Model 6: Circular Bioeconomy in Agricultural Production

The type is formed by seven agricultural producers that apply principles of circular production in their resource and waste use in their own production facilities. Enterprises in this group are primary producers themselves and this sets this type apart from other types in case of which enterprises used the biomass as inputs, but did not produce it themselves.

Value proposition

The main value proposition is producing food, fertiliser and energy by circular bioeconomy methods/approaches in agricultural production. It means sustainably and environmentally friendly produced agricultural and food products, fertilizer and bioenergy (biogas, heat and electricity). Enterprises in this group produce milk, meat, grain, fish, and feedstuff sustainably and are reusing their waste and biomass for bioenergy and fertiliser production.

Infrastructure

The key partnerships the enterprises depend on are companies involved in the production and supply of machinery and means of production and financial providers (e.g., banks, subsidies). Cooperation with knowledge organisations such as universities and their extension services for development of projects and changing the BM by adding the side activities for circular production was also mentioned. For those selling their bioenergy, the access to electric and local heating grid is required. 

Key activities are quite different and depends on the profile of the enterprise and area in which the circular economy is developed. The enterprises are characterised by diversified activities in order to develop a circular economy. Those includes plant and animal husbandry, production of food products, production of biogas from manure or silage, production of heat and electricity from biogas, distributing and biofuel, utilizing the digestate by producing organic fertilizer. For those activities, production from harvesting, storage, transport, and marketing and delivery activities are carried out. Several companies integrated their production with services, incl. agricultural services and non-agricultural services (tourism, catering, and shops).  

The tangible key resources are agricultural land, raw material (own produced manure, silage), farm buildings, equipment and machinery for agricultural production, reception of waste, biogas plants and storage facilities for the product in various stages of production. Intangible key resources include the technical and innovation competence and knowledge and educated staff with leadership qualities to manage this kind of operations and side activities.

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Customer interface

The enterprises established their customer relationships through direct sales in internet and physical store as well as sales via intermediary stores. As the enterprises produced different produce, processing some onsite, very different relationships and marketing and sales activities were mixed (direct selling some of products, raw material inputs for others).

The main focus was on B2B and B2C sales in both local area and outside, and customer segments included private individuals, wholesalers and retailers (farmers, florists, and nurseries), truck and other logistic companies as biogas customers, food and cosmetics industries for raw materials, electricity and gas industry. B2G sales were mentioned in connection with selling energy to municipal buyers.

The channels through which customers are reached are mixed as both direct and enterprise owned channels (direct personal sales, farm shops, online selling) were mixed with distribution through partner owned retail and wholesale networks, food companies (milk, meat, fish products), local government (electricity production) and through filling station.

Business Model Canvas for Circular Bioeconomy in Agricultural Production Business Model type

Financial viability

The cost structure is divided between several different activities which reduces the overall cost. The costs include land costs, production costs of crops and animal husbandry, production costs for biofuel (biogas, electricity), investments in the biogas plants and operating it, costs of servicing of the machinery and equipment, costs of personnel, transportation costs.

The revenue stream is diversified and comes from the sale of products (biomass, electricity, heat and fertilisers, food products), from different services and state guaranteed payment for electricity produced, reduction of waste management costs.

Socio-economic aspects and novelty

The companies provide variety of social and economic benefits for both the local community and the local economy. The companies directly create variety of different jobs with their diverse activities in local area, facilitate local economy by purchasing local biomass, producing and selling produce, energy and services. The shift from primary production of raw materials towards processing of higher value-added products and sales provides opportunities to capture more value from the production. The environmental benefits include highly circular production minimising waste, use of renewable biomass to replace fossil- fuels based inputs in production process. This Business Model is transferable. The business activities are highly diversified. As the companies are agricultural producers, the companies receive agricultural subsidies, thus are dependent on subsidies and related regulation and investment opportunities.

The novelty of companies is at an average level and lies in combining different activities and products in new ways that maximise the utility of each. Self-produced and locally sourced biomass is recycled. Biomass is converted into products that are used again in the company as a production input for other activities. The Business Cases of this type include Energifabriken (Case 6.1: Energifabriken – fossil fuel free circular economy – Sweden), a biofuel processor that operates the value chain from fossil-fuel free production of raw material at farm to processing and sales of the biofuels. Other Business Case of Ziedi JP (Case 6.2: Ziedi JP – circular economy in a Latvian farm – Latvia) demonstrates integration of agricultural production with biogas and fish production in order to utilize each activity and minimize waste. The Business Case of Wapnö Farm (Case 6.3: Wapnö Farm – sustainability and the circular economy example in a Swedish farm – Sweden) provides an example of diversified sustainable Business Model that integrates dairy and crop production, forestry, processing, sales and marketing activities while focusing on sustainable production, animal welfare, openness to consumers and reduction of energy consumption.

Other related Business Models

Archetype of integration of complementary biomass production activities into circular production loop was formed by Business Model type based on the primary producers that aimed to maximize the resource use with diversification and integration of new activities and reuse of by-products in the same production unit into more efficient and circular production system. The archetype contains similar characteristics as waste recycling or fossil fuel replacement, but the distinctive element is that while companies in the other two archetypes typically are specialised and processing companies, the enterprises in this type are agricultural producers that diversify their value propositions and integrate a wide set of complementary activities and side streams into the production cycle starting from bioresource collection until product and service delivery for the customers. Besides the environmental benefits of reuse of production outputs for complementary activities, the companies had more control over their value chains. The diversification activities themselves are easily replicated, but the success of Business Model depends on combining and valorising the specific resources available for the enterprise.