A Week of Circularity: Going Beyond Trends

The evidence is clear: national policies involving the circular economy can spark micro-innovation at the regional level. 

In the EU alone, around half of all businesses that innovate also report environmental benefits. One growing trend is that towards eco-innovation – any innovation that makes progress towards reducing environmental pressures, increasing resilience, or using natural resources more efficiently.  

Let me take you on a tour this week to explore how the funding stages of innovation and the evolution of environmental laws can help shape consumer preferences towards circularity.

A brief stop in France will provide the “bread and butter” for our journey…

🔍 The Science of Impact

Micro-scale innovation clusters are becoming go-to places for social entrepreneurs.

In 2022, we have seen a number of them sprouting all over the world – almost all seeking to leverage science and technology to bring social value and create an ongoing dialogue with their growing user base. As part of its annual Global Innovation Index Release, the World Intellectual Property Organization – WIPO has identified their highest concentration by region, with middle-income economies such as Brazil, India and Türkiye registering strong advances.

Why are these networks so desirable? Quite simply, they are open knowledge-oriented cohorts where participants bring in complementary assets. They challenge traditional corporate environments, afford founders greater autonomy to experiment, encourage unlearning of stereotypical product and process design tools, and start with openness as a synonym for possibility.

The EU bloc’s dedicated research and innovation fund alone, Horizon 2020, has put to work over EUR 80 billion in 2014-2020, and is positioned to match a similar investment in 2021-2027. Yet, the Circular Economy has only been awarded EUR 1 billion in the Horizon 2020’s final work program – supportive evidence that micro-scale incentives can go a long way for early starters.

🎯 Circularity Roadmaps Explained

Governments around the world are already implementing a broad range of trade-related policies relevant to the circular economy, including promoting new ways to fund them. An assessment by the World Trade Organization identified nearly 400 financial measures of governmental support directed to boost circularity efforts since 2009 – think, for example, of grants, preferential loans and loan guarantees, income and price support. Half of them involve funding for recycling solutions, followed by reuse and repair (< 20%), biodegradability and waste-related technologies, and innovation, each accounting for over 10%. Waste-to-energy, and refurbishment and remanufacturing initiatives – which seem to have found increased traction in North America – have received the lowest level of financial backing globally.

The interesting – and possibly predictable – finding is that most measures focus on downstream segments of the circular economy, with only a handful addressing design and other upstream segments (think of biodegradable packaging as an example of such upstream activities) which are also the closest to the consumer and where user behaviors need to be shaped by the right incentives.

Speaking of incentives, the European Environmental Bureau has been researching circular taxation, a concept that encourages changes in behavior through penalties that provide a clear price signal. This form of incentive can reduce consumption, resource use, and individual carbon and material footprints, but it also affects different stages of the product lifecycle, creating different impacts over time. To be both effective and credible, it would not be surprising to see the emergence of taxes for circularity laggards and tax breaks for leaders.

Environmental laws offer another example of how systemic incentives function.

The eco-labeling law in France (formerly known as Loi Anti-Gaspillage pour une Économie Circulaire (AGEC) or Anti-Waste Law for a Circular Economy) has just entered in effect in January and introduces climate impact labels for consumer products. It offers a direct example of delayed policy impacts on lifecycle of products- in this case, affecting the textile sector among others. The pain et beurre of the AGEC is to provide consumers with information about the environmental qualities and characteristics of waste-generating consumer products holding producers, importers and distributors all accountable.

Sounds like traceability tools could be deployed and do the trick, right?

Not without full transparency at the product level.

The textile sector offers foundational insights of the perils of a fast interpretation.

To be effective, environmental impact tools must provide product-by-product comparisons, not just materials to materials.

To actively adhere to the law, we would need to contrast a pair of organic cotton jeans with a pair of traditional jeans, instead of just the recycled materials. Moreover, resource utilization and environmental impacts differ from region to region.

In the words of the Norwegian Consumer Dispute Commission “There are significant differences in the way cotton is grown and how much water farmers use, as well as how and if they use these inputs correctly”.

💰 Investing in the Circular Economy

Good news! Micro-scale innovation with focus on the circular economy is well-positioned to attract a diverse mix of public sector instruments and private sector platforms to choose from.

The EU Innovation Fund offers a good example of project proposals and eligibility evaluation criteria within the EU as relate to low-carbon technologies including processes and products substituting carbon-intensive ones. It also emphasizes environmentally safe carbon capture and utilization and storage of carbon dioxide, innovative clean energy breakthroughs and energy storage solutions.

The call for small-scale project funding has attracted proposals for R&D collaborations and project duration in the 3-5 year range, working with universities and research & technology organizations including:

• Scale-up phase opportunities where the project coordinator may be an innovative, high-growth SME, and
• Product development clusters for co-creation of value with your customers and subcontractors, where the project coordinator is usually a partner in the middle of the value chain.

Caveat: Please note, it's not EU bureaucracy free!        

From time of application to funding disbursement, both project documentation and potential audit requirements can prove quite cumbersome if not demoralizing.

Private Sector Opportunity:

The Circular Innovation Fund by Paris-based Demeter and Montreal-based Cycle Capital . At first glance the fund seems to offer a fit-for-purpose alignment with the need to scale micro-innovations for the circular economy. Its overall allocation targets a diverse range of solutions to circularity challenges in terms of both underlying themes and geographic location.

No surprise if its focus on growth VC is where the private sector is most likely to find higher returns for circularity on the scale of the multi-decade plenary boundaries we live in.

💡 You don't want to miss this week...

Note: Feb 9th seems to be a special day for circularity....

Feb 6th – Feb 11th: National Week of the Circular Economy (The Netherlands). A week of events held across the country to share knowledge about the circular transition. On Feb 9th, Valérie van 't Lam and Roos Bruijnsteen , both lawyers at Stibbe specializing in environmental and administrative law, will host a webinar (Towards Circular Administrative Law) to discuss the main topics in the field of circular environmental law and the impact of circular, administrative law norms in the Netherlands. For in-person attendance at the Circl building on Gustav Mahlerlaan, Amsterdam, please email stibbeevents@stibbe.com to register.

Feb 9th: Les enjeux de l'économie circulaire. Château de Wiltz. Luxembourg. In person event: The municipality of Wiltz, the Circular Innovation Hub and In4Green are joining forces to organize a series of events throughout 2023 on the theme of the circular economy in Luxembourg. Held in French, the debate will be co-hosted by Ariane Bouvy from the Circular Innovation HUB and Frédéric Liégeois , founder of InfoGreen .lu .

Feb 9th: Manufacturing and the Circular Economy ( UK Research and Innovation ). The Engineering and Physical Sciences Research Council (EPSRC) will be hosting a one-day community and stakeholder workshop in Manchester. The event will “inform the EPSRC’s understanding of the priorities and opportunities for research and innovation, in driving a sustainable, resilient, thriving, and productive UK manufacturing sector and a truly circular economy.”

Feb 8th – Feb 10th: 11th Regional 3R and Circular Economy Forum in Asia and the Pacific (Siem Reap, Cambodia). Hybrid event. Theme: Integrating Circular Economy in Major Development Sectors towards Achieving Zero Waste Societies and the SDGs. Co-Organizers: Ministry of the Environment, Kingdom of Cambodia; Ministry of the Environment, Government of Japan (MOEJ); United Nations Centre for Regional Development (UNCRD) of Division for Sustainable Development Goals (DSDG) / UN DESA.

Off to another impactful week!