The 3-step Recipe to Create Impact from Circularity
by Felix Staeritz, Adam Mitchell-Heggs & Frank van Beuzekom
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Our economy is based on a ‘take — make — dispose’ model that assumes an abundance of raw materials and limitless capacity for waste (including carbon emissions, landfill space, and our ocean’s capacity to absorb plastics). These assumptions are deeply misleading.
We have abundant data highlighting the problems with our current system: carbon driven climate change; significantly reduced life expectancies due to poor air quality; islands of plastics growing in our oceans; deforestation; and dwindling or toxic water sources. Yet we are still demanding single-use plastics, dressing ourselves in fast fashion, transporting ourselves and our products inefficiently and often unnecessarily, while we consistently and thoughtlessly waste.
It doesn’t have to be like this. The solution to today’s challenges is simple: move to a circular economy. The idea isn’t even a new concept. However, it has been largely neglected and ignored over the last two centuries, due to the ease, speed, and low cost of mass production introduced by the first and second industrial revolutions.
What Is the Circular Economy?
The circular economy uses smart production and pairs consumption with waste reduction (or even elimination). It encourages the design and implementation of sustainable practices, such as prioritising regenerative resources, optimising operational models, building in loop cycles to improve material efficiency, and designing new and engaging consumer models that enable and influence responsible consumer behaviour.
‘take — make — dispose’ industrial model
Business models based on circularity look beyond the ‘take — make — dispose’ industrial model. Instead, they redefine growth by decoupling economic activity from the consumption of finite resources to focus on positive society-wide benefits.
Digital and platform businesses have the potential to play a key role in driving sustainable change. Optimising supply and demand along the entire value chain creates economies of scale that can make sustainable solutions cost effective, more efficient, and often more transparent to the consumer.
In a nutshell, the circular economy promotes a way of thinking that looks beyond simple economics — the kind of economics that doesn’t account for externalities — and into the environmental and societal value of our production and consumption behaviour.
For readers unfamiliar with the circular economy, the World Economic Forum has a great introduction on the topic. We also recommend reviewing the Ellen MacArthur Foundation’s sleek and intuitive definition of the circular economy. It consists of three core principles:
- design out waste and pollution,
- keep products and materials in use, and
- regenerate natural systems.
Those principles apply both to physical and immaterial waste, such as old clothes or an empty seat in a car. Underpinned by a transition to renewable energy, the circular economy builds economic, natural, and social capital.
Circular models remind us that at every part of the value chain, we can and should challenge the linear model by thinking laterally and creatively. An example of lateral thinking is packaging as a service. When Terracycle launched Loop, along with various leading consumer brands (e.g., P&G and Unilever), they took what used to be an industry with a massive waste problem and turned it on its head. Products sold through the Loop platform are sent in durable packaging that is collected after use, washed, and reused by the manufacturers.
Given the resources and new technologies available, the mounting pressure from policy and economic regulators, and the changes in consumer behaviour, there is clear urgency for corporates to apply circular principles. But they often struggle to do so.
Unlocking the biggest impact potential of Circularity
Circular economic principles make the biggest impact when applied by, or to, large corporations, government bodies (e.g. city initiatives), or part of a larger value chain initiative (e.g. Loop and the CPMG brands). Every large corporation has assets that hold tremendous potential to become more efficient, regenerative, and less wasteful. When we talk about assets at FoundersLane, we are not only talking about physical ones but also data, talent, networks, and more. Tackling those assets leads to efficiency gains.
Circularity for big corporations
Companies that use corporate venture building to apply circular economic principles unlock even more value creation. This secures competitive advantages by using the unfair advantage a corporate already has within a particular ecosystem.
How does a company use its unfair advantage when applying the principles of a circular economy? Take ShareNow, a joint venture between Daimler and BMW. The company provides car sharing services (a classic example of a circular economy) across Europe and North America. They leveraged their joint ecosystem network and to create a sizable impact, both on their finances and on circularity.
Start-ups do not have the luxury of an established ecosystem and valuable assets like corporates do. And corporates have lost flexibility that start-ups are known for. That is where corporate venture building comes in — hybrid teams of entrepreneurs and corporate partners.
Circularity — all or none?
Circularity is not only about total resource circulation. We introduced the core principles earlier — design out waste and pollution, keep products and materials in use, and regenerate natural systems. But what defines waste?
Waste is defined broadly here. It can be the result of inefficient production processes that create excess materials, it can be using people’s time in wasteful ways, or it can be using energy inefficiently or not getting the maximum out of energy production. Looking at the Built Environment for example; more than 50% of the activities in this industry are non-value added. Hence, the (non-traditional) waste is huge!
We are far from being circular as a society. The global economy is only 9% circular, according to the Amsterdam based Circle Economy firm. The world uses 92.8 billion tons of minerals, fossil fuels, metals and biomass — and only 9% of those are re-used. The rest is waste. We have a long way to go, but there is tremendous potential to develop more efficient business models.
We spoke to environmental activist, polar explorer, and author Sebastian Copeland for our FightBack book. In it he argues that we need hybrid models that align environmental mandates with sustainable and stable businesses.
Through our corporate venture building process, we have identified some of the biggest areas to make more efficient, less wasteful, and thus more circular. An example is Solytic. The company optimises Solar PV’s efficiency and produces efficiency gains of up to 30%. Solytic is a venture that came out of a co-creation process between FoundersLane and Vattenfall, one of the largest utility companies in Europe. Together we managed to identify where the biggest leakage is — that allowed us to unlock massive value. Today, the company is the fastest growing PV analytics company in the world. It operates in 42 countries and creates value for the Vattenfall and society while making a cleaner planet.
In our latest book FightBack, we show how companies can use digital technology, entrepreneurial creativity, and new business models to exploit our existing assets and create a viable future for our children. It offers a new approach, based on corporate venture building, that can mobilize the underutilized potential of our mighty corporations, enabling them to play a key role in launching innovative, profitable, and strategically relevant businesses and creating a better world. The book is part of a community effort. Learn more here.
Bottom line
Through a hybrid structure, corporate venture building capitalises on circular economic principles to unlock value. That value can be waste reduction, time optimization, production gains (such as with Solytic), as well as corporate revenue creation. In the end, we only get better by doing, by collaborating.
We are driven by a mission to shape the world for better now. How?
1. Take a look at the Fightback Sessions to access the webinars that help accelerating in the new normal.
2. The Fightback Now book explains how you can leverage your assets to shape the new normal.
Fightback Now book by Felix Staeritz and Dr. Sven Jungmann.(coming soon)
3. If you enjoyed this story, you might also like our bi-weekly The Lane newsletter on the matters of Business, Innovation and Entrepreneurship:
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Felix Staeritz is the founder of FoundersLane, the leading corporate venture builder in climate and health, where he works with 30 of the Forbes 500 companies on the next groundbreaking technological innovations. His experiences as a founder and entrepreneur, where he’s led companies to IPOs, and his activities as a business angel and investor have taught him to recognise when VC-financed startups reach their limits. Therefore, Staeritz looks for ways to combine the strengths of corporations and entrepreneurs and is driven by implementing solutions in a short period of time. As a member of the Digital Leader Board of the World Economic Forum, his core concern is to solve our major societal challenges with innovation.
Frank van Beuzekom is the Co-Founder of the Climate Vertical at FoundersLane. Frank has extensive experience in Corporate Venture Building, and Strategy & Innovation projects in corporate environments as well as start-ups, in particular in relation to energy.
Adam Mitchell-Heggs is a Senior Venture Developer at FoundersLane where he works with leading companies to build new ventures with positive impact. At FoundersLane he helped to co-found the Climate Vertical and is a Partner of the FightBack Built Environment Alliance. Adam is a specialist on theoretical and practical aspects of Circular Economy; and integrating Circular Economy into venture building.
FoundersLane creates new, fast-growing digital companies in categories that are highly topical and current. FoundersLane counts more than 100 founders, experts and entrepreneurs with great expertise in the fields of medicine, health, climate, disruptive technologies such as IoT connectivity, AI, and machine learning. Clients and partners include SMEs and corporations as well as more than 30 of the Forbes 500 companies, such as Trumpf, Vattenfall, Henkel and Baloise. FoundersLane is active in Europe, MENA and Asia with offices in Berlin, Cologne, and London.
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