Understanding Circular Economy Business Models

A circular economy business model keeps products and materials in use for as long as possible. Resources are reused, reimagined, and recycled through the market over and over. 

This model contrasts traditional commerce, in which companies take resources from the earth, make products out of them, and the products are used up, or ultimately end up in a landfill. The materials are used only once, and economic activity is coupled with the use of natural resources. The Circularity Gap Report 2026 from Circle Economy and Deloitte Netherlands estimates that nearly a third of global GDP (about €1 of every €3 in value created) is lost each year to this model. 

For store owners, that lost value is also an opportunity. Every step that keeps a product in circulation is value you can recapture. In this article, you’ll learn what a circular economy business model is, five examples of circular business models, and ways to build circular practices into your store—from repair and resale programs to recycling and rental options. 

What is a circular economy business model?

A circular economy business model reduces the need to produce new items and reduces waste through processes like refurbishment, repair, maintenance, reuse, sharing platforms, manufacturing with renewable materials, and recycling. 

According to the Ellen MacArthur Foundation, a UK-based organization dedicated to accelerating the transition to a circular economy, these business models are designed around three circular economy principles:

• Eliminate waste and pollution

• Circulate products and materials at their highest value

• Regenerate nature

Cutting new production also shrinks a business’s environmental footprint. Less raw material pulled from the earth means less resource extraction and lower environmental impact than the traditional linear economy creates.

Why circular business models are growing

Sustainability has become a competitive advantage. Shopify research shows 43% of shoppers are more likely to buy from brands with sustainable practices like carbon-neutral shipping. Younger consumers are especially aligned with this cause. An eBay survey from late 2025 found nearly 80% of Gen Z and millennial shoppers consider themselves part of the recommerce movement. 

5 types of circular economy business models 

• Circular inputs (recycled/renewable materials)
• Sharing economy (asset utilization)
• Product-as-a-service (access over ownership)
• Product life extension (repair, resale, refurbishment)
• Resource recovery (recycling materials)

There are several different processes and models that businesses can employ to contribute to the circular economy. Here are five common business models:

Circular inputs (recycled/renewable materials)

For some companies, sustainability strategy begins long before a product is even manufactured. Circular inputs are materials that are sustainable, renewable, or recycled. Think reclaimed lumber, bamboo, and bio-based fabrics rather than virgin wood, polyester, and man-made synthetics. Transitioning away from finite, non-renewable materials ensures that the items going into the supply chain can be regenerated and recirculated without depleting the planet’s resources.

Circular inputs are the driving force behind Sabai Design, a furniture company that Phantila Phataraprasit cofounded after becoming disheartened with the lack of product sustainability in the industry. Instead of defaulting to traditional petro‑based foams and plastics, Sabai reimagined sofas and chairs from the inside out. Cushions are stuffed with rubberized coconut fiber to displace synthetics. Upholstery options include a “leather” made of cactus, bypassing animal hides and plastic-based coverings. 

“We’re always sourcing alternatives to what’s standard in the industry,” Phantila says in an interview.

As Sabai has grown, the company has leaned even further into its mission. On Earth Day in 2026, Sabai launched a collection of furniture made entirely of natural materials. Coconut fiber and natural latex replace polyurethane foam, muslin swaps in for polyester, cotton is used instead of polyester fiber, and jute webbing stands in for polyester.

"It's really important to think about sustainability starting from the design phase itself, because if you aren't thinking about that in the beginning, it's really hard to address problems later,” Phantila says on an episode of Shopify Masters. 

Sharing platforms (asset utilization)

In the sharing economy model, companies create platforms that maximize the use of underutilized items, like cars, extra rooms, and swimming pools. These brands do not manufacture goods or build spaces. Instead, they connect people who own underused assets with consumers who are willing to pay for their use.

For example, Turo is a car rental marketplace, but the company doesn’t own or even maintain any cars. It provides a platform, booking software, and insurance policies for car-owners to list their underused vehicles for drivers to rent.

Airbnb is another well known example of this peer-to-peer model: The company doesn’t own the homes or rooms on their platform, but it facilitates a marketplace for owners and renters to connect with each other and do business together.

Product-as-a-service (access over ownership)

The product-as-a-service (PaaS) model is similar to sharing platforms, but the difference is that the companies own the asset being rented out and sell usage of those goods, often through rental or subscription services.

Because companies are responsible for the ownership and upkeep of these goods, it encourages businesses to maintain products for longer instead of manufacturing new ones. At the same time, it allows many people to use a single item over its lifetime (and often saves customers money on goods they need for only a short time).

Bebello is one example: The company sells both new and refurbished baby bottle washers outright, but it also created a rental program that has per-month rentals at a fraction of the cost of buying a new unit. 

The Fitzroy rents out designer clothing and accessories. The company owns the items for lease, so customers can rent a designer outfit for an event like a black-tie wedding instead of buying one they’ll wear once.

Product life extension (repair, resale, refurbishment)

In the traditional linear model, consumers use items until they break, wear out, or are no longer needed. The product life extension model keeps items useful for longer—companies repair broken items, refurbish old ones, and/or resell goods. 

Bedi Studios, which makes premium outerwear and accessories designed to never end up in a landfill, was built on these principles, founder Inder Bedi says on Shopify Masters. The company’s “Second Life” program encourages customers to trade in their older or no-longer-needed apparel in exchange for store credit. Bedi Studios then refurbishes the items if necessary and resells them at a lower price.

“We have a customer base that will only buy through our Second Life program just because they’re thrifts, and those to me are the real environmentalists when it comes to fashion,” Inder says. The closed-loop system ensures that if a customer’s needs change, the item “still has this life going on” instead of ending up in a landfill, he says.

Sabai Design’s “Repair, Don’t Replace” program follows a similar mentality. This replacement program helps to combat the 12 million tons of furniture waste generated in the US each year—about 80% of which goes to landfills. Customers can buy individual components (like a single couch arm, chair leg, or slipcover) rather than replace a whole piece of furniture. Like Bedi Studios, Sabai also operates a resale platform, called Revive, where customers can sell used or returned items.

Resource recovery (recycling materials)

The resource recovery model aims to extract new uses from items like packaging and old products. Instead of getting tossed in the trash, used materials go on to a new life—rescuing value that would otherwise leak out of the system as mere waste.

Aerflo, which sells a portable sparkling water maker, built its subscription program to recover used hardware. Rather than shipping new carbon dioxide capsules to customers on a fixed schedule, the company sends refills as soon as a customer ships their empties back. 

At Aerflo’s facility, each returned capsule is cleaned, inspected, refilled, and inspected again before going to a new customer. Over its life span, one capsule will replace more than 330 single-use cans of water, the company says.

Ideas for adapting your business model in a circular economy

Here are several ways to adapt your strategies and become part of the circular economy:

• Test new products and services. Pilot one new circular offer such as a rental or leasing option, a repair kit, or a repair or refill subscription run through Shopify Subscriptions. 

• Offer resale. Launch resale or refurbished product lines, pricing your products at a lower rate than new items.

• Create take-back or recycling programs. Give shoppers a way to return goods or packaging so materials stay in your loop, as Aerflo does with its returnable capsules.

• Reduce packaging or make it recyclable. Test lighter or recyclable packaging to cut waste and lower shipping costs.

• Introduce new shipping policies. Make your shipments carbon-neutral by partnering with entities like the Planet app, which funds companies that remove carbon dioxide from the atmosphere and store it.