Insead flags up circular economy challenges

  • January 22, 2018
  • ReMaTec
  • Circular Economy

Remanufacturing can help sustainability – but it will not be profitable for all companies, warn researchers at French institute INSEAD. A closed-loop business model cannot work for everyone, says Patricia van Loon in a paper which looks at the profitability of leasing and remanufacturing washing machines for a large white goods producer. Companies thinking about changing their model are “strongly advised to apply care in being overly optimistic about the circular economy, and to look for alternative business models which show some promise before committing”. Previous research has ignored important costs, such as repair and administration, which should be included in the economic assessment of remanufacturing “since they significantly influence economic viability for the manufacturer”. More tools that simultaneously look at costs for consumers and profitability for manufacturers are needed so that the full economic impact of circular business models can be understood, van Loon suggests. More attention should also be given to different consumer segments and how circular business models might affect their costs. In the model her paper examines, it was challenging to make the same level of profit as in the traditional, linear system.