Circular vs. Sustainable Business: What’s the Difference?

1. Challenges and Limits of Circularity

1.1 Not everything that’s circular is sustainable.

When I first heard this phrase, it brought a deep sense of quietness to me, shifting the attitude from worshipping the circular economy towards accepting that it is not as simple as I wished — not as perfect as the waste-free circular processes of Mother Earth. And worshipping is the right wording here, as some find a sense of relief in pursuing climate action as a replacement for religion. But if we stop looking at it as a religion — as a set of rules guaranteeing us heaven — we can experiment and nurture many varieties of solutions that are optimized and compromised rather than idealized.

Paper recycling, for example, requires massive amounts of water; moreover, during the recycling stages the water often becomes polluted, and if it is not filtered, it can harm local water sources and surrounding ecosystems. In addition, paper cannot be recycled endlessly — it has a limit of only a few cycles, which means that trees are still needed for new paper production. There are already existing solutions to these disappointments of mine, such as filters that clean the water before it is released back into the environment. Moreover, circular processes make it possible to endlessly reuse the same water. So that’s it, all problems solved, and we have a perfect circular process? I kept asking more: “What else? Or what about…?” as I went deeper. What about the filters themselves — they eventually become waste, and true circularity implies that no such waste should exist at all. But is that so?

Of course, solutions are endless. For paper recycling, closed-loop processes have already been developed that allow water to be reused indefinitely. Even the waste heat from the water-cleaning filters can be used to warmup houses, and the plastic from the filters themselves can also find a path to recycling… and suddenly everything seems to fall into place — almost zero waste.

And when I look at these processes, I no longer see just circularity, but rather an endless spiral when asking What else? How else it could have been done more sustainable?

1.2. It is not so much about Circularity as it is about Resource Efficiency. With the devil in the details — data on understanding how much each resource (Land, Water, Minerals, Air) costs to us and to Nature — we do the work for the resources, as they cannot speak for themselves. It becomes a bit clearer how sustainable our Circular actions really are.

And the more we design and iterate the Circular Economy in business operations, the better the processes will be redesigned and the richer the set of solutions discovered.

Just as each bug’ has its own purpose for the entire system, Just as every word in a language carries meaning and contributes to the richness of expressions or a Gallerist learns to recognize the value of each masterpiece through years of experience, the same should happen with the Circular Economy replacing the Linear one and offering a bouquet of “Models” for Economists and Management Strategists to pick and apply.

Maybe we are in the phase of generating a whole new Encyclopedia of Circular Business Solutions.

2. Circular Business Models: How to Integrate it into Canvas

Traditionally, business models focus on defining the customer segments, key activities, required resources, partnerships, and customer relationships. We ask: Who is the target audience? Who are the partners? At the beginning, this makes sense for the go-to-market strategy. However, with Circularity in business models, the questions starting with What and How shift to How long? What else? How else? Where else? Thus, we discover additional phases through which products (and the resources they are made of) can continue sustaining.

I spent some time trying to understand if there was a universal structure, such as Osterwalder’s Business Model Canvas, but for Circularity — so that when applied, you know you have gone through the process and ensured that you answered all necessary questions. But it is not as easy as it seems.

I have tried to merge Osterwalder’s Business Model Canvas with the Circular Business Model (example presented by Lund University). What they do is go through the business model questions for separate stages of the product life cycle: before production (extraction, collection), during production, and after sales. Moreover, by generating as many questions as possible, we can see how Circularity can be applied not only to the product being marketed, but also to the entire operational process.

I find they do it beautifully by placing the Business Model metrics in one vertical column — instead of expanding everything on one dashboard as in Osterwalder’s Canvas. But unfortunately, it does not help to come up with one generic template that says: here is a tool, a methodology — use it, scale it for your own business. Every time the idea of Circularity comes to mind, you might get confused about whether the key element you are investigating is the product, the resources, or the processes. What is primary and what is secondary? In fact, they all matter when it comes to applying Circularity. But once they all matter, chaos in business modeling becomes inevitable. And a structure is still needed.

And what matters even more is remaining lucrative while pursuing Circularity. So it is not an easy task to wrap Circularity into one dashboard, as in the example by Lund University. With Design Thinking processes, it becomes possible to unbox all knowledge with the help of smart questions and then wrap it back into whatever forms it needs to take.

That is why I refer to Circularity as a bouquet of solutions or an Encyclopedia, where you have endless ways to tackle the process. Some might be purely circular, others both circular and resource-efficient, others questionable when not sustainable — and many more options. And they all make sense, as they can inspire, be used, reused, or repurposed … similar to resources. In such a case, no idea or solution is a waste, just as no material product (object) is not a waste.

I like how nowadays waste management companies present slogans such as “Wow, what a waste.” This approach encourages us to produce and consume more mindfully.

What questions might we want to ask to design a business model for each case?

Design & Strategy

1) How else could we extend the life cycle — repurpose? repair? remanufacture? refurbish?

2) What are the ways to produce better products — durability? modularity? reuse?

3) How do we produce less waste — renewable? recycled? upcycled?

4) How do we motivate returns — leasing? renting? sharing?

5) How do we track the logistics of products — take-back systems? deposits? partnerships?

3. Circular Business Models in Practice

It is only a matter of time before we see award-winning companies recognized for durability and for loyalty to resources — as a mindset of appreciating and showing gratitude to each resource that generates income for the business. Today the KPI is a returning client; tomorrow it will be durability, with lucrativeness coming from long-term customer relations.

As I mentioned with the Encyclopedia of Circular Business Models, the best way to learn is to ask how others are doing it. I am listing the most common and my favorite models below. I believe the more we learn from others, the more we are capable of shaping and generating our own vision of how to apply Circularity with Sustainability and Profitability in mind.

What are the common circular business models?

Product as a Service (PaaS). Customers pay for use, not ownership (leasing, renting, pay-per-use). A great example is “Light as a Service” — the Circular lighting at Amsterdam’s Schiphol Airport by Philips, where the business is paid for lighting, not for lamps.

Resource Recovery. Recovering useful resources or energy from waste, by-products, or end-of-life products enables closed-loop business models. An example is recyclable EV batteries offered by Umicore. By recovering batteries and feeding them back into new EV battery production, the process enables automotive companies to source circularly instead of following the linear model. Other good examples include using waste heat or materials from one industry as input for another. Classic cases are Kalundborg Symbiosis (Denmark) or Rotterdam Port (Netherlands), where waste heat is used to warm homes.

Sharing Platforms. Maximizing the use of underutilized assets by enabling shared access, such as car-sharing or tool libraries. A practical example is Leihladen Köln — renting tools instead of buying them.

Product Life Extension. Extending product life through repair, maintenance, upgrading, resale, or second-hand markets. Examples include IKEA’s Buyback & Resell or IKEA Zweite-Chance-Service, which allows customers to gain points for future purchases when returning used products. Other examples are platforms for circular construction, enabling the resale and reuse of building components (doors, windows, flooring, etc.), such as Concular (Germany) or similar marketplaces that reduce construction waste.

And let us remember: while we look at how others are already doing it, there is always space for the a-ha moment — an insight that might add a new approach to Circular Business Model to the Encyclopedia of yours.