How will we finance circular business models?
In a recent blog post, ING Group observe that, “increasingly, businesses are offering products through a subscription or leasing arrangement, but it’s still early days in getting to grips with how to finance this.”
While the circular economy continues to gain traction with the world’s leading businesses, organisations and institutions, ING’s article points out that examples with a thorough successful business case attached are still at least somewhat scarce.
This is in part an understandable reality for emerging ideas and new concepts. ING put this down to the potential breadth and complexity of the circular economy, which can be applied in a wide range of sectors and different part of the economy. Building enough knowledge in the market about what a circular economy really means is unquestionably still a challenge for the idea’s pioneers.
An associated challenge is that new product-as-a-service business models move transform the cash flow from one-off payments at the point of sale to leasing agreement with regular bills. Building understanding in banks, so that they can in turn offer better financial terms for companies aiming to drive the circular economy is still an important question.
Establishing the business case with both small and large companies demonstrating the potential benefits will have to go hand-in-hand with a shift in the current economic context and the financial models that govern it.
Read the full ING blog here: Jeans, phones, engines: circular business models are growing, but how to finance them?