Circular Business Model for MSMEs
The Circular Business Model is indispensable for MSMEs who wish to create circularity in their business. Because of this, MSMEs can learn various activities that they can do to apply the principles of circular economy in their business.
Conventional Business Model VS Circular Business Model
A business model is a business concept that is commonly used to build a successful business. However, usually this concept is still in line with the linear economy. Linear economy is a business system that exploits a lot of resources, processes them, consumes them, then throws them away. Therefore, researchers and practitioners began to create a circular business model. The Circular Business Model (CBM) is integrating between a business model with circular economy principles.
Circular Business Model
The term circular business model is widely used to help practitioners implement the circular economy in their business. However, in this article, there is a circular business model that appears most frequently in the literature which is ReSOLVE framework. This ReSOLVE framework as CBM comes from the collaboration of the Ellen MacArthur Foundation and McKinsey & Company. This CBM framework is often adopted and used by both researchers and practitioners involved with the circular economy.
Regenerate means that the company can regenerate the energy and materials used. For example, companies can switch to renewable energy and materials. They can also reclaim, retain and restore the ecosystem around them. In addition, they can also restore natural resources that were previously over-exploited. In this way, natural resources will be much more sustainable and have a positive impact on life in the long term.
Share means that companies can share resources, energy, or tools used in business. By sharing, of course the company will get the benefit of reducing operational costs and resources. For example, you can exchange business assets and reuse materials or equipment. In addition, you can extend product life through maintenance.
Optimize means that you optimize the value of your product for consumers so that the product has maximum selling value. This point also stresses you to ensure that your product design does not create waste. This is because waste is a part of the product that is not valuable. Elimination of this waste both in the supply chain of your product and after the consumer use the product. In addition, optimize your product by utilizing technology, big data and various other innovations.
Loop means creating a circular production chain. First, you can remanufacture your product or product components. Second, you can recycle the materials used in your products. If your product is organic, you can process it into other valuable products, such as compost or certain extraction substances. The more circular paths your product material has, the less waste it will generate.
Virtualization means you make your product virtual or digital. This way you will reduce the product and operational costs required if your product is still in the form of goods. There are two types of dematerialization, the first is direct and indirect dematerialization. Direct dematerialization is the dematerialization of products sold, such as turning a CD of songs into streaming music. Second, indirect dematerialization is dematerialization that is not directly related to the product, for example creating an online shopping platform.
Exchange means you need to replace the necessary resources. You have to replace old materials with new materials that are more environmentally friendly and sustainable. You can also apply new technologies that are more efficient and effective so as to eliminate waste from product design. Finally, you can replace your products with products that are easier to implement circular economy principles.
What can help SMEs to implement circular economy?
To be able to apply the circular business model, SME practitioners are not necessarily able to apply it. Qualified knowledge is needed so that SMEs can understand and elaborate their knowledge into ideas that are in line with the circular economy. Second, an SME practitioner needs to design CBM so that the ideas are systematic, effective and efficient, so that other people can easily understand them. Third, in the implementation stage, a practitioner needs qualified expertise to implement a circular economy-based strategy, and technology or tools that can accelerate the transition to a circular economy. Therefore, a practitioner can take part in the following things that can help him carry out each of these stages, including:
- Individual Coaching
- Platform and knowledge Bank
SMEs have an important role in building a circular economy in a country. This is because SMEs can collaborate and symbiotic with each other so that they can accelerate the creation of a circular supply chain. SMEs that run a circular business model will get various benefits, first from an economic perspective, they can reduce production costs, save time, and increase product value so as to increase financial benefits and competitive advantages. From an environmental point of view, they will have a positive impact on the environment, maintain the sustainability of their resources, and will ultimately build a positive corporate branding in the eyes of consumers. Finally, from a social perspective, circular economy product diversification will open up varied and new job opportunities, thereby reducing unemployment and increasing people’s welfare.