Embarking upon circular construction

The building industry consumes approximately 40 per cent of materials entering the global economy while facing significant challenges related to unsustainable consumption of natural resources and greenhouse gas emissions. The concept of the circular economy is gaining momentum as a solution which addresses these issues while generating economic benefits. To transition towards a circular economy, scholars and practitioners stress the need for new circular business models (CBMs). Today, the uptake of CBMs in the building sector remains limited. A fundamental factor for succeeding with CBM implementation is to design value propositions based on circular economy principles that are appealing to and accepted by customers. This study uses a case study approach to explore how a large manufacturing company in the building construction industry can create added customer value by re-defining its value proposition in line with circular economy principles. By means of a three-step business model innovation process for value proposition re-design, “thinking, talking, testing”, three potential value propositions of facade elements are suggested. The findings suggest that CBMs can provide added customer value by delivering environmental, financial and end-user value. However, the financial value in terms of risk minimisation and reduced construction cost is a critical prerequisite for the viability of CBMs. Despite the potential added value creation, two key barriers to customer acceptance remain: split-incentives between actors in the value chain and the long lifecycles of buildings. The existence of these barriers suggests that a circular value proposition should be tailored to the span of responsibility of the customer and that the viability of CBMs, which generate value at end-of-life is dependent upon the effective delivery of other customer benefits. Future research may investigate the potential for value chain collaboration to stimulate the emergence of CBMs which create shared value and new financing models which promote circular construction. (Less)