-NL will organize a conference to continue the dialogue on these important topics. They invite interested parties to participate in this discussion and thus contribute to the development of a sustainable circular economy.
Read the full report “Circular Venture Building – Emerging Fundamentals“.
