Circular business models - Avoid the common mistakes

Most businesses are inherently linear with only 7% of the global economy coming from circular business models. Businesses are geared to take, make, sell with the end-of-life consequence sitting beyond the business' operating horizon. And they are good at it, very good at it. Often having spent decades optimising each process along the way, scrutinising every opportunity for increased value creation or higher profit delivery.

So changing that fundamental linear model can feel inherently risky, moving from the world of the familiar to having to navigate new and uncertain challenges – indeed this fear factor is a frequent blocker to many businesses making meaningful progress toward more circular solutions.

Based on our experience working with businesses across various industries, there are several common mistakes that can derail circularity initiatives before they gain momentum. By being forewarned about these pitfalls, you can de-risk your circularity journey, hopefully making that first step less daunting.

> RELATED ARTICLE:  Taking the first (and likely hardest) step towards circularity

1. Treating Circularity as a Sustainability Add-On

The Mistake:  Many businesses approach circularity as an extension of their existing sustainability programmes, managed by environmental teams with limited business authority.

The Reality:  Successful circular strategies require fundamental changes to how value is created and captured. They need to be owned by core business leaders with profit and loss responsibility.

How to Avoid It:

• Ensure your circularity strategy is championed by senior business leaders, not just sustainability teams.
• Make circularity a board-level priority with clear business metrics, not just environmental ones.
• Establish cross-functional steering committees that include commercial, operations, and finance leaders alongside sustainability experts.
• Create dedicated budget lines for circular initiatives that sit within core business units rather than sustainability departments.

2. Waiting for the Perfect, End-to-End Solution

The Mistake:  Some businesses get caught in analysis paralysis, waiting for the perfect circular solution before taking any action. They assume transformation must happen overnight or not at all.

The Reality:  Circular innovation is inherently experimental. The most successful companies start with imperfect solutions and iterate based on real-world learning. Transformation happens incrementally, building capabilities over time.

How to Avoid It:

• Embrace a "test and learn" mindset that prioritises progress over perfection.
• Start with pilot programmes focused on specific product lines or customer segments where you can gather meaningful data quickly.
• Develop a portfolio approach with multiple small-scale experiments running simultaneously, allowing you to learn what works in your specific context.
• Use frameworks like our Circular Ready Reckoner approach to identify the most promising starting points for your business, focusing on areas where circular models can solve existing customer problems while building internal capabilities for larger transformations later.

3. Underestimating Consumer Education Requirements

The Mistake:  Assuming that consumers will immediately understand and embrace circular offerings without significant education and communication.

The Reality:  Most consumers need help understanding the value proposition of circular products and services. Clear communication about benefits, usage, and impact is essential. However, education alone isn't enough – circular offerings must solve real customer problems first.

How to Avoid It:

• Focus on solving existing customer pain points through circular solutions rather than asking customers to change behaviour for purely environmental reasons.
• Develop clear, compelling narratives that explain not just what your circular offering does, but why it matters to customers personally.
• Create educational content that demonstrates tangible benefits – cost savings, convenience, quality improvements – alongside environmental impact.
• Partner with trusted voices in your industry to build credibility and reach.

4. Ignoring Ecosystem Dependencies

The Mistake:  Developing circular initiatives in isolation, without considering the broader ecosystem of suppliers, partners, and infrastructure required for success.

The Reality:  Circular business models often depend on complex ecosystems of partners, from reverse logistics providers to remanufacturing specialists. Success requires orchestrating these relationships effectively.

How to Avoid It:

• Map out all the ecosystem partners you'll need early in your planning process, treating ecosystem development as seriously as product development.
• Engage with potential partners from the beginning to understand their capabilities, constraints, and commercial requirements.
• Consider building consortiums with other businesses facing similar challenges to create sufficient scale for infrastructure investments.
• Remember that ecosystem building often takes longer than product development, so start these conversations early and maintain them throughout your transformation journey.

The Window for Action is Narrowing

The uncomfortable truth is that most businesses aren't built for circularity. Industry has spent more than a century optimising linear business models, and the task of reinventing these models can feel like commercial suicide.

This is not the moment to panic, but it is the moment to act. Most large legacy businesses are still at the start of this journey, and the revolution won't happen overnight. The challenge is more complex but not insurmountable. The organisations that will thrive are those that start building the foundational work today – building circular capabilities, developing strategies, launching pilots, before they're forced to by regulation or disruption.

Learning from Success and Failure

The companies succeeding in circular transformation share common characteristics. They treat circularity as a strategic imperative, not a sustainability project.They invest in understanding their entire value system, not just their immediate operations. They build new capabilities rather than trying to retrofit old ones. Most importantly, they start with pilots that solve current customer problems, building momentum and learning before attempting wholesale transformation.

The failures share patterns too. They mistake circular initiatives for circular strategy. They underestimate the complexity of value chain transformation. They launch solutions before the supporting infrastructure exists. They optimise for environmental impact rather than commercial viability.

These pitfalls are avoidable – but only through deliberate capability building and strategic discipline. The key is recognising that circular transformation is a marathon, not a sprint, requiring sustained commitment and the wisdom to start before you feel completely ready.

So where does that leave you?

Hopefully feeling more sure-footed on the path towards circularity, armed with practical insights to navigate the common obstacles that derail so many well-intentioned initiatives. The circular economy represents both the greatest commercial opportunity and the most complex transformation challenge of our time. Success belongs to those who start now, learn fast, and build systematically toward a fundamentally different way of creating value.