A New Method for Assessing Circular Business Cases

Conventional business analysis overlooks the costs and new revenue sources found in circular approaches.

- By Samsurin Welch and Khaled Soufani

THE CIRCULAR ECONOMY IS A KEY enabler for businesses to achieve sustainability targets. However, traditional financial analysis models can be inadequate for evaluating circular business models. While circularity helps reduce waste, recover materials, and extend product lifespans, it also fundamentally changes how value is created and measured. Yet, most financial models remain rooted in linear assumptions — where profitability is assessed through onetime product sales and predictable cost structures.

This misalignment creates significant risks. Circular businesses generate revenue across multiple life cycles — through leasing, refurbishment, resale, and material recovery — but linear analysis overlooks these ongoing value streams. Additionally, cash-flow timing, revenue recognition, and asset management complexities must be restructured to ensure financial viability. These analytical gaps can lead to undervaluing circular investments, misjudging payback periods, and deterring financially viable circular strategies.

To make circular business models financially competitive, executives need new approaches to financial analysis — ones that capture multi-life-cycle revenue, asset utilization, and residual material value. This article introduces practical financial considerations tailored for circular models in order to equip leaders with rigorous methods to assess profitability, risk, and long-term financial performance.

Why Circular Models Defy Conventional Analyses