Circularity Capital partner Jamie Butterworth outlines the cross-sector efficiencies and economic opportunities of placing the circular economy at the heart of future decision making.
As we begin to rebuild from the devastating impact of the coronavirus pandemic, accelerating the transition towards a circular economy will prove pivotal in driving financial and environmental opportunity.
According to new insight from WRAP, the implications of designing out waste, enhancing asset productivity, embracing circular design and harnessing enabling solutions would yield significant dividends – helping us to build back better.
As a specialist private equity firm supporting growth and innovation in the circular economy, we are gaining valuable insight into how circular business models can support a more resilient, restorative and socially responsible economy post-COVID-19.
Alongside bolstering the economy by an estimated £75 billion net Gross Added Value (GVA), moving towards a circular economy would create almost 500,000 new jobs and, in parallel, offset the production of 15 million tonnes of CO2e.
As a specialist private equity firm supporting growth and innovation in the circular economy, we are gaining valuable insight into how circular business models can support a more resilient, restorative and socially responsible economy post-COVID-19.
Our growing investee portfolio highlights the relevance of a number of these business models, as their respective market sectors navigate through the recovery period.
The retailers’ returns crisis
Seizing the chance to solve the retailers’ returns crisis is a huge opportunity. Already a significant problem facing the retail industry, the huge spike in lockdown eCommerce orders and returns has exacerbated this even further. Increased returns are a natural result of rising online orders.
It is a sad fact that many returned items end up in landfill as a result of logistical processing difficulties. An estimated £5 billion in waste is generated through returns each year, adding 15 million metric tons of carbon dioxide to the atmosphere.
Environmentally, this solution is unsustainable. Financially, it is unworkable for retailers who lose money in each returned goods transaction.
As shoppers flock to online channels, many retailers will find themselves in need of a robust returns mechanism capable of mitigating any financial losses.
According to new research, a mere 16% of UK consumers intend to return to their old shopping habits post-lockdown.
As shoppers flock to online channels, many retailers will find themselves in need of a robust returns mechanism capable of mitigating any financial losses. Our investee company ZigZag has developed a solution to support retailers in closing the loop on returns.
ZigZag’s SaaS product enables clients to ensure that 100% of goods are kept out of landfill, as all international returns are consolidated before being returned, resold or recycled.
ZigZag’s solution also uses data analytics to return goods in the most energy-efficient way possible, which has proven to reduce journeys by more than 60%. This in turn results in a 40% reduction in customer enquiries and 57% reduction in return costs.
Food waste
Meanwhile, food waste, the cause of 10% of global greenhouse gas emissions, is not only environmentally wasteful but also costs the hospitality industry $100 billion annually. Stretched, time-poor kitchens can waste up to 20% of all food purchased, a figure that is often equivalent to their total net profits.
Chefs lack the tools they need to accurately measure and manage waste. With restaurants struggling to emerge from the pandemic unscathed, food waste is an area many restaurants are focussing on to help reduce costs and drive up margins.
Our investee company Winnow Solutions’ AI food waste tool surpasses human levels of accuracy in identifying waste food, using computer vision to track the food being discarded.
The data-enabled solution cuts kitchen food waste by 50% on average, increasing both profitability and reducing emissions through significant and measurable carbon savings. Indeed, Winnow estimates that its technology has prevented the landfilling of more than 36.5 million meals – saving an estimated $42m and offsetting 61,000 tonnes of CO2.
Energy efficiency: a vital post-pandemic boost
Construction has been heralded as a potential saviour of the UK economy, and energy efficiency is key to maximising this opportunity for growth.
Indeed, the government has recently launched a £3 billion package to improve the energy efficiency of existing buildings, providing a much-needed employment boost post-pandemic.
Around 3.2 million properties across the UK live in fuel poverty, while 70% of all UK homes are below the target standard required to reduce carbon emissions.
Around 3.2 million properties across the UK live in fuel poverty, while 70% of all UK homes are below the target standard required to reduce carbon emissions.
Green Home Group (GHG) is an energy efficiency company geared towards helping private homeowners, tenants and landlords reduce their energy consumption and save money with effective insulation, heating and renewable technologies.
GHG operates in the regulatory-backed Energy Company Obligation (ECO) market, which underpins the UK’s long-term commitments to both reducing the carbon emissions from domestic properties and tackling fuel poverty.
ECO obligates the UK’s leading energy companies to deliver lifetime savings targets (LTS) across fuel poor households, by funding the installation of appropriate measures such as insulation, upgraded central heating systems and smart meters/controls. The company also prioritises the use of recycled insulation materials.
Access over ownership
Electronic waste poses a significant environmental and financial cost to businesses. Firms are required to pay environmental fees for every item they place on the market, under extended producer responsibility (EPR) legislation, in addition to paying a fee to fund end-of-life collection and recycling.
Environmentally, many of the valuable materials in the electronics products we own, from laptops and phones to fridges and ovens, contain valuable and critical metals lost to the supply chain if they end up in landfill.
Unfortunately, the UN’s Global E-waste Monitor report (July 2020) highlighted that a record 53.6 million tonnes of e-waste was dumped worldwide in 2019 — equivalent to the weight of 350 cruise ships the size of the Queen Mary 2, or 7.3kg per person.
An estimated $57 billion worth of gold, silver, copper, platinum and other high-value, recoverable materials were either landfilled or burned.
An estimated $57 billion worth of gold, silver, copper, platinum and other high-value, recoverable materials were either landfilled or burned.
Monthly subscription service Grover, which has been described as the Netflix for technology, provides a consumer rental service for everyday devices such as laptops, smartphones, tablets and digital cameras.
This approach extends the life usage of each product through reuse, repair and redistribution methods. The product you return today will be used by someone else tomorrow.
Over the past few months, Grover has leveraged the flexibility of its platform to support a range of COVID-19 related challenges. Specific home office and home entertainment packages have been launched for the increased number of home workers.
Grover has also partnered with Samsung in its Neues Lernen project to provide a comprehensive solution to advance digitalisation in the German #education system. Neues Lernen provides schools with flexible access to hardware, digital learning materials and teacher training, as well as technology management and support services.
Grover is also working with Microsoft to provide teachers and students free access to key software and classroom tools to facilitate the transition to effective remote teaching and learning during the COVID-19 period.
As Europe emerges from lockdown, e-scooters are now considered the smart commuter choice for those keen to avoid public transport.
Grover has recently launched an e-scooter monthly subscription service, ‘GroverGo’, as an alternative to the pay-per-ride offering. Destinations can be reached quickly and conveniently, allowing users to avoid shared spaces and surfaces.
Transforming waste into value
Meanwhile, with waste management firmly under the radar, our most recent investment dives deep into the PolyVinyl Butyral recycling sector. We recently confirmed a growth funding round in Shark Solutions, a specialist in advanced recycled PVB products.
The investment will develop the company’s manufacturing infrastructure across Europe and the United States, while also accelerating the adoption of its product range into adjacent end markets globally.
Traditional approaches to the recycling of end-of-life laminated glass (including windscreens and architectural glass) are unable to capture the highly valuable polymer interlayer that improves performance under impact. Shark Solutions separates this layer and transforms it into highly valuable, non-toxic, recyclable and price-competitive materials for use in paints, coatings, adhesives and flooring products.
Shark Solutions manufactures tens of thousands of tonnes of material per year for leading industrial companies worldwide. This includes for use in a number of Cradle-to-Cradle certified products.
Premium returns for circular solutions
As we move forward, the circular economy provides a strong framework for decoupling business growth from resource constraints, enhancing resource productivity and driving competitive advantage.
It also highlights a subset of business models which are enabling this transition and can generate premium returns for investors.
