Innovative Companies with Sustainable Business Models: Kierrätysverkko Oy

Company profile

Name: Kierrätysverkko Oy
Founded: 2011
Founders: Harri Välimäki, Pasi Papunen, Heikki Laakso, Kompassi Oy, Pixoi Oy, Juha Saarinenen, Markus Rimon (rest of the current owners can be found here).
Industry
: Reuse ja recycling IT-services and business concepts
Main services: 
Kierrätyskeskus 2020 – modernization of recycling centres
Sustainability: Kierrätysverkko Oy is driving the transformation towards a circular economy by helping to modernize Finnish recycling centers.

Idea and company history in brief

Kierrätysverkko Oy’s mission is simple: Help society use its resources more efficiently. In order to fulfill its mission, Kierrätysverkko Oy has been involved in developing several services that are based on different circular economy business models. So far the company has launched MPankki, a resource sharing platform where companies can share excess supplies and materials, and Mahdoton, an online community for circular economy entrepreneurs and advocates.

Moreover, Kierrätysverkko Oy has recently developed a prototype of a modern recycling center, and in the future the company wants to no less than transform the Finnish recycling system. The name ‘Kierrätysverkko’ reflects the company’s mission: in English the name would mean Recycling Network.

According to the CEO and one of the founders of Kierrätysverkko Oy, Harri Välimäki, the idea for the company emerged around 5 years ago when he started wondering about why the supply and demand of recycled and reused materials were intersecting so poorly.

“According to studies, the Finnish people use eight billion euros a year on consumer goods, but we get bored with most of that stuff within six months. At the same time over half the population thinks that selling their stuff in second-hand shops, such as Tori.fi or Huuto.net takes too much time and effort. This means that over half of the stuff we buy ends up stashed away in our basements and storage rooms.”

Does your storage room look like this?

Does your basement look like this?

Although Välimäki has a background in IT and had little experience in environmental issues, the question got stuck in his mind and he decided that something needed to be done. Founding a company to tackle the issue appeared a viable option, but Välimäki also realized that he couldn’t start the venture on his own.

“With a long business background I knew right from the start that I shouldn’t do anything by myself. Therefore I started gathering a team of professional across different fields of knowledge, including IT, marketing, and business consulting.”

Välimäki also felt strongly that Kierrätysverkko needed to be founded on solid societal values and that the company would in fact be a social enterprise. This would mean that under Finnish law the company would be completely transparent about everything, including the ownership structure of the firm. Furthermore, the purpose of Kierrätysverkko Oy wouldn’t be to make profits for shareholders, but to maximize societal value.

While Kierrätysverkko was founded to fulfill a social mission, the company is not a non-profit-organization and therefore works like any other private enterprise. Välimäki also emphasizes that Kierrätysverkko is looking for scalable business solutions.

“The fact that we’re a social business doesn’t mean we’re just fooling around. What it means is that all of our business activities are based on solid values and principles. We take this very seriously and we intend to create solutions that are scalable.”

Kierrätysverkko Oy set out to solve the excess stuff issue by helping modernize the Finnish recycling system. The idea was to use digital services to make recycling centers more accessible and easier for the end-user. The modern recycling center would be connected online to other centers across the country, which would allow the end-users to browse used products also over the internet rather than being stuck with the local center’s inventory.

However, before setting out to transform the Finnish recycling center network, Kierrätysverkko had to first take a detour and develop two other services, MPankki and Mahdoton.

“We shared our idea about the modern recycling center with many potential end-users and found lots of support for the idea. However, we struggled to find interested recycling centers that would work with us. This came to us as a surprise, but that’s the nature of creating something new, there’s always resistance to change.”

After successfully launching MPankki and Mahdoton, the company was finally able to negotiate partnerships with Patina recycling center, the city of Lahti, and two waste management companies: Päijät-Hämeen Jätehuolto Oy and Lassila & Tikanoja Oyj. The partnerships also opened doors for funding from the Ministry of the Environment.

With the help of the new partnerships, Kierrätysverkko Oy began developing a working prototype of the modern recycling center in Patina, Lahti. The prototype, called Kierrätyskeskus 2020, was completed in the spring of 2015, and the company is now refining the model and using it as a reference for finding new partnerships with other municipalities and recycling centers.

Kierrätyskeskus 2020 (Recycling Center 2020) Business Model: Sharing platform

Value proposition: End users: One stop shopping for used goods and one stop recycling. Society: Putting human and physical resources into more efficient use.
Users: 1) Individuals who want to get rid of unwanted items. 2) Individuals interested in buying used goods.
Revenue generation logic: Kierrätysverkko Oy receives a provision on the goods sold at the recycling center.

Below is Accenture’s framework of 5 different circular economy business models. Based on this framework, KK2020 has a sharing platform business model. A sharing platform is either an online or physical platform that facilitates the sharing of resources and decreases the overcapacity of assets. In Kierrätyskeskus 2020’s case the recycling center helps individuals share their excess goods with other people.

Accenture's (2014) 5 Business Models for a Circular Economy.

Accenture’s (2014) 5 Business Models for a Circular Economy.

There are several interesting aspects about Kierrätyskeskus 2020 worth pointing outFirstly, in modern recycling there is a clear distinction between reuse and actual recycling. Reuse means that you’re using an existing product again for the same purpose it was made for, whereas recycling means that you’re taking the product apart for other purposes. According to Välimäki, there is a lot of embedded value in existing products, which is lost if the products are taken apart for recycling. Therefore, in the modern recycling center, products would be reused as often as possible, and recycling or incineration would only remain as a last resort for unwanted items.

Secondly, KK2020 uses a one-stop shop principlewhich hides the complexity of recycling behind a single service. According to Välimäki, the idea is that individuals will have one place for all reusable and recyclable goods, instead of having to make multiple stop.

“We want to create a one-stop shop, so that the end-user doesn’t have to think about where to take their used goods. Most consumers don’t know how to assess the potential value of their used belongings and it might even be difficult to know which items are actually reusable. In the modern recycling center you won’t have to know these things beforehand.”

How it looks inside KK2020.

How it looks inside KK2020.

Thirdly, all recycling centers will be networked together to allow users to browse goods from other centers online. This creates larger economies of scale and helps users find a larger selection of recycled goods. However, in other aspects the centers would not be highly interdependent (i.e. they are loosely-coupled). This allows the recycling centers to operate independently and have their own unique brands while also being able to serve their customers better due to larger selection. Digitization serves a clear purpose.

“What’s really important about creating a network is making supply and demand intersect better. This requires the use of digital and online tools, but we also need to reshape all the processes inside the recycling center. We also need partnerships with waste management companies.”

Finally, the processes and IT systems that enable networking the centers together are relatively easy to operate, which makes it easier to train staff and to install necessary equipment. Scaling the system can therefore be done much faster.

According to Välimäki, Kierrätysverkko Oy is already negotiating new deals about Kierrätyskeskus 2020 with several municipalities. If Kierrätysverkko Oy is successful, all Finnish recycling centers will be using the same technology as the one in Patina. After Finland, Välimäki and Kierrätysverkko Oy plan to go out and sell the idea abroad.

“Our vision is that all Finnish recycling centers will be using this model. Individual centers would have strong local brands, but they would be networked together, which enables supply and demand to intersect better. After we get the Finnish system to work, we’re going go out and tackle the rest of the world.”

Thanks for reading! I appreciate all comments and would love to hear your opinion. Also, check out an introductory video about the modern recycling center below (in Finnish):

 

Creative Commons Recycle reduce reuse by Kevin Dooley is licensed under CC BY 2.0.

Creative Commons Project 365 #2: 020115 This Could Get Messy by Pete is licensed under CC BY 2.0.

 

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