The Top 5 Sectors Transitioning to Circular Business Models And How to Overcome Their Challenges

What Does Transitioning to Circular Business Models Mean?

A circular business model decouples economic growth from resource depletion by designing waste out of the system, keeping products and materials in use, and regenerating natural systems (Ellen MacArthur Foundation, 2015). Unlike traditional linear models (take-make-waste), circularity prioritises reuse, repair, remanufacturing, and recycling—creating closed-loop systems that reduce environmental impact while unlocking new revenue streams.

The Top 5 Sectors Leading the Circular Transition

Based on EU policy priorities, waste volume, economic potential, innovation activity, and regulatory readiness, these sectors are at the forefront:

1. Construction

Why? The EU’s largest waste stream (36% of the total) is driven by demolition and inefficiency.
Policy Driver: EU Construction & Demolition Waste Protocol.
Example: The Netherlands’ Madaster platform tracks reusable building materials.

2. Textiles

Why? The second-highest carbon footprint sector: 11 kg of textiles discarded per EU citizen annually.
Policy Driver: EU Strategy for Sustainable Textiles (2022).
Example: MUD Jeans leases denim, ensuring 90% recycling rates.

3. Plastics

Why? Only 14% of plastics are recycled globally.
Policy Driver: EU Single-Use Plastics Directive.
Example: CuRe Technology (NL) chemically recycles PET into food-grade material.

4. Food & Agriculture

Why? Twenty per cent of EU food is wasted; protein alternatives are crucial.
Policy Driver: Farm-to-Fork Strategy.
Example: Protix (NL) produces insect protein from food waste.

5. Electronics

Why? Fastest-growing waste stream (3% annual increase).
Policy Driver: EU Right to Repair Directive (2023).
Example: Fairphone designs modular, repairable smartphones.

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Challenges & Solutions for Circular Innovation

Transitioning to circular models isn’t easy. Below, we break down key pre-launch and post-launch challenges and how Growth Lantern can help innovators navigate them.

1. Construction: The High Cost of Circular Materials

Challenge: Recycled bricks or modular designs often cost 20-40% more than those made from virgin materials.

Pre-Launch Solution:

• Partner with municipalities for subsidized pilot projects (e.g., Rotterdam’s circular housing initiative).

• Utilise digital material passports (such as Madaster) to demonstrate compliance early.

Post-Launch Solution:

Scale via public procurement contracts, leveraging EU Green Deal funding.

Growth Lantern helps optimise product-market fit and navigate certification processes to accelerate commercialisation.

2. Textiles: Low-Quality Recycling Inputs

Challenge: Less than 1% of clothing is recycled into new garments due to the blending of fibres.

Pre-Launch Solution:

• Focus on mono-material designs (made from 100% polyester) for easier recycling.

• Partner with brands (H&M, Zalando) for take-back program trials.

Post-Launch Solution:

• Invest in chemical recycling (e.g., Worn Again Technologies) to handle mixed fibres.

Growth Lantern helps develop scalable business models and partnership strategies with retailers.

3. Plastics: Contamination in Waste Streams

Challenge: Over 30% of recycled plastic is unusable due to food and oil residue.

Pre-Launch Solution:

• Target pre-sorted industrial waste (e.g., packaging scrap) vs. post-consumer.

• Align with EPR schemes to ensure cleaner collection.

Post-Launch Solution:

Deploy AI sorting robots (AMP Robotics) to improve purity.

Growth Lantern provides supply chain optimisation support to enhance commercial viability.

4. Food: Consumer Resistance to Novel Products

Challenge: 60% of Europeans won’t try insect-based foods due to "yuck factor."

Pre-Launch Solution:

• Market products as pet feed or aquaculture ingredients (lower barrier to entry).

• Use behavioural nudges (e.g., "ugly produce" discounts).

Post-Launch Solution:

• Partner with supermarkets (e.g., Albert Heijn) for in-store sampling.

Growth Lantern designs go-to-market strategies and consumer adoption campaigns to overcome resistance.

5. Electronics: Low Repair Participation

Challenge: Only 5-10% of smartphones are returned for recycling.

Pre-Launch Solution:

• Build trade-in incentives (e.g., €50 discount for old devices).

• Design for modularity (like Fairphone).

Post-Launch Solution:

• Lobby for stronger Right to Repair laws (EU 2023 Directive).

Growth Lantern helps refine product designs for easier repairability and facilitates the development of incentive programs to boost participation.

How Growth Lantern Accelerates Circular Innovation

Growth Lantern specializes in helping SMEs and innovators overcome development and commercialization hurdles in the circular economy. Our expertise includes:

• Product Development Support: From ideation to prototyping, ensuring designs meet market and regulatory needs.

• Commercialization Strategy: Crafting tailored go-to-market plans and identifying key partnerships.

• Stakeholder Engagement: Facilitating collaborations between startups, corporates, and policymakers.

Sources:

• EU Policy Trackers

• Ellen MacArthur Foundation

• Industry Reports (Textile Exchange, Circle Economy)