Insights

Circular Economy: Finance your circular innovation

At Catalyze we admire entrepreneurs that want to change the world; as an impact-driven innovation consultancy, we pursue the same goal. With this article we aim to facilitate product development for green and sustainable entrepreneurs. The article provides a brief history of, and the need for, a circular economy. Both nationally and internationally, the current regulatory ambitions are described, including funding opportunities. At the end of the article, we share a small number of examples of our track record in circular economy innovations.

Historical development

Circular practices have been around for centuries, stemming mostly from scarcity and poverty where natural resources were used optimally and waste minimized or re-used. In the 18th century, the Industrial Revolution began accompanied with the development of modern industrial production processes – and shifting from circular practices to a new linear manufacturing model, which has dominated ever since. As a result of this new paradigm, the use of finite resources rapidly increased, resulting in the oil crisis of 1973(1,2).

In 1988, the term ‘circular economy’ appeared for the first time. The core explanation of the circular economy, despite differences in terminology, is that a ‘circular economy uses a systems-focused approach and involves industrial processes and economic activities that are restorative or regenerative by design, enable resources used in such processes and activities to maintain their highest value for as long as possible, and aim to eliminate waste through the design of materials, products, and systems.’ The aim of a circular economy is to reduce material use and recapture, reuse, and recover waste as a resource for the production of new materials(3).

In this day and age, the world is facing several crises such as global warming, material scarcity, biodiversity loss, and pollution. In response to these accumulating crises, governments are changing policies to transition systems from a linear economy to a circular economy.

The Circular Economy

Within a circular economy, there are two types of materials: technical (stock management cycle) and biological material (renewables flow management cycle) – see the figure below(4). Technical materials are materials that do not biodegrade, such as plastic and polymers. The aim is to recover and reuse these materials, with recycling being the lowest value loop and sharing the material of the highest value loop. When designed correctly, biological materials biodegrade, such as food and wood. The goal with biological material is to reuse the material for as long as possible, this is known as cascading. After the material can no longer be cascaded it is ready to be biodegraded(4-6).

In bringing circular innovations to market, business cases are often limited by suboptimal cost-effectiveness due to a True Cost pricing – the market price plus the social and environmental costs of a product. This can be offset by targeting high-value markets for initial product launches, or targeting markets where the barrier to paying a green premium is lower due to (incoming) legislation.

Circular economy

Image from Ellen MacArthur Foundation.

National (NL) and European ambitions to implement circular practices

To further drive the circular economy and its beneficial impact on our planet, environment, and climate, national and European governments are increasingly allocating funding for development of innovations contributing to the circular economy. A key element on the European level is the Circular Economy Action Plan that is a part of the European Green Deal. In practice, this translates to grant funding in several calls.

Circular economy: funding options for development of innovative and impactful technologies 

Funding in the Netherlands

Several national and regional bottom-up funding options are available to start-ups developing innovative technologies. Most of these calls, such as the NWO take-off grants, MIT R&D and the Innovatiekrediet support different stages of development and all aim to bring innovative products to market. There are also several programs that offer top-down calls such as the Nationaal groeifonds and EFRO grants where e.g., the Kansen voor West 3 program has a strong focus on circular economy as a specific objective under their Climate pillar, for which they have reserved €17,5 million until 2029. In addition, the VEKI and Circulaire ketenprojecten program offers funding specifically for initiatives that contribute to the Dutch climate goals, towards which the circular economy contributes.

Funding in Europe

The European commission offers several grant programs that support innovations contributing to the circular economy. As a start, several bottom up programs such as the Eurostars program and the EIC programs (Pathfinder, Transition, Accelerator) are available to all types of innovations. Conversely, an increasing number of top-down funding programs are offering substantial budgets for green innovations, including the circular economy. The LIFE program, which turned 30 this year, is the oldest program in the field and funds projects with an impact on climate and environment. Under LIFE there is a subprogram dedicated to the circular economy.

Within Horizon Europe, the second pillar incorporates the Green Deal – and therefore circular economy – in the last three clusters. In the final cluster ‘Food, Bioeconomy, Natural Resources, Agriculture and Environment’ one of the destinations is specifically focused on Circular economy and bioeconomy sectors.

Structure of the Horizon Europe Framework Program.

Last but not least, the CBE JU program funds circular bio-based projects. This initiative is built on a €2 billion partnership between the European Union and the Bio-based Industries Consortium (BIC). Similar to the Horizon2020 calls under pillar 2, these calls are opened top-down, where a specific set of desired outcomes are pre-defined.

Previous winning projects in the field – by Catalyze partners

At Catalyze we have had the honour to support a wide range of innovators in obtaining funding for their novel technology or product. We are extremely proud of their achievements. We have included a small selection of winning projects below, follow the links to read the interviews with the coordinators of the winning projects:

 

This article was written by Carla van Alem, Managing Consultant Green & Sustainable Innovations, and Esther van Loon, Consultant GSI.

 


Contact us

Are you an entrepreneur or researcher with an innovation that can contribute to the circular economy, and are looking for non-dilutive funding? Reach out to us to find out the optimal funding program for you.

 


References

  1. Garza-Reyes JA, Kumar V, Batista L, Cherrafi A, Rocha-Lona L. From linear to circular manufacturing business models. J Manuf Technol Manag. 2019;30(3):554-560. doi:10.1108/JMTM-04-2019-356
  2. The future of manufacturing: From linear to circular. The Berkeley Blog. Published February 25, 2014. Accessed August 16, 2022. https://blogs.berkeley.edu/2014/02/24/the-future-of-manufacturing-from-linear-to-circular-2/
  3. Sullivan D. Text – S.1982 – 116th Congress (2019-2020): Save Our Seas 2.0 Act. Published December 18, 2020. Accessed August 16, 2022. http://www.congress.gov/
  4. MacArthur E. Circular economy introduction. What is a circular economy? Accessed August 15, 2022. https://ellenmacarthurfoundation.org/topics/circular-economy-introduction/overview
  5. Circular Economy Guide. Circular Economy Guide. Accessed August 15, 2022. https://www.ceguide.org/
  6. Circular economy: definition, importance and benefits | News | European Parliament. Published December 2, 2015. Accessed August 16, 2022. https://www.europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-benefits
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