The rise of circular economy has brought in a wave of innovative business models designed to minimize waste and maximize resource utilization. However, a new study reveals these circular business models can have unintended consequences, potentially undermining their environmental benefits.

The circular consumption conundrum

The study, which analyzed 30 real-life cases of consumer-facing circular business models, found consumer behavior can either enhance or diminish the sustainability gains. When consumers engage with circular models in a way that promotes sustainable consumption, it leads to "conservation effects." This includes behaviors like reducing overall consumption, choosing used products over new ones, and extending product lifespans.

For instance, customers using a pay-per-use washing machine service were found to reduce their laundry frequency and temperature, thus lowering their environmental impact. Similarly, a car-sharing service motivated some users to give up car ownership altogether, leading to a significant reduction in their carbon footprint.

However, the study also identified a range of ‘rebound effects’ where consumer behavior offsets the environmental benefits of circular models. These include behaviors like increased consumption due to lower prices, using shared products in addition to owned ones, and substituting eco-friendly options with less sustainable ones.

For example, some users of a clothing rental service increased their overall consumption by renting clothes without reducing their regular purchases. In another case, a laundry service led to increased consumption as it was primarily used for washing bulky items that wouldn't fit in home washing machines.

The complexity of factors

The study highlights that consumer behavior in circular models is influenced by a complex interplay of factors, including personal values, social norms, economic incentives, and business model design. While convenience and practicality were found to be the primary motivators for engaging with circular models, sustainability concerns often took a backseat.

Furthermore, the study found that the environmental impact of circular models can vary significantly across different consumer segments. For instance, in a boat-sharing service a small group of users generated more emissions than they saved, negating the positive impact made by other users.

Environmental impacts, a mixed bag

The findings on the environmental impact of circular models are sobering. While some cases showed significant emission reductions, others resulted in increased emissions or only marginal improvements. The average environmental savings were found to be relatively low, and in some cases, the negative impacts far outweighed the positive ones.

This study has important implications for businesses, policymakers, and researchers alike. It underscores the need for a more nuanced understanding of consumer behavior and the complex interplay of factors that influence it.

Businesses need to design circular models that not only promote convenience and practicality but also incentivize sustainable consumption. This can be achieved through user-centric design, co-creation, and the integration of elements that nudge users towards sustainable behaviors.

Policymakers need to recognize that market-based approaches alone are not sufficient to address the systemic issues that drive rebound effects. Policies should integrate efficiency and sufficiency measures, moderate consumer demand, and promote a shift in societal values towards mindful consumption.

Researchers need to adopt interdisciplinary approaches that combine qualitative and quantitative methods to gain a more comprehensive understanding of consumer behavior in circular models. This will enable the development of more effective strategies for mitigating rebound effects and maximizing the environmental benefits of the circular economy.

Thus the study reveals that circular business models are a double-edged sword for sustainable consumption. While they offer the potential for significant environmental gains, their success hinges on a deeper understanding of consumer behavior and the implementation of holistic strategies that address the complex interplay of factors driving both conservation and rebound effects.