A Circle, Not a Crisis! Research on Success Factors of Circular Transformation

What factors make a successful circular transformation possible in SMEs?

Our colleague Jasmin devoted her master's thesis to this question. She examined the internal and external success factors of the shift from a linear economy to a circular one in expert interviews, and developed a "Circular Transformation Canvas". Stay with us to the end!

Why should I transform my company as fast as possible?

Alongside the reasons we all know, it's above all the global deterioration of our living conditions through the one-directional use of finite resources that pushes companies to transform circularly. And that's exactly where a fascinating opportunity appears: the competitive advantage. Whoever transforms now is among the few companies in Germany that have already done it, and thus a role model.

This advantage can be explained with the example of the company Lorenz Meters (near Ulm):

The idea of the circular economy at Lorenz first arose from economic considerations. Water meters have to be replaced regularly due to legal calibration rules and accuracy requirements, even though many components of high-quality products still work perfectly after use and removal. The water-meter business was fiercely contested, and almost 20 years ago Lorenz Meters was in a difficult economic position. In the mid-2000s, some competitors began replacing the durable core material brass with plastic and moving production to low-wage countries. At the same time, strong fluctuations and sharp price increases on raw-material markets created additional challenges. To stay competitive, the company decided to take its products back and integrate them into a circular process. This strategy paid off: today Lorenz is market leader in water meters and has received numerous awards for innovation and sustainability. The consistent implementation of the circular economy is seen as the key to this success. (Source: https://circularhubs.de/lorenz-meters-wasserzaehler-im-kreislauf-3/)

Sounds good, but what challenges will I face?

Circular transformation comes with considerable challenges and costs. Companies have to redesign processes and supply chains and invest in modern machinery and equipment. At the same time, the availability of affordable, sustainable energy and raw materials is another hurdle. It's also necessary to convince companies that circular business models with more durable products can help secure their revenue. That certainty, however, is undermined by global crises like supply-chain problems, economic uncertainty and inflationary pressure.

Low acceptance of products not considered "new" also holds back the implementation of such models. The example of a rented Christmas tree that gets replanted after the holidays shows how cultural and geographic factors shape individual consumption decisions. These considerations concern not just holiday goods but also mobility, housing and clothing.

Another obstacle is the lag in digitalization, especially among SMEs, where know-how and staff resources are often lacking. Missing partnerships and a lack of transparency between stakeholders also make transformation harder. International dependencies and regional differences in recycling regulations can further complicate introducing a circular economy. On top of that, there aren't enough incentives from legislation to make the switch easier for companies. The tension between environmental and growth goals persists, despite European initiatives like the right to repair and waste-reduction measures. Another problem is measuring ecological, social and economic sustainability, since suitable metrics are still lacking.

How do I start a successful transformation in my company now?

Based on the research findings, a "Circular Transformation Canvas for SMEs" (CTC) was derived. Its goal is to form the starting point for SMEs in circular transformation. It bridges the gap between the previous linear business model and the target state of a circular one. The canvas is grounded in the surveyed internal and external success factors as well as theory.

Want the canvas or to go deeper and apply its individual elements to your company in a kickoff workshop? In our FUTURE CANDY workshop we work through all the important building blocks of the Circular Transformation Canvas together, so you can start with a clear roadmap.

Get in touch by email at jasmin@futurecandy.com

Bring the motto a circle, not a crisis to life in your company!