Circular economy business models in developing economies: Lessons from India on reduce, recycle, and reuse paradigms

• Author: Mark Esposito,Sandeep Goyal,Amit Kapoor
• Date: 01 September 2018
• DOI: http://doi.org/10.1002/tie.21883
• Published date: 01 September 2018

COMPANIES IN THE CIRCULAR ECONOMY

Circular economy business models in developing economies:

Lessons from India on reduce, recycle, and reuse paradigms

Sandeep Goyal

1

| Mark Esposito

2,3

| Amit Kapoor

1

1

Institute for Competitiveness, Gurgaon, India

2

Division of Continuing Education, Harvard

University, Cambridge, Massachusetts

3

Grenoble Ecole de Management, Grenoble,

France

Correspondence

Sandeep Goyal, Institute for Competitiveness,

U 24/8, DLF Phase 3, Gurgaon 122 002,

Haryana, India.

Email: sandy2u@gmail.com

According to the UN Sustainable Development Goals in 2016, the demand for resources will

require natural resources equivalent to two and three planets by 2030 and 2050, respectively.

The linear economic model driven by a “take-make-dispose”philosophy is unable to manage the

demand and supply balance in consumption of natural resources. This imbalance is affecting the

sustainability of the countries and enterprises as well as affecting the global supply chain leading

to socioeconomic and environmental risks and volatility. Realizing the future resource scarcity

challenge, the current linear economy model is giving way to the circular economy model. The

circular economy model focuses on careful alignment and management of resource flows across

the value chain by integrating reverse logistics, design innovation, collaborative ecosystem, and

business model innovation. This article examines how circular model is pushing the companies

in developing economies like India to design and implement business models that are based on

reduce, reuse, and recycle paradigms.

KEYWORDS

business models, circular economy, cradle-to-cradle, cradle-to-grave, developing economies,

linear economy, reduce-reuserecycle

1|INTRODUCTION

The global demand–supply curve is showing trends of caution with

the increasing gap between growing demand and finite resources.

The growing demand and competition for limited resources are lead-

ing to price volatility, resulting in environmental degradation and

threatening the competitiveness of countries (Di Maio & Rem,

2015). The resource pressure is increasing, due to the multitude of

reasons. The first reason being that world population will exceed

8 billion by 2030 and 9 billion by 2050 (EMF, 2013; Tse, Esposito, &

Soufani, 2015). This population growth level implies that the

demand for resources will require two and three planets' worth of

natural resources by 2030 and 2050, respectively (Esposito, Tse, &

Soufani, 2015a). The second reason is attributed to the linear econ-

omy model, which is driven by the “cradle-to-grave”philosophy. The

linear orientation implies a single-use lifestyle motivated by a “take-

make-dispose”approach toward consumption of resources (Ellen

MacArthur Foundation [EMF], 2013; World Economic Forum [WEF],

2014). The linear economy model is driven by the core premise of

balance and equilibrium between demand and supply of one planet,

whereas demand is expected to reach two planets' worth of

resources by 2030.

This upcoming reality questions the basic premise of linear econ-

omy model followed by the countries and businesses globally. The

third reason is attributed to the variations and complexities regarding

policies, priorities, and regulations among different countries. The

sociocultural and economic diversity, as well as psychological behavior

and resistance to change from a use-and-throw mind-set, have made

it difficult to design and implement a global change and action plan to

drive the transformation from linear to circular economy model. The

fourth reason points at the demographic shift happening regarding

the concentration of population across countries. According to Haub

(2012), the majority of the population resides in developing countries.

By 2050, the developing countries will account for more than 90% of

the world's people (Figure 1). The concentration of population in less

developed countries poses a significant challenge and need for sys-

temic intervention because the concept of circular economy is rather

new for the developing countries as compared to the developed coun-

tries. The adoption of circular economy approach in developing coun-

tries requires a long-term systemic behavior change orientation for all

DOI: 10.1002/tie.21883

Thunderbird Int Bus Rev. 2018;60:729–740. wileyonlinelibrary.com/journal/tie © 2016 Wiley Periodicals, Inc. 729