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Thomas Zobel
Thomas Zobel, Professor of Quality technology and logistics at Luleå University of Technology View original picture , opens in new tab/window

Circular economy is often better for the environment – but not always

Published: 17 August 2022

Researchers at Luleå University of Technology and Chalmers University of Technology have developed a new method, Business Model LCA (BM-LCA), which helps companies calculate how climate footprints and other environmental impacts from operations change during a transition from a traditional to a circular business model. In the project, they have mainly looked at the market for high-quality outdoor clothing and for them this means renting their clothes instead of selling them.

Thomas Zobel, Professor of Quality technology and logistics at Luleå University of Technology, took the initiative for the project when he noticed that some companies are switching to circular business models by assuming that it is better from an environmental and climate point of view. They did not count on it in advance to see if it was the right decision. He contacted Henrikke Baumann, Professor and researcher of LCA (life cycle assessment) at Chalmers University of Technology, and together they formed a project group that has now developed the new method.

Switching to circular business models

The purpose of the project from the beginning was to develop new circular, more sustainable business models in the outdoor sector, more specifically high-quality outdoor clothing. Special focus was on a certain type of business model based on a service system. Instead of manufacturing and selling the clothes to consumers, the company rents them to people. The business model also includes extending the life of the clothes; when they need to be updated or repaired it is done by the company who rents the garment to the consumer, and they also wash the garment before it is rented again. In the long run, the stores will also have to change their business models – from selling to renting. This means that they will sell fewer physical garments, they provide services instead, but it also places other demands on what a store looks like in the future.

The rental can be in the form of a one-time rental, where the customer for example rents a shell jacket during a week of skiing in the mountains for a fee, or a subscription service where the customer pays a fixed fee per month and has the right to pick up clothes a number of times.

– The idea is that the products should be used as much as possible, not just one week a year. Fewer numbers of garments are in circulation, but its function is used more or less continuously, says Thomas Zobel.

Better or worse – it depends

So is it always better with circular business models? Not always, says Thomas Zobel. The companies that manufacture the clothes have been good at keeping down their environmental and climate impact and the climate footprint per garment is not that big anymore. When the garments are sold to the customer, they are only sent once, unlike if they are rented. Then the garments are sent back and forth many times and the transports increase. However, what is most important for the climate impact is how the customers choose to transport themselves when they are picking up their rented garment. Thomas explains:

– If all customers were to choose to cycle or walk to pick up their garment, CO2 emissions would fall by up to 80 percent compared with a company that has a traditional business model. In our calculations, we have assumed that some walk, cycle or use public transports while some take their fossil-fueled car, which is the most realistic, and then we have seen that CO2 emissions fall by 35 percent. However, if everyone were to choose to take the car, the climate footprint would be larger than with a traditional business model. The circular business model works best for the big city person who may not use the garment so many weeks a year and does not need to use the car to pick up their rented garment.

Thus, companies cannot assume that their environmental and climate footprint decreases just because they switch to a circular business model. In reality, they lose some control over the products' environmental impact and their own environmental and sustainability work by handing over responsibility to customers.

Customer communication is crucial

In order for a circular business model of this type to reduce the environmental and climate footprint, creative and continuous communication with customers is required, something that the researchers are now looking at more closely in the last part of the project. As the company transfers some of the responsibility for improving its sustainability work to the customers, it is of the utmost importance for them that the customers make the best possible decisions regarding transport to the collection point. Simply introducing this model, and not doing anything more, can rather lead to the company increasing its environmental and climate impact.

Free model for everyone to use

From Luleå University of Technology, there are no plans to commercialise BM-LCA. The researchers are more interested in informing that the method exists and making it available to everyone. But it is difficult to change their business model and this competence is often not available in companies, so they now want to look at how they can make it more user-friendly. There is a consulting company connected to the project, which specialises in LCA studies, which for the time being can support companies with this. Thomas' advice to companies that are considering switching to a circular business model is clear:

– Make an analysis before you proceed with changing your business model, preferably with the help of BM-LCA. Get yourself a good basis. Do not guess, count on it. This is a complex method, but the advantage is that it gives good answers – in detail.

The follwing researchers from Luleå University of Technology has participated in the project SYSTAIN:
Thomas Zobel, Professor of Quality technology and logistics, Åsa Ericson, Professor of Information sytems, Johan Lugnet, researcher of Information systems, and Johan Wenngren, researcher of Information systems.

Contact

Thomas Zobel

Thomas Zobel, Professor

Phone: +46 (0)920 492134
Organisation: Quality Technology and Logistics, Business Administration and Industrial Engineering, Department of Social Sciences, Technology and Arts