Building Sustainable Businesses that Scale and Change the World
We are consuming more resources than our planet can handle. Every day $111B is spent in the US alone on an insane number of consumer goods producing an unfathomable 728k tons of garbage (or 63k garbage trucks) per day filling our landfills. And that is just the US. And worldwide, we’re running out of resources, space and time.
The problem is, modern business incentives and marketing do nothing but accelerate this trend. Does your iPhone really need to be replaced every 1–2 years? Why aren’t all water bottles reusable? Why the hell is it cheaper to buy a new appliance than to repair your current one?
With climate-driven chaos increasing daily and a growing swell of consumer demand for sustainable options, maybe it is time we rethink market incentives and evolve toward a truly circular economy.
But before we look at the keys to successful circular economy startups, it is probably worth taking a moment to define: “What exactly is the Circular Economy?”
Isn’t everything circular in a way?
Well, according to Wikipedia: The circular economy is “a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible” to help tackle global challenges like climate change, biodiversity loss, waste, and pollution.
It is basically a landfill at last resort philosophy of extending product lifespan as much as physically possible.
Now, contrast that with today’s mass consumerism model. Products built today are a bit like a honey bee that dies after a single sting or an airplane that’s destroyed/scrapped after every trip because there’s no landing gear.
And while neither are very appealing, this is exactly the model we base much of our economic system on.
Don’t believe me? Don’t forget to toss your Starbucks cup and fast food spork or scrap the invaluable rare Earth materials and powerful processors in your iPad when the screen breaks… Not a big deal, right? Except your iPad has a whopping carbon footprint of 113kg of CO2 over its lifetime, most of which is production and transport (Source). And to think, Apple sells 120k iPads a day.
It is insane when you think about it?
Boxes within boxes within Amazon boxes…
The prom dress you only ever wear once.
Those freaking Nespresso coffee cups…
Doesn’t it just make you furious? Like restaurants tossing their leftovers into the trash rather than feeding the homeless.
For fucks sake… how did we get to this point?
Want to know the dirty little secret why? It’s gamification and capital gains taxes…
GDP was never meant to be an indicator of the economic success/health of a country. But that that gets measured gets managed… and optimized. Especially when it comes to tax incentives.
For a quick primer, capital gains are the taxes you pay on the income derived from owning assets (stock appreciation, real estate, Bitcoin etc…) while income tax taxes the direct results of your labor (a salary, stock dividends, selling Girl Scout cookies etc…). In most countries, income tax is higher/much higher than capital gains tax. That means it is better to have your money work for you than it is to work yourself — you’ll pay less in taxes.
In a more practical view, this plays out in the stock market with executive compensation. Companies and executives are incentivized to focus on increasing share prices (i.e. future expected value of the company) rather than increasing current profits or distributions/dividends, because their salaries are largely based on stock/options and they can sell those shares and only pay capital gains taxes.
This is just part of why Jeff Bezos, Elon Musk and the top 1% are able to pay less % in taxes than their starving 2 McDonald shift a day counterparts struggling to stay above the poverty line. It is because tax law is geared toward building and perpetuating wealth.
Which means when given the chance, every company’s best bet is to sell more product. It is the best way to increase revenues and thus, overall stock price. Why bother increasing margins or sharing the gains with retail investors (as dividends), when you can reinvest 100% into unsustainable growth?
Outside of the universe itself, only one thing grow indefinitely in nature…
And it eventually kills the host.
Just some food for thought.
Building for Sustainable Growth
But what if there was a better way? What if instead of being trapped by these clearly broken incentives, we could create businesses that sustainably fueled themselves. Businesses that could be incredibly profitable, but didn’t need to focus on growth at all costs (to maximize shareholder value), because it was already a great business in the first place.
And what if we could do it without relying on corrupt politicians to “bite the hand that feeds them” by changing the tax law?
That is where circular economics comes in, at the intersection of innovation and incentives. It is time we create game changing new business and social paradigms that support rather than strangle our world and still make the founders, employees, customers and communities incredibly happy and successful in the process.
To do that, we need to rethink the way we think the way we produce, consume and value products.
The 4-minute Circular Mile
You probably know the story of the 4-minute mile. Prior to Roger Bannister breaking the record in 1956, it was deemed “impossible.” Utterly unfathomable. How could any man (or woman) ever hope to achieve four minutes…
And then it happened and kicked off a wave of record setting results, with thousands of other runners now having best the once “impossible” limit.
Suddenly it was “easy” because it was “doable.” All it took was a pioneer to prove the point.
The same is true with the circular economy and sustainable business. It not only seems impossible, it is utterly unfathomable. How could something like that work, function, make money…?
(NOTE: For more on building profitable, mission-driven businesses and why sustainability should be at the core of any ambitious startup or business, see the following posts: Why Sustainability Should be at the Core of Every Business and Startup and How to Building Impact Businesses that also Make Money)
Unfortunately, our experience biases us from actual creativity and innovation. We literally can’t think outside the box… until someone gives us the Red Pill.
And there is no better way to do that than by examining and analyzing the new wave of circular economy startups that seem to be cropping up everywhere, especially in Europe.
“If I saw further, it was because I stood on the shoulder’s of giants” — Newton
It’s time to get “inspired” by the great efforts of others.
And why not, imitation is the highest form of flattery after all (and Facebook is really good at this).
14 Strategies for Rewriting Circular Economy Playbook
1. Reusable Subscription Products: VIGGA — Kid’s clothing subscriptions
Anyone who’s ever had kids knows how quickly kids grow and develop. Unfortunately, so too do their bodies and needs for new clothing. This rapid growth spurt” from birth until the teenage years is especially exponential in the earliest years of infancy and with toddlers, which equates to parents buying new clothes, shoes, everything… for their kids every single year. That is a ton of waste.
VIGGA is a Danish clothing company challenging that by allowing parents to rent clothes for their kids, ensuring your baby’s onesies always fit and will go to good use again and again, instead of ending up in a landfill after covering just one baby’s bottom.
And this model can be applied to many different types of products and industries — anywhere where products aren’t often needed or are only needed for short periods of time are perfect.
Imagine if you had to buy every book you ever read… Libraries are a thing for a reason and they are the perfect model to position many a circular startup around.
2. Recycling Raw Materials: RecoverBrands — 8 Recycled PET bottles = 1 shirt
One million plastic bottles are consumed every single minute. Yearly, that is enough to reach the Moon and back 154k times.
That is insane. And so is what RecoverBrands is doing, taking those bottles out of landfills, recycling centers and oceans and turning them into super sustainable clothing, literally turning the plastic into reusable yarn and weaving their way to a better world.
And while plastic bottles are the obvious culprits/place to start, there are millions of other possible uses for recycled raw materials… Like turning the rubber from old tires into shoes (Timberland) or matted padding, repurposing truck tarps for cool bags and accessories (Freitag) or turning used aluminum into your new bike (ReCycle).
3. Biodegradable Products: Beer bottles without the mess
When it isn’t possible to reuse or recycle a product, the next best alternative is often to leave as little a footprint as possible. Because filling up landfills damages our world, destroys natural resources and pollutes our water and air.
That’s where composing comes in, like with E6PR’s biodegradable beer bottles. Which is absolutely brilliant. Not only does it kill two birds with one stone in terms of reducing overall landfill/trash load (because many cans and bottles don’t end up getting recycled), it also ensures that nature’s protected as, more often than not, the places where beer bottles get left/forgotten are often in parks, beaches or the woods where people have a little too much fun.
And the same thing is happening with many CPG products, especially in beauty and fast food — like femine pads, coffee pods, togo silverware and more, all of which break down well and lead to less overall waste per person.
Want help designing your Circular Economy startup’s business model and flywheel? That’s what I do: help impact-driven companies change the world faster.
4. Using Unwanted Product Residuals: Coffee grounds to culinary mushrooms
Did you know 99% of the nutrients within ground coffee beans are wasted every time you make coffee. You are literally throwing 99% of the “good stuff” away.
But the coffee grounds can be used for a lot more. They are great for composting/soil health, can be repurposed for sustainable beauty and cleaning products or even used to grow mushrooms, like GroCycle does.
And this need not be on a small scale. Have you ever had a whey protein shake? Did you know it’s a simple by-product of cheese production?
That is almost like having your cake and eating it too.
Another great (although completely different) example of this in action is data centers as alternative heating sources. And with heating and cooling homes accounting for 50% of total energy consumption, the massive amounts of “waste” heat produced from today’s modern IT infrastructure might not need to be so wasteful after all (Source).
5. Repurposing Entire Products: Smartphones that stop illegal deforestation
Your smartphone is a lot smarter than you give it credit for, even after you get the black screen of death. The compute power in your little device is more than everything NASA’s had in the entire 1960’s space race… combined. Imagine how those mission-driven astronauts and scientists would have reacted if you’d have scrapped their entire computing center, simply because it got a scratch on the screen…
Although I met the founder of Rainforest Connection years ago, they remain one of the coolest and most meaningful companies I know. Using the microphones and connectivity that even simple flip phones possess, the company is able to track and report illegal logging activities to the authorities, in real time.
They are literally keeping crapped cellphones out of landfills (more on that below) while also preserving our breathtaking and planet-critical rainforests (one of the biggest carbon sinks we have for pulling CO2 out of the atmosphere)…
And the kicker, they even make money while doing it!
6. Repurposing Product Components: Upcycling old cell phone parts
Unlike taking the raw materials from a product (fabric, plastic, wood, etc…) to create something new (which generally requires a great deal of time and capital investment and has its limitations) often a much more plausible/efficient approach is simply repurposing the parts themselves.
Did you know that in the US alone, 151M+ cell phones end up in landfills every single year… And that, despite the fact that the components that make up your busted iPhone are incredibly valuable themselves (Source).
But it isn’t just money. Don’t forget that all of the time, energy and resources that have gone in creating every transistor or processor contribute significantly to a product’s overall environmental impact. For instance, your little 200g smartphone has an average carbon footprint of 55kg (Source). That’s a 275:1 ratio of CO2 to product… Why waste all that?
That’s why many companies like SellCell help consumers recycle/sell their busted phones for parts.
And this trend will only accelerate as the use of electric vehicles (which require high performance, long lasting batteries) grows. Imagine a Tesla whose charge lasted but 3 kilometers… it would be pretty useless, right?
But those batteries (which have about the same environmental impact as driving a regular car for 1–2 years — Source) are still great for stationary power storage (think storing solar energy etc…).
7. Reusing Raw Materials: The circle of brick life
Certain materials are more “obviously” reusable than others. We’ve known about recycling plastic bottles or reusing hand-me-down jeans for ages, but what about the byproducts that most industries view as annoying waste & extra work? For an extreme example, think about demolition & construction — you tear down a building and are literally left with a tumble of bricks and busted wood…
Before Gamle Mursten, those heavy, hard-to-transport bricks would end up in a landfill somewhere, contributing nothing other than additional emissions as they were lugged to a dump in some garbage truck.
Contrast that with Gamle Mursten’s REBRICK technology/process. They turn old, yet still usable bricks into reusable raw material for new construction, cleaning and testing the bricks for strength and durability and keeping 713g CO2 out of the atmosphere for every brick they salvage.
And the same type of business model can (and should) be used in the wood/furniture industry as well, especially as humanity needs to transition away from highly pollutive cement-based construction practices to a more sustainable, natural model designed around reusable, carbon capturing trees and wood.
By getting more “uses” out of our raw materials, we can stem our demand for natural resources while also building great businesses in the process. Plus, it’s often cheaper than having to buy new!
8. Designing Modular Products: A phone that keeps talking
Almost none of the consumer products we buy are modular in design. Your phone, your fridge, your laptop… nearly every electronic product that we use on a daily basis is designed as a one-use product. You use it until a single component dies, then it is time to buy another.
And it makes sense why — it’s a good business model, at least when you don’t have to account for/pay for emissions.
As we’ve said several times, your iPad or HP aren’t worthless when one little thing breaks. In fact, go back ten or twenty years and there has always been a strong DIY repair culture. Like car folks that change their own oil and repair their motors or hackers & techies that build and upgrade their own PCs.
Unfortunately, this has been getting harder and harder as companies like Apple and John Deere fight “right to repair” bills (thereby forcing consumers to use expensive, licensed 3rd party repair services ** and either design seemingly more complex, unserviceable products or outright ban individuals from repairing or upgrading their own property.
**NOTE: Apple has recently changed their stance on this, likely due to increased pressure from European regulators over monopolistic practices.
And while this is one side of the corporate greed spectrum which cares little for environmental concerns, modular product design is on the complete other end of the spectrum. Imagine a phone or laptop where you could swap out the keyboard, the screen, the processor etc… without needing nearly a PhD in product repair while also risking your warranty in the process.
That’s why companies like Google, Lenovo and LG tried (unsuccessfully) for years to create a modular smartphone — something only FairPhone has been able to successfully commercialize to this point. And even then, you have probably never heard of them…
Hopefully, as more consumers push for sustainable products and worldwide carbon taxes become a thing, more modular products that extend overall lifespan will grow in popularity and traction.
9. Repairing Damaged Goods: If it’s broke, why not fix it?
One of Patagonia’s most successful advertisements of all time totally backfired. The super eco-focused company ran an ad encouraging customers to repair and sew their existing products rather than buy new ones — because torn pants or a ripped jacket is only several stitches away from being like new again.
Interestingly enough, it didn’t work.
Rather than discouraging customers from buying more products, Patagonia actually converted massive numbers of North Face and Columbia buyers into Patagonia loyalists and had their biggest sales day of all time.
Which just goes to show the power of sustainability in fueling a brand’s raving fanbase (Want to do the same? Check out my articles on How to Build Profitable Impact Driven Brands & Why Sustainability Should be at the Core of Every Business to start building your raving eco fanbase!).
But repair goes a lot further than H&M’s “Close the loop” recycled garments program or Patagonia’s product repair guides. In fact, some companies are not only turning the repair process into a way to resell used products, but into an entire business model itself.
Take for instance Swiss startup, Thingsy, which in addition to helping consumers recycle broken products and extend product lifespan through better servicing and lifecycle management, they also offer a robust one-click repair solution to help connect you with certified local repairmen and service providers. Which is a massively big deal…
Because repair vs rebuy is all about cost and convenience.
Amazon takes one-click to replace your “broken” vacuum or toaster in under 2 days, even if it would only take two seconds and some expert knowledge to fix the one you have.
Multiply that times every single product you own: clothes, cars, TVs, furniture etc…, and you are looking at a major reduction in your level of consumerism and carbon footprint.
As an added bonus, you’re helping to support the local service economy rather than funding a faceless Amazon giant…
10. Sell Your Old Stuff: Cause one man’s trash is another man’s treasure
Yes… think Ebay, Amazon, Facebook Marketplace or other used product platform or marketplace… even Craigslist. Every used product that’s bought or sold, that is one less brand new one to produce. And with our atmosphere warming and our landfills filling, the planet and all future generations will thank you. Oh, and let’s not forget that there it’s actually a great business model, i.e. taking a cut of every transaction.
But that is obvious when you think about it. Bigger still is the question: how do you both increase the use of online platforms like Ebay etc… while also expanding the types of products offered to more than just electronics and consumer goods?
One way is by simply making it easier to sell your stuff online. Thingsy, for instance, is working on having a one-click Ebay integration so consumers that buy a new table or break an old watch can automatically list it/sell it without the hassle of setting things up themselves.
Because remember the golden rule: People are inherently lazy.
Which is why we need to make circular systems not only sustainable, but super convenient, cause let’s face it, the trash is only a toss away…
11. Turning Trash into Biofuels: The Back to the Future’s Delorean…
A great movie and a great concept that is in fact happening as we speak. In fact, forward-thinking governments like Denmark, Switzerland and Australia have been burning non-recyclable trash for years in so-called waste-to-energy incinerators.
Denmark is especially adept at this. Every day, 300+ trucks filled with non-recyclable solid waste are sent to the massive Amager Bakke incinerator — enough to provide electricity and heat to around 100,000 households throughout the country…. Just from their trash.
And waste-to-energy incinerators aren’t the only thing when it comes to reusing waste. Enerkem is a massive Canadian company that turns trash into biofuels (like ethanol and methanol) and renewable chemicals for everything from transportation and heating to manufacturing.
And hot on their heels is a wave of innovative startups looking at new ways to process biomaterials and food waste to create greener, lower emission biofuels, not in small part, because battery/charging technology will be a hindrance to the electric car industry for years to come.
12. Peer-to-Peer/Community Product Sharing: Think borrowing, not buying
Who do you trust more, your neighbor or a stranger? The truth is, we already babysit each other’s kids, give Christmas cookies and borrow sugar when a recipe calls for it. And how many of your neighbors have their own lawnmower, driller, blender etc…? Wouldn’t it be awesome if your community had a pool?
Think about it. How many things in your home do you really use on a daily basis? Doesn’t it just make sense to share? Do we really both need a drill press when Dave next door has a worldclass DIY shop in his garage or Pat has the perfect projector for your kid’s birthday party?
There is a ton of potential in community sharing initiatives (like a library), at least if it was easier. And unlike the Subscription or B2C rental businesses, true sharing models can be implemented with almost no cost to the end user, especially if their existing products are added to a community pool for the collective.
And it could still make money. Any company that facilitated something like this for communities could easily take either a small cut of the transaction if money was involved (like Amazon), a small membership fee for access (like Costco) or even monetize via advertising (like Google) or offering financial products (like a bank) without having to charge the users an arm and a leg.
Together, our neighborhood has pretty much everything we could ever possibly need (and plenty of things we don’t). All it takes is someone making it easier to access and share, a little extra trust layer, and suddenly, it’s not socialism, it’s just sharing — and it just makes sense, and saves money and means everyone has access to better stuff too.
The race is on… Everything is up for the taking!
13. Rent Rather than Own: The other type of ridesharing
Ten years ago, when someone said ridesharing, you thought of carpooling — either for work or your kid’s events probably. It was all about moving the most amount of people in the least number of vehicles in the most efficient way possible.
Ten years later, ridesharing has ballooned into anything but… Uber and Lyft are everywhere, and yet, even before the pandemic, only 31% of Uber rides had more than one passenger (Source). That doesn’t seem very efficient.
And sure, you can argue that many aren’t buying cars these days, because, thanks to Uber, they don’t need one. But preventing new cars from being purchased is only half the battle. What about the billions of vehicles that lie dormant during the day while their owners are at work?
We could easily outfit our entire next generation with vehicles by simply better distributing and utilizing the ones that we have, no new cars required (which would be problematic from an electric vehicles perspective but illustrates the point).
This is the direction some of the most promising circular economy startups are going — joint ownership rentals. As we said, there are so many products you need once or twice a year or a month. What’s the point of owning a drill if you could just rent one when you needed to replace your lights?
One of the biggest names in the space (and also one of the biggest flops) was Rent the Runway. Rent that sexy prom dress for one night and then send it back, like Zalando for rentals.
But there were/are two major problems:
1) Shipping tons of stuff is incredibly unsustainable from a climate perspective
2) Venture capital expectations: With over $526M invested by VCs (at valuations at one point reaching $1.7B — now valued publicly at under $1B despite COVID-fueled market inflation) the company was forced to try and grow unsustainably fast. Unsurprisingly, it all came crashing down eventually and is no longer viewed as a promising business .
That said, the rental model works well in many use cases, especially when the products are local and shipping isn’t an issue. We for instance are members of Mobility, a Swiss public/private partnership that allows anyone to rent a car by the hour (for quite cheap: as low as 2 CHF per hour) whenever we need one. But the same could be applied to almost anything, which is exactly what Swiss startup Sharely is doing.
Rent a boat, a toolkit, a food processor, a pair of skis and pay just for the day, or less. With enough people onboard, that means attractive pricing, access to everything you could want, and a lot less “stuff” — which means lower carbon footprints and quality that actually lasts longer.
14. Company Return & Refurbish Programs: Upgrade your iPhone
Apple has long had a program to encourage customers to upgrade their phones and gadgets… By offering cashback credits for old products, Apple literally kills four birds with one stone: they encourage customers to buy more product, reduce the number of “broken” or outdated products that end up in landfills, extend product lifespan (thanks to their repairs) and make more money by reselling the returned and refurbed products as Apple Certified devices — which cost much more than your average used Macbook.
And while Apple does this presumably for all the wrong reasons (i.e. just to sell more iPhones and charge customers more), it is an incredibly effective model, especially from a climate perspective when the end goal isn’t to convince the customer to buy a new product.
And although this repair/refurbish model is generally only applied to electronics, it doesn’t have to be. Think of clothing stores: both secondhand and name brand ones. Some resale companies simply sell things as is (new or used), while others like Patagonia (probably my favorite company) have long repaired products for a small fee and now also resell returned/refurbished clothes to others with their Worn Wear collection. And they are by no means the only company pioneering this new approach to clothing sustainability. Even luxury brands and sites like Restory are getting in on the action.
Then there is furniture, vehicles, tools, instruments… the list goes on and on. The only question is, who will conquer each vertical?
Closing the Circular Startup Loop
As you can see, there are innumerable ways to start a circular economy startup or make your business more sustainable, all while still making great money in the process. Doing good and doing well don’t have to be mutually exclusive and incorporating sustainable and circular principles into your business don’t have to be an all-or-nothing approach. Similar to meat consumption or automobile/plane use, the key to improving our world/future is not about going hardcore and cutting out everything, it is about doing as much as you can to make a difference and enabling others to do the same.
But to do that, the world needs more examples of circular successes. We need more visionary entrepreneurs building the businesses of tomorrow, basing success not on endless, unsustainable growth and impossibly high stock market expectations, but on the basic fundamentals of business: serving customers and making money.
For existing businesses, the question is: how do you incorporate circular economy strategies into your operations and existing business practices/models?
For aspiring entrepreneurs, it’s: what big hairy problem do you want to solve and how can circular economics and some of the ideas presented here help you to do just that?
I hope this has been an inspiring and eye-opening example of just how original and awesome some of the evolving models of circular business can be. We are living in an era where our creativity and willingness to try and envision new things is the biggest limiting factor to the success we create and the world we make.
If you’ve been inspired by this post or know of other great circular economy startups or strategies that should have been included in the article, please share them in the comments below.
Need help building your circular startup or making your business more sustainable overall? Be sure to reach out. I’d love to help you change the world and if I can’t I’ll be sure to connect you with someone that can.
Cause entrepreneurs change the world, at least when they believe they can.
And I believe we can.