Updated: May 21, 2021
The idea of a circular economy or circularity has been discussed in business since the 1970s. Since then, as a society, we have gradually worked toward creating a circular economy. But, in recent years, our efforts have slid backward.
In 2018, the global economy was 9.1% circular. In 2020, that number decreased to 8.6%, according to The Circularity Gap Report 2020. 9.1% was nothing to brag about, and 8.6% should really make us hang our heads in shame.
Why is this number decreasing? Three reasons:
Ongoing stock build-up
Low levels of end-of-use processing and cycling
High rates of extraction
Ongoing Stock Build Up
All humans have needs and wants.
The problem begins when we start stockpiling instead of using what we already have. While recycling has become commonplace on one level, we have a long way to go when it comes to urban infrastructure.
We should use existing resources efficiently when constructing roads and buildings. We can design and manufacture machinery and the products we build to be maintained and reused in a circular system. As our population grows, we cannot ignore the demand for stock build-up, and we must address it.
We should also incorporate digital technology to optimize how we use our resources. We have seen AgTech startups embrace this approach and lead the way.
For example, our portfolio company, iShence, created a platform to automate, monitor, and control all the elements, including water, nutrients, and electricity, needed to grow crops. Their platform allows farmers and researchers to reduce electricity by 40% while delivering consistent yields with fully automated control, real-time alerts, and improved analytics. The iShence sensors take the guesswork – and waste – out of deciding when to water, fertilize, or adjust lighting for crops.
Another one of our portfolio companies, GrowRay, has become a leading provider of full-spectrum LED grow lights for cannabis growers since its inception in the US. Their unmatched thermal engineering and ratio-based spectrum technologies increase productivity, efficiency, and sustainability by offering patented LED lights that provide up to 35% less energy consumption than outdated HPS technology.
Low Levels of End-of-Use Processing and Cycling
Government policies, investments, and technical innovations are efforts we see municipalities enacting to increase recycling and solid waste recovery. However, these waste recycling improvements are not enough to increase circularity given our growing population and ever-increasing rate of material extraction.
As a result, we see startups – especially FoodTech startups - taking matters into their own hands. For example, our portfolio company, The Nom, includes sustainability in its values and enables zero waste with its products, flavored edible straws. The straws are made from wheat and rice flour, vegetable oil, and cacao powder that can last up to 25 minutes in hot beverages such as coffee. After using them to in their drinks, consumers can eat them as they come in multiple flavors, ranging from strawberry rose to crunch vanilla.
Another one of our FoodTech portfolio companies, Paragon Pure, uses sustainable food-producing technologies to produce natural flavorings and ingredients. They are developing a rice bran oleogel delivery system to reduce dependence on palm oil and build next-generation sustainable ingredients for plant-based meat. Paragon Pure’s mission speaks to its dedication to sustainability – “to understand the science of nature to create ingredients for delivering natural flavors, colors, and nutrients into wholesome foods.”
High Rates of Extraction
Material extraction has been taking place since Industrial Revolution, and it continues to function at an increased rate every year, again due to our rising population and stock build-up. Unfortunately, our current world economy relies extensively on extracting virgin materials, many of which are non-circular such as oil derivatives. We need to address this issue to enhance circularity.
Why Should Countries Care about Creating a Circular Economy
The clear benefit of a circular economy is reducing climate change. A circular economy leads to lower carbon emissions and decreasing global warmth.
So, what is the motivation for countries to adopt a circular economy?
Benefits for counties when they close the circularity gap include:
Creating a more competitive national economy by not relying on outside materials
Decreasing environmental degradation which helps create a cleaner planet for everyone
Reducing reduce social inequality – everyone is a “have” instead of a world of haves and have nots
Ensuring supply security
Achieving emission reduction targets
Closing the circularity gap won’t happen overnight, but when it does, countries can meet the needs of a growing population and drive better social outcomes for their citizens.
Here in the US, our portfolio company, Quickload, aims to reduce carbon emissions via its transportation system. By offering a “smart” trucking network that transports freight more efficiently to shippers, Quickloaod aims to reduce carbon emissions. Their street-turn technique means fewer empty containers and trucks.
What Can We Do to Get Back on a Circular Economy Track?
The circular economy is a dynamic system which means there is no specific endpoint. It is a transformation process that comes with multiple steps.
Design for the Future - During the design process, plan to use materials for the appropriate lifetime
Incorporate Digital Technology – to track and optimize resource use
Sustain & Preserve - maintain, upgrade, and repair resources to maximize their lifetime
Rethink the Business Model - create increased value by building interaction between products and services
Use Waste as a Main Source - utilize waste as a source of secondary source via reuse and recycling
Prioritize Regenerative Resources - ensure renewability and reusability
Create Joint Value –increase transparency and shared value. Work together with the public sector and internally within organizations throughout the supply chain
To systemize the path toward a circular economy, we need to educate society about the connections between resource use and social needs. Then we need to transition to provisioning systems to protect our resources.
Positive Stories about the Circular Economy
It’s not all doom and gloom. Many companies and countries have flirted with the circular economy.
According to The Circularity Gap Report 2020, Brazil developed a digital solution for informal trash collection. Nigeria started waste processing. Sweden, Luxembourg, and Austria are beginning to have high solid waste recovery.
Entrepreneurs are coming together with government authorities to find solutions. More and more governments are creating sustainability programs and policies. We see countries around the world supporting investments towards a circular economy.
Many startups began because entrepreneurs wanted to find sustainable solutions to help protect the environment and our planet. Here at Sente, we support that vision, and we look forward to seeing their answers to close the circularity gap.