Imacs 2016 imecs 2016 Proceedings (Preliminary version) of the 4
NEW INNOVATIVE BUSINESS MODELS: CIRCULAR ECONOMY CASE
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- 270.Introduction
- 271.1 The concept of circular economy
- Research methodology
- 272.2 THE MODEL OF CIRCULAR ECONOMY
- 273.Conclusion
- 274.References
NEW INNOVATIVE BUSINESS MODELS: CIRCULAR ECONOMY CASE269.Valentinas Navickas, Akvilė FeiferytėAbstract The concept of circular economy is receiving increasing attention worldwide as the way to reduce the demand for primary resources focus on urban and industrial waste to achieve a better balance between economic growth, environment and society. Circular economy prompts innovation for reuse, manufacturing and recycling activities. The importance of circular economy implementation is seen by many politics, scientists and manufacturers. Today’s business must adopt principles of circular economy in their business models to improve production, reduce pollution and stimulate continuously economic growth. The purpose of this paper is to present theoretical business model incorporating the concept of circular economy. A literature review and data analysis covering the issues how circular economy will affect business models and economic structure. Main contribution (the novelty) of this paper is our proposed circular economy business model for the economy and natural environment. Key words: business model, circular economy, waste recycling, competitiveness JEL Code: Q50, Q53, Q55, Q57 270.IntroductionEconomic activities are rooted in a unidirectional concept of production (linear production) – natural resources entering one end of the production process and economic products emerging at the other end. Linear model based on principles “take-make-consume and dispose” where resources are abundant, available, easy to source and cheap to dispose of is no longer effective. The market economy is focusing on the value of economic products and ignoring the depletion of natural resources and economic waste. A supply chain in the linear economy involves multiple suppliers: farmers, miners, refiners, product assemblers, wholesalers, transportation companies for these reasons the costs of the final product is high. The linear economy is generated to improve the efficiency of each step along the chain, thus ensuring maximum outputs at minimal cost. Returning, repairing and recycling create additional costs which are not required (Schulte, U. G. 2013). The linear economy based on the natural resources as inputs but do not use recycled or reused materials. Irrational natural resources and waste management leads to the reduction of natural resources and global ecological problems such as pollution of water, land and air and diseases. Replacing linear supply chain with a circular model that maximizes the effectiveness a new business model will ensure prosperity in spite of growing populations and the demands it makes on finite resources. The concept of the circular economy was introduced in the 1960s by Professor Kenneth E. Bouling who had understood the limitation of the resources (George, D., Chi-ang Lin, B, & Chen, Y. 2015). Circular economy seeks the transition from the linear economy to a circular one reducing the using amounts of natural resources. Today more and more countries in the world implement circular economy principles. Japan, Austria, Germany and the Netherland are already developed strategies compatible with circular economic activities (Circular Economy related international practices and ... (n.d.). The European Union in 2014 published communication „Towards a circular economy: A zero waste program for Europe“. This document defines further waste management policies across Europe and includes the areas of the economy such as manufacturing and economic competitiveness. From this point forward the concept of the circular economy gets more attention from the scientists. The aim of this paper: to present innovative business model incorporating the concept of circular economy activities. The circular economy model appears in the literature. This model natural input replaces with recyclable inputs offering the new perspective on achieving sustainability. 271.1 The concept of circular economyThe research of circular economy is taking first steps. Scientists look for the new ways for production effectiveness which leads to economic growth. Despite growing interest in resource efficiency and competitiveness, the concept “circular economy” is relatively low analyzed. Most publications are in government and companies’ level. Such countries as China, Denmark or Sweden circular economy defined in the legislation level. Most of the published articles are focused on the China as a result of the “Circular economy Promotion law of the People’s Republic of China” (Lieder, M., & Rashid, A. 2016). Sweden is the other country which has a long time successively introduced various incentive programs through public education. Sweden, Germany, and other European countries incorporate green political parties in their political systems and process of decision making to encourage and eased a transfer towards a circular economy (Heshmati, A. 2015). The circular economy is concentrated on the effectiveness of waste management policy. Considered the technology development of the industry, waste recycling and reuse not only helps to increase the efficiency of production but also to reduce the use of natural resources (Preston, F. 2012). Circular economy implementation becomes an important aspect of waste management effectiveness. This change occurred when the politicians and businessmen’s understood that increasing global competitiveness access to natural resources makes increasingly complex. The sheer appeal of the circular economy is reflected in the July 2014 European Commission landmark communication “Towards a Circular Economy: A Zero Waste Programme for Europe” where are set the basis for the future waste management in Europe (Velis, C. A. 2015). European Commission seeks to boost global competitiveness, foster sustainable economic growth and generate new jobs. The circular economy model is built to create minimal waste or materials to be upgraded or reused and keep the added value in products for as long as possible. This will help to reduce waste generation and solve the pollution problem. In the circular economy, value creation is built on new forms of consumption and resources longevity (Schulte, U. G. 2013). Circular economy approaches “design out” waste and involves innovation through the value chain. Today most of the business production chain convert all material inputs to non-usable waste and still using primary resources for the further production. For this reason, the amount of waste is rapidly growing past few decades. States waste policy is not effective and about 50 per cent of waste still goes to landfills. Growth-oriented business models seeking to reach market saturation by increasing frequency of products replacement. Boosting demand through mass production, reducing costs of production and improvement in labor efficiency. Ignoring of resources efficiency leads to pollution problems, rapidly reduce of natural resources and slow economic grow. Waste recycling and measures to improve efficiency can help to reduce the need for extraction of raw materials. In a circular economy, resources are reused. Other products can be made from plant-based materials. This means basic structural changes in the industrial sector (Preston, F. 2012). Recently, most of the manufacturers note that the linear production system increases the risk of rising resource prices and supply disruption. Due to the unpredictable price of the stock markets and growing competition, the production price of the last century has tended to decline. Industry sector is one of the main driving forces of economic development. Continuous technological development helps to reduce costs and improve value add of products and services (Wang, K., Kovacs, G.L., Wozny, M., & Fang, M 2006). Circular economy includes waste in the value chain process as inputs. Fig. 1 shows the environmental aspects of the product and waste realization link of the value chain based on theoretical assumptions. Waste, raw materials, and semi-finished products are understood as costs in the value-added process and they are necessary for manufacturing. Products, semi-finished products, or waste are thought to be the output at the end of manufacturing. They will be used for recycling or other manufacturing processes. Fig. 1: Relation between environmental aspects and product realization 
Source: Emblemsvåg, J., & Bras, B. 2001. Waste is as a resource and as a final product in the value chain which can be recycled into resources for other manufacturing processes. Recycled waste can replace part or all primary natural limited resources. Because of the re-use and constant renewal waste occupy an important place in the value chain. Using circular economy principles can change primary resources to recycled waste using as an input. Research methodologyRecently the discussion on the concept of the circular economy has intensified. However, while theoretical projection analyze potential economic, environmental and social benefits of the circular economy are promising, practical research are limited. Using literature review and data analysis this paper presents the circular economy business model for the economy and natural environment. 272.2 THE MODEL OF CIRCULAR ECONOMYCircular economy model raises several practical challenges that require experts from diverse disciplines to ensure proper and effective circular economy implementation in practice. The circular economy must provide the economic incentives to ensure that post-consumption products are integrated into the manufacturing process. Manufacturers are interested to in declining their expences in the production. Circular economy implementation is usually more expensive to manufacture durable long lasting products (Sauvé, S., Bernard, S., & Sloan, P. 2015). The circular economy also requires to re-orient consumer thinking towards assessing alternative products, collect wastes and recycling them. Scientists are calculated that a potential consumption bomb will lead to inevitable resource constraints. Around 3 billion people are expected to join the ranks of the middle class by 2015. By that time the population will growth about 1.1 billion people, food spending expenditures increase 57 percent, packaging materials will increase 47 percent. Meanwhile, a number of end-of-life materials will increase 41 percent (ICCE n.d.). The circular economy presents radical break where materials should not be cast away and expended, but they should be re-used and replenished. The circular economy is more like „new industrial model“ which replace „ends-of-life“ concept with restoration, opting for reusable materials in design, ending wasteful manufacturing processes, waste pollution and developing new markets for repurposed products (Henley, W. 2013). Today many companies extract materials and use them to manufacture a product, sell it to the customer who then discards when it no longer services its purpose. In 2010, about 65 billion tonnes of raw materials entered the economic system and this number is expected to grow to around 82 billion tonnes in 2020. The linear economy also increases business exposure to risks with higher resource prices and supply disruptions. Business today is facing two problems: rising and less predictable prices in resource markets and high competition and stagnating demand for certain sectors. Business leaders are in search of a „better hedge“ and many moving towards an industrial model that decouples revenues from the material input. Circular economy model replaces the end-of-life concept with restoration, aims for the elimination of waste through the design of materials, products and business models (Towards the circular economy… n.d.). We are proposing circular economy implementation model based on the theoretical analysis (Fig. 2). Fig. 2: Circular economy model implementation
Based on this circular economy implementation model, the business sector is affected by limited resources, growing costs and government decisions. Lacking in natural resources, environmental problems, growing prices encourage governments to look for new solutions. Governments stimulate circular economy implementation by the legal regulation of the business sector and resource market. Linear production is based on the natural resources consumption that follows a take-make-dispose pattern. In the circular economy model companies are concerned to use natural and recycled / reused resources to reduce costs and improve product lifetime. All wastes due to the manufacturing and consumption process are considered as a resource for further production. All cycle must be repeated all the time to ensure the minimum amount of generated final waste. 273.ConclusionBased on the review and analysis of prevailing research circular economy is a solution to the need for reducing the environmental impacts and growing amounts of waste. Although the implementation of the circular economy worldwide is still at an early stage of development. The linear economy is no longer effective because of the lacking natural resources and slowing economic. The circular economy model can maximize the effectiveness ensuring the prosperity despite growing population and their needs. Only a few countries decided to implement the circular economy model in their economy. Such countries are China, Denmark and Sweden. They had reviewed their legislations and use economic measures conserving the environment and resources. The circular economy is concentrated on waste management effectiveness (reusing, recycling) using them as a primary resource for the product manufacturing, energy and heat production. The circular economy model is built to increase the amount of the waste and keep added value in products as long as possible. Based on literature review and data analysis this work proposed the circular economy model where successful circular economy implementation requires conjunction between environmental requirements and needs, government decisions and business capabilities. Waste, used products parts, reused products and recycled waste should be implemented in the production process replacing natural resources.
Circular Economy related international practices and ... (n.d.). Retrieved March 21, 2016, from http://siteresources.worldbank.org/INTEAPREGTOPENVIRONMENT/Resources/CircularEconomy_Policy_FinalDraft_EN.pdf Emblemsvåg, J., & Bras, B. (2001). Activity-based cost and environmental management: A different approach to ISO 14000 compliance. Boston: Kluwer Academic. George, D. A., Lin, B. C., & Chen, Y. (2015). A circular economy model of economic growth. Environmental Modelling & Software, 73, 60-63. Henley, W. (2013). The circular economy: Could it present a new way of doing business? Retrieved March 21, 2016, from http://www.theguardian.com/sustainable-business/circular-economy-new-way-doing-business Heshmati, A. (2015). A Review of the Circular Economy and its Implementation. Retrieved March 21, 2016, from https://ideas.repec.org/p/iza/izadps/dp9611.html ICCE » MEGATREND. (n.d.). Retrieved March 21, 2016, from http://becircular.eu/circular-economy/why-now/ Lieder, M., & Rashid, A. (2016). Towards circular economy implementation: A comprehensive review in context of manufacturing industry. Journal of Cleaner Production, 115, 36-51. Sauvé, S., Bernard, S., & Sloan, P. (2015). Environmental sciences, sustainable development and circular economy: Alternative concepts for trans-disciplinary research. Environmental Development. Schulte, U. G. (2013). New business models for a radical change in resource efficiency. Environmental Innovation and Societal Transitions, 9, 43-47. Towards the circular economy: Accelerating the scale-up across global supply chains. (n.d.). Retrieved March 21, 2016, from http://reports.weforum.org/toward-the-circular-economy-accelerating-the-scale-up-across-global-supply-chains/ Wang, K., Kovacs, G.L., Wozny, M., & Fang, M. (2006). Knowledge enterprise: Intelligent strategies in product design, manufacturing, and management: Proceedings of PROLAMAT 2006, IFIP TC5, international conference, June 15-17 2006, Shanghai, China. (2006). New York: Springer. Contact Prof. Valentinas Navickas Kaunas University of Technology School of Economics and Business Department of Economics Gedimino str. 50-501, LT- 44239 Kaunas, Lithuania Valentinas.navickas@ktu.lt
Kaunas University of Technology School of Economics and Business Department of Economics Gedimino str. 50-501, LT- 44239 Kaunas, Lithuania feiferyte@gmail.com Directory: wp-content -> uploads -> 2015 2015 -> Police Militarization 2015 -> 2015 ihbb championships: hs history Bowl Round 4 – Prelims First Quarter 2015 -> Wrtp/big step · 3841 W. Wisconsin Ave., Milwaukee, wi 53208 2015 -> Rao bulletin 1 December 2015 html edition this bulletin contains the following articles 2015 -> Darton College 2015 -> Training Workshop on Planning and Implementation of Multi-Sectoral Development Programme (MsDP) in Bihar Date : 6th 2015 -> Rao bulletin 15 June 2015 html edition this bulletin contains the following articles 2015 -> Rao bulletin 1 September 2015 html edition this bulletin contains the following articles 2015 -> Rao bulletin 1 August 2015 html edition this bulletin contains the following articles 2015 -> Science, and transportation united states senate Download 2.73 Mb. Share with your friends:
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