Introduction
For manufacturing small and medium-sized enterprises (SMEs), circularity is a real industrial challenge taking place now, not a sustainability objective looming in the distant future. Products are increasingly expected to last longer, be repairable and upgradeable, use resources more efficiently and retain value beyond their first use. Meeting these expectations, however, cannot be solved with just product design.
A modular or repairable product may require different production capabilities. Still, maintenance, take-back, refurbishment or remanufacturing must also make economic sense. This creates an interdependent development challenge, since decisions concerning product architecture, manufacturing systems and business models affect one another across the whole product lifecycle.
For small and medium sized enterprises (SMEs), the challenge is indeed demanding, as technical, regulatory and commercial capabilities are often limited by available resources. This article delves into how circular product design, adaptable production and circular business models can be joined. Additionally, it seeks to answer why their alignment is an important capability for today’s manufacturing SMEs.
Sustainability is already a product requirement
Manufacturing SMEs are under increasing pressure to respond to climate change, resource depletion, biodiversity loss and ever-tightening environmental expectations. However, production and consumption still mainly follow a linear “take–make–use–dispose” logic, in which products are often underused, prematurely discarded and insufficiently considered at end-of-life (Toth-Peter et al., 2023).
‘Circular economy thinking’ challenges this model by aiming to keep products, components and materials in use for longer through life extension, reuse, repair, refurbishment, remanufacturing and recycling (Den Hollander et al., 2017; Wang et al., 2022). This moves sustainability considerations upstream, i.e., environmental performance must increasingly be addressed during product development and across the lifecycle rather than treated as a passing afterthought (Aguiar et al., 2022; Chiu & Chu, 2012).
In the EU, this change is already embedded in regulation through the Ecodesign for Sustainable Products Regulation (ESPR), which entered into force in 2024. ESPR establishes a framework for progressively introducing product-specific and horizontal requirements concerning durability, repairability, upgradability, reusability, recyclability, refurbishment, remanufacturing, resource efficiency and product information (European Union, 2024). Its rationale is that product design still insufficiently supports lifecycle sustainability and value-retaining activities.
For manufacturing SMEs, this creates both opportunities and challenges. EU evidence indicates that these SMEs are already relatively active in sustainable-product innovation but less advanced in circularity, eco-design and newer circular business models. They also face additional R&D, data utilization, compliance and capability demands. Thus, there is a strong demand for targeted support, knowledge, experimentation and collaboration (Radley-Gardner et al., 2022a, 2022b, 2022c, 2022d).
Circularity is designed into the product
A large part of a product’s environmental performance is influenced during product development, since early design decisions impact on material use, manufacturing, use itself, maintenance and end-of-life options. Hence, product architecture combines design choices with later lifecycle activities (Chiu & Chu, 2012). Ecodesign addresses this by integrating soft environmental considerations into product development alongside conventional hard criteria such as cost, functionality and quality (Ceschin & Gaziulusoy, 2016; Karlsson & Luttropp, 2006). Its lifecycle perspective extends from raw-material extraction and manufacturing to use, recovery and final disposal, helping to identify where design interventions can reduce environmental impacts most efficiently (Ceschin & Gaziulusoy, 2016).
From a circular economy perspective, the objective extends beyond just reducing environmental impacts. Products should retain their utility and value for as long as possible through durability, repair, upgrading, reuse and other value-retaining activities before recycling becomes absolutely necessary (Den Hollander et al., 2017; Wang et al., 2022). Hence, decisions concerning disassembly, component replacement, material selection and product architecture become essential to circular product design. A product that cannot be economically repaired, upgraded or disassembled limits drastically the possibilities available later in its lifecycle.
Modular product design can make these objectives reachable. Modularity structures a product into relatively independent modules with defined interfaces, allowing components or functional units to be separated, replaced or recombined (Kusiak & Chun-Che Huang, 1996; N. Machado & Morioka, 2021). Depending on the product and its architecture, modularity can facilitate maintenance, repair, upgrading, disassembly, reuse, remanufacturing and recycling. Furthermore, it can reduce assembly and service costs (Gershenson et al., 1999; N. Machado & Morioka, 2021). Thus, modular design has been identified as a high-potential approach for circular product development (Wang et al., 2022).
However, modularity does not make a product circular by itself. Its contribution depends on how modules, interfaces, materials and various lifecycle strategies are designed and integrated into the broader product system (Bonvoisin et al., 2016; N. Machado & Morioka, 2021).
Adaptable products need adaptable production
Circular and modular product architectures can increase the need for manufacturing systems to accommodate changing product variants, components, materials and production volumes. A product may be designed for different configurations, replacement modules or upgrading. However, such possibilities have limited practical value if the production system cannot respond efficiently.
Earlier flexible manufacturing systems (FMS) addressed this challenge by combining automated equipment, material handling and computer control to process different part types and volumes with limited changeover effort (Browne et al., 1984; Buzacott & Yao, D. D., 1986). Similarly, modular production strives to shorten product introduction times and enable capacity adjustments as demand and product requirements change (Rogers & Bottaci, 1996).
Reconfigurable manufacturing systems (RMS) push this logic further by allowing the manufacturing system itself to be modified. Equipment, capacity, functionality, software and process capabilities can be added, removed or rearranged according to changing production needs (Koren & Shpitalni, 2010; Mehrabi, M.G. & Koren, Y., 2000). Unlike systems where broad flexibility is built in from the outset, RMS target customised flexibility. By doing so, the required functionality and capacity can be introduced when needed (ElMaraghy, 2005). This can support new product variants and technologies. It can also potentially extend the productive life of manufacturing assets instead of requiring entire systems to be replaced. Moreover, such capabilities connect adaptability with sustainable manufacturing.
Sustainable manufacturing seeks to reduce resource and energy use, as well as environmental impacts, without compromising product quality, competitiveness and productivity across the lifecycle (C. G. Machado et al., 2020; Rosen & Kishawy, 2012). Manufacturing flexibility can promote material substitution, reuse, remanufacturing and changing material flows, whereas RMS can reduce the need to replace otherwise functional production assets (ElMaraghy, 2005; Rosen & Kishawy, 2012). Consequently, a product can be designed for adaptation, but the production system must also be capable of adapting with it.
Circular products must make business sense
Circular product design and adaptable production create technical possibilities for extending product life, but such possibilities generate circular value only if they are backed up by a robust business model. A business model defines how a company proposes, creates and delivers value, and how it captures revenues and other benefits from that activity (Guldmann & Huulgaard, 2020). Circular business models (CBMs) adapt this logic to slow, close, intensify or dematerialise resource loops, e.g., by extending product use, returning products and materials to circulation, or substituting ownership with service-based solutions (Geissdoerfer et al., 2020). Consequently, the physical and economic lifecycles of products become interdependent.
Durable, repairable, upgradeable and re-manufacturable products can enable maintenance and upgrade services, take-back and refurbishment schemes, resale, and product-service systems (PSS), but these activities must also create and capture sufficient value to remain commercially sustainable and competitive (Guldmann & Huulgaard, 2020; Nußholz, 2017). Thus, circular services may complement circular product design by keeping products in use and ensuring their return when the original user no longer needs them. Additionally, CBMs can require changes in customer relationships, revenue models, reverse logistics, partnerships and lifecycle responsibilities (Antikainen & Valkokari, 2016; Bocken & Ritala, 2022).
The transition is certainly not risk-free. CBMs can require additional resources, longer validation periods and higher exposure to risks connected with retained ownership, product returns and later sales cycles (Linder & Williander, 2017). Furthermore, organisational, value-chain, market, institutional and technological barriers can hinder implementation (Guldmann & Huulgaard, 2020; Salvador et al., 2020). Hence, circularity depends on both technical value retention and economic value retention, i.e., a product that can be repaired, upgraded or remanufactured creates limited circular benefit if no actor has a clear reason or need to perform those activities.
For SMEs, the hard part is alignment
For manufacturing SMEs, circular development is not a set of independent decisions concerning product design, production technology and business models. Choices in one area directly influence what is possible in the others. A modular product architecture may support repair, upgrading and remanufacturing, but it can also require different assembly processes, production configurations and material flows (N. Machado & Morioka, 2021). Similarly, adaptable manufacturing can enable changing product variants and recovered components, but such capabilities create business value only if there is sufficient demand and a clear way to capture that value. Circular business models further extend the requirements by introducing activities such as maintenance, take-back, refurbishment and reverse logistics, which depend on appropriate product design and operational capabilities (Bocken & Ritala, 2022; Guldmann & Huulgaard, 2020).
Manufacturing SMEs can find this alignment highly challenging. EU evidence indicates that many SMEs are already engaged in sustainable-product innovation but remain less active in circularity, eco-design and more novel circular business models. Limited financing, regulatory uncertainty, knowledge requirements and limited access to support can restrict their ability to develop these capabilities simultaneously (Radley-Gardner et al., 2022a). Thus, circular development may require choices about which capabilities should be developed internally and where external expertise, partnerships or shared experimentation are more appropriate (Bocken & Ritala, 2022). The following SWOT analysis (Table 1) captures the most relevant SME considerations.
| Strengths: | Weaknesses: |
|---|---|
| Agility and short decision chains Close customer relationships Ability to customise Specialised knowledge | Limited specialist resources Investment constraints Limited experimentation infrastructure Fragmented circular capacities |
| Opportunities: | Threats: |
|---|---|
| New lifecycle services and revenue models Repair, refurbishment and manufacturing Circular differentiation Flexible small-series production | Increasing regulatory complexity Compliance and data-management costs Uncertain market demand Technology and investment risks |
Circularity is a system capability
Sustainable manufacturing cannot be reduced to a greener product, more adaptable production technology or a circular business model developed in suffocating isolation. Product architecture determines possibilities for repair, upgrading and value recovery. Production systems determine whether changing products, components and materials can be handled efficiently. Additionally, business models determine whether retaining this technical value is commercially justified. Thus, circular capability depends on how the mentioned elements work together across the whole product lifecycle.
For manufacturing SMEs, building such combination internally can be too complex and difficult. Circular development can require a breadth of expertise that may be unattainable internally, covering product design, manufacturing technologies, lifecycle assessment, regulation, digital product information and business-model development. Limited resources make external expertise, partnerships and experimentation increasingly relevant, particularly when new solutions must be tested before substantial investments are made.
DesignMod: Helping manufacturing SMEs turn circularity into practice
The DesignMod project addresses this implementation challenge and more by combining circular product development, modular production experimentation and circular business-model development. Its shared development environments are intended to help manufacturing SMEs explore and test how such elements can function together before committing resources to wider implementation. Hence, the project provides a practical means of moving from separate circular improvements towards wider integrated development. For manufacturing SMEs, circularity becomes a capability only when product design, production and value creation work as one lifecycle system.
DesignMod project info
- DesignMod – Sustainable Modular Production Environment (Kestävä modulaarinen tuotantoympäristö)
- Duration: 1 April 2025 – 31 March 2027
- Lead: Vaasa University of Applied Sciences (VAMK)
- Partners: Centria University of Applied Sciences and Novia University of Applied Sciences
- Funding: Co-funded by the European Union
- Budget: 212 174 €
- Focus: Circular product development, modular production environments, experimentation and circular business models for SMEs.
