Circular Enterprises and Being Paid Twice

So far, this course has focused on seeing: seeing abundance, seeing dependence, seeing patterns and seeing the principles that should guide a project. This chapter is about how it works. How does a circular enterprise actually earn money? How is it financed? And who owns it?

We start with the business model that sits at the heart of many circular enterprises, and that has come up throughout this course: being paid twice.

What makes an enterprise circular

A circular enterprise takes something that would otherwise be wasted, lost or underused, and turns it into something of value, close to where it was found. Its inputs are often other people’s outputs: food scraps, wood, buildings, heat, water, land or skills that nobody else is using.

That gives circular enterprises an unusual advantage. Many conventional businesses have to buy their raw materials. A circular enterprise can often get its raw materials for free, or even be paid to take them.

The paid-twice model

Here is how it works. A business, a household or a local government has a material it needs to get rid of. Disposing of it costs money, through landfill fees, transport or simply the trouble of dealing with it. A circular enterprise offers to take the material instead, and charges a fee for doing so. That is the first payment.

The enterprise then turns the material into a product, such as soil, compost, mulch, building materials, energy or reused goods, and sells it. That is the second payment.

A composting company can be paid to receive organic and suitable wood waste, and paid again when it sells the soil, compost and mulch it makes. The same material earns twice, and the product goes back into local gardens, farms and landscapes.

Consider a hypothetical building-reuse project. A property owner has budgeted for demolition and disposal. If suitable buildings or components can be recovered safely, some of that budget could instead support dismantling, transport and reuse. The terms, quality and total costs determine whether the exchange works.

Other circular revenue models

Paid twice is not the only way circular enterprises earn. Here are some others, often used together.

• Products from waste. The City of Surrey turns its curbside organic waste into renewable natural gas, which fuels the city’s own garbage trucks and service vehicles. The waste becomes the fuel that collects the waste.
• Long-term supply partnerships. A processor and a material supplier can agree quality, volume, service expectations and pricing over a suitable period. That certainty can support investment when the agreement and market demand justify it.
• Matching and exchange. The Building Material Exchange on Vancouver Island connects contractors, developers and demolition firms, so that leftover materials from one project become inputs for another.
• Reuse and resale. Habitat for Humanity’s ReStore in Sechelt sells donated building materials and household goods, and the proceeds support local housing.
• Services. Some circular enterprises earn by providing a service, such as collection, repair, deconstruction, monitoring or consulting, rather than a product.
• Avoided costs. Sometimes the biggest benefit is money not spent: energy not bought, waste not trucked away. This is especially important when a community owns the enterprise and keeps the savings.

What makes it work

Circular business models are powerful, but they are not automatic. The ones that succeed tend to share several features.

• Reliable supply. A steady, predictable flow of material, ideally backed by contracts.
• Clean inputs. Material that is separated properly, so the product meets quality standards. Contamination is one of the biggest threats to any circular enterprise.
• Real markets. Buyers who want the product and will pay a fair price, year after year.
• A fair gate fee. A price for taking material in that covers the cost of handling it, and stays below what the supplier would otherwise pay for disposal.
• Good operations. Processes, equipment and people that can turn material into product consistently and safely.
• Permits and compliance. The right approvals for handling the material, and the discipline to meet them.

What makes it fail

Many circular projects fail for predictable reasons. Watch for these.

• Depending on a single supplier or a single customer.
• Underpricing the gate fee to win business, then losing money on every tonne.
• Building too big before proving the model works.
• Ignoring quality, so the product can’t be sold.
• Assuming grants will cover operating costs indefinitely.

The strongest circular enterprises treat themselves as real businesses. They are mission-driven, but they have to pay for themselves.