Save on raw materials through circular business

Circular economy: definition

In a circular economy, raw materials are used more consciously, for longer periods of time, and are reused over and over again. For example, products must have a longer lifespan, be repairable, and serve as raw materials for new products. Old train seat upholstery is recycled into shoes, bananas that are ‘too straight’ are made into banana bread, and clothing is rented out rather than sold.

Cradle-to-cradle

A related term to circular economy is cradle-to-cradle. Cradle-to-cradle products are deliberately designed in such a way that they can be reused after use for the manufacture of new products, or are fully biodegradable. If you use a circular business model, check if you can organise your production process based on the cradle-to-cradle principle, so as to make the circular production process as simple as possible.

Benefits of circular business

Is your business circular? Then you save on raw materials. You are also less dependent on price increases and uncertain delivery times. The prices of many raw materials shot up recently due to shortages. Also, deliveries from far away are more often uncertain. The end of these price rises and the uncertainty surrounding delivery times does not seem to be in sight for the time being. If you work in a circular way, you will be less affected. And that is not only nice for your business, but also for your customer. After all, you can deliver what and when you promise.

“Natural resources will become even more scarce and expensive in the future,” says Suzanne van Haren, programme manager at the Versnellingshuis Nederland circulair!, an initiative launched by the Ministry of Infrastructure and Water Management and MVO Nederland. The Versnellingshuis supports businesses in doing circular business free of charge. “All this shows that the dependency on new natural resources is not without risk. If you would like your business to remain profitable in the future, it is sensible to learn more about opportunities for circular businesses and about the risks involved if you do not do this.”

Rules and regulations

As a business owner, you must comply with certain laws and regulations regarding circular business. For example, in the EU there is a ban on disposable plastic items, such as cutlery and plates. You can also no longer give plastic cups and meal packaging to your customers free of charge. Not even for on-site consumption. In addition, you must provide a reusable alternative.

Van Haren says additional rules have been introduced to promote the reuse of natural resources. In a growing number of sectors and industries, for example, manufacturers must pay for waste collection and disposal. “This applies, for example, to the textile sector. Textile manufacturers are responsible for collecting, reusing, recycling, and waste processing of their products, and they also cover the costs of waste management. We also have this system for producers of batteries and accumulators.”

Grants and tax benefits

The government promotes circular business through financial support (RVO, in Dutch) in the form of grants and subsidies, tax benefits, and affordable loans. Many regional governments also invest in the circular economy. Use this tool (in Dutch) to check if your local authority or city council provides relevant grants and subsidies.

Subsidy for reuse, repair and recycling

For entrepreneurs who want to reuse, repair, or recycle products and materials in their business, there is the Circular Implementation and Upscaling subsidy (CIO). This allows you to invest in new circular techniques and processes.

Tax benefit through MIA and Vamil

If you invest in circular business assets and technologies, apply for the environmental investment allowance (MIA) and the random depreciation of environmental investments (Vamil). The MIA allows you to deduct a percentage of the investment costs from your taxable profit. With Vamil, you write off any percentage of the investment costs in any year. Combine the MIA and Vamil and benefit from a net tax advantage of up to 14%.

Getting into circular business

If you intend to get involved in circular business, there is no need to radically change your entire business operations or business model. You can follow the R-ladder of circularity strategies (RVO, in Dutch) a model to make your business more circular in 6 steps.

The R-ladder of circularity strategies

• R1. Rethink

Take a critical look at the products, materials, and fabrics you are using. Abandon anything you do not really need or set out to find sustainable alternatives.

• R2. Reduce

Manage natural resources more economically and more efficiently in order to prevent waste.

• R3. Reuse

Reuse of obsolete products. Items such as smartphones and tablets are increasingly finding their way back to consumers. Refurbished, recovered, or upgraded, they are like new, but lower in price.

• R4. Repair

Extend the economic life of products by repairing or refurbishing them. Turn old products into new ones or use parts of an old product for the manufacture of a new one.

• R5. Recycle

Process and reuse natural resources and waste streams or waste, including grass, waste wood, and coffee grounds. They should preferably be processed into resources of the same quality as the original resource.

• R6. Recover

Incinerate waste materials whereby the incinerator converts the material into heat and electricity. In a circular economy, as few materials end up in this stage as possible.

Tools and partners

• The  Natural Resource Scanner (grondstoffenscanner, RVO, in Dutch) developed by the Netherlands Enterprise Agency tells you what natural resources you are using and how to reduce your risk of scarcity.
• If you would like to design or redesign products, services, and business models based on a circular model and then do circular business, CIRCO (in Dutch) will help you with the support of the government.
• Ask all your questions about network partners, funding, and laws and regulations related to circular business to the Versnellingshuis.