Toward a sustainable society, the concept of circular economy (CE) has increasingly been attracting attention. For the implementation of CE, it is necessary to innovate business models through digital technology (Chauhan, Parida and Dhir, 2022). A variety of service-oriented circular economy (SoCE) business, such as car sharing and clothing rental, has been increasingly emerging. Examples of SoCE business currently being developed are shown in Table 1.
Table 1. Examples of SoCE business
airCloset (airCloset, Inc. 2023)
A stylist selects clothing suited to the consumer, which can then be rented.
BlaBlaCar (BlaBlaCar. 2023)
A person traveling in his or her own car can carry other people in the car who are heading to the same destination.
BlueMovement (Robert Bosch, GmbH. 2023)
The service provides comprehensive transportation, installation, repair, and collection of appliances for each household.
CLAS (CLAS, Inc. 2023)
Provide a subscription service for furniture and appliances.
Loop (Loop. 2023)
The company makes products that were previously sold in disposable containers reusable, and collects, cleans, refills, and resells used containers.
Peerby (Peerby. 2023)
Neighborhood residents can borrow furniture and clothing from each other.
Pool.farm (pool.farm, AB. 2023)
It connects consumers, who want to order the foods they want and as much as they want, with the farmers who are their suppliers.
*B2C: business-to-consumer, C2C: consumer-to-consumer
For example, airCloset (airCloset, Inc. 2023) is a service that allows consumers to rent clothing, and BlaBlaCar (BlaBlaCar. 2023) is a car ride-sharing business between consumers. From these, SoCE business has characters of involvement of consumers and deployment across various industries.
There is much research on SoCE businesses. A typical example is Product-Service Systems (PSS) (Tukker, 2004). PSS are systems that integrate products and services to provide the functions required by users. There is also a study that proposed a framework for product design and business model strategy in the move to CE (Bocken et al, 2016). Hirota et al (2022) proposed an architecture for a platform-based circular economy business. The architecture consists of four viewpoints (i.e., business viewpoint, usage viewpoint, functional viewpoint, and implementation viewpoint) in order to describe CE business scenarios. There are also many studies assessing the environmental impact of new business models. Pouri (2021) developed a framework for analyzing the environmental impacts of the Digital Sharing Economy (DSE). She organized various SoCE business cases, such as ride-sharing and food-sharing, and proposed indicators for assessment.
However, it is still a big challenge to assess the environmental benefit (e.g., avoided emissions) of SoCE business due to two problems as follows – (i) the linkage between a business concept, expected customers, use cases, products, and services is complex and (ii) it is unclear to what extent consumers will choose assumed SoCE business. Aiming to address these problems, this study develops a method for designing SoCE business scenarios. A scenario is defined as a description of multiple possible futures, and the process from its creation to analysis is called scenario design (Kishita et al, 2020). In this paper, we prototype the method and apply it to examine various SoCE business ideas in a quantitative manner.
In this study, we describe SoCE business scenarios using workshops, questionnaires, and interviews with business providers and consumers as shown in Figure 1. To address (i), scenarios are described in a narrative format based on the architecture (see Figure 2, Hirota et al, 2022).
The reason for using the architecture is to clarify the structure of SoCE business for a better understanding among all stakeholders. To address (ii), we develop a simulation model to evaluate described scenarios. The model consists of two sub-models: a consumer behavior model and a product circulation model. A consumer behavior model is used to forecast the demand for services by consumers by applying a statistical approach (Umeda et al, 2022). A product circulation model represents the entire product life cycle.
The process of designing business scenarios is as follows: (1) describing various scenarios using the architecture, (2) estimating the demand of services based on the conditions set by the scenarios using a consumer behavior model, (3) assessing environmental impacts from the conditions and demand using a product circulation model, and (4) comparing and analyzing the described scenarios, to support to generate new service ideas.
To demonstrate the proposed method, a case study of bike-sharing business in a Japanese city was conducted by following the steps described above.
First, to describe business scenarios, we held three workshops where a business provider and three university researchers participated. In these workshops, based on the architecture in Figure 2, we described 88 elements of bike-sharing business as shown in Figure 3. We expressed the relationship between making secondary traffic comfortable and detailed design information for bicycles or IoT devices, ranging from the vision of the business to the implementation of products and digital technology. By getting ideas from the elements in Figure 3 and on-site surveys, we came up with four usage scenarios as described in Table 2. Since Figure 3 states that bike-sharing is an alternative to buses, we compared the use of buses with the use of bike-sharing in each usage scenario.
Subsequently, we estimated the demand of bike-sharing service, using actual usage data of bike-sharing in another area and population ratios between the areas. Finally, CO2 emissions from bike-sharing services were calculated using the average CO2 emission intensity of bicycle manufacturing (see Figure 4). It was found that CO2 emissions for bike-sharing per trip (not for the entire area) were reduced 17-63% when compared to buses. The scenarios with the most and least reductions in CO2 emission have been identified, so future business plan could be developed based on these results.
Table 2. Usage scenarios assumed in this paper
Visitors from outside the city visit temples, shrines, and natural spots in the city.
People from outside the city travel between the station and the city hall for commuting.
The city residents rent bicycles at the station and cycle along the main road.
The city residents visit commercial facilities around the station by bicycle.
The results of the case study showed the usefulness of our proposed method in the following two points.
First, by utilizing the architecture, we structurally represented the relationship between the elements of the bike-sharing business. This structural representation was helpful to conceive possible services and the functions of products and digital technologies based on assumed visions, business models, and target customers. In addition, we were able to describe use case scenarios inspired by that representation. Second, the comparison between the assumed use case scenarios was effective to clarify potential measure to reduce the environmental impacts from the baseline scenario. As a result, the case study was able to assess the environmental benefit of business in accordance with our proposed methodology.
However, there are two challenges to be tackled in future research. The first is to develop a simulation model to model the dynamic transformation of consumer behavior when a new business model is introduced. In this study, we compared the environmental impact per use of bike sharing with that of buses. When a new bike-sharing service is introduced, the question is how many consumers who traditionally use public transportation will switch to the new service. In order to dynamically simulate such behavioral changes of consumers, employing life cycle simulation (LCS) (Umeda et al, 2022) to run our simulation model is an option. The second challenge is to provide a computer-aided connection between scenarios and simulation models. In the case study, the input parameters of the model were quantified from the scenarios, but much time was required. To address this, it may be promising to use computer-aided scenario design system developed by Kishita et al. (2020) to semi-automate what-if analysis of assumed scenarios by connecting narrative scenarios and simulation models by computer.
In conclusion, we proposed the method for designing SoCE business scenarios. We conducted a case study using a bike-sharing business. The main contributions of this research are: (1) by utilizing the architecture, we can represent the relationship between elements of SoCE business, which could be easy for various stakeholders to understand; (2) the comparison between assumed use case scenarios is effective to clarify potential measure to reduce the environmental impacts from the baseline scenario. In future work, we will consider the introduction of LCS for the development of a simulation model and computer-aided method for connecting scenarios to models.
We would like to thank Mr. Kaito Kotake of Ocean Blue Smart, Inc. for his cooperation with the case study conducted in this study. This research was performed by the Environment Research and Technology Development Fund (JPMEERF20223R04) of the Environmental Restoration and Conservation Agency Provided by the Ministry of Environment of Japan.
Circular economy business, Service design, Business design, Bike sharing
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