“Economic resilience and innovation” – Building Bridges 2024 makes the commercial case for circularity

The 2024 edition of Building Bridges, held in Geneva from 9th to 12th December, was marked by what became an overarching theme – to attract capital at scale, the sustainability transition must, first and foremost, make commercial sense for companies and investors.

At a panel entitled ‘Unlocking the power of the circular economy: a bold solution to today’s environmental challenges’, delegates heard that circular business models are at the forefront of an expanding opportunity to innovate, reduce costs, and build market share.

Felix Philipp, Head of Research for Circular Economy and Materials, Lombard Odier Group, gave the keynote speech, explained that by cutting their need for increasingly scarce and expensive virgin materials, forward-thinking companies are aligning growth with environmental impact. For investors, businesses and governments alike, he said, circularity has become “the pathway […] to economic resilience.”

The case for the circular economy

Material extraction and processing, Felix Philipp explained, “is responsible for over 90% of land-based biodiversity loss, 60% of climate impacts, and 30% of pollution.”¹ With many of the physical resources we need for modern life “quickly reaching the end of their abundance, circularity is key to our economic prosperity, resilience and autonomy. Circularity allows us to decouple economic value creation from resource use.”

While the transition to circular business models will be challenging for businesses, he acknowledged, “it opens the door to building competitive advantage and addressing rapidly shifting value pools.”

He added: “For governments, embracing circularity can lead to enhanced job creation and economic stability. For investors, there’s a whole wealth of new investment opportunities materialising before our eyes, from new low-impact high-performance materials; to advanced supply chain management solutions.”

Food sector: ripe for change

Despite this potential, Julia Binder, Professor of Sustainable innovation and Business Transformation at IMD Business School, noted that business leaders are struggling to move past the initial, small-scale, “feel-good” phase of implementing circularity. “How can companies make a big leap within the confines of a rigid economy?” she asked.

Answering, Eija Hietavuo, Vice President, Corporate Affairs, Tetra Pak², said that the food industry is ripe for a circular transformation – simply on the basis of the cost savings and productivity increases that could be achieved. “The finance world should see food circularity as a huge opportunity because one third of all food produced is lost and there’s a price tag on that waste,” she said. “The food sector has a lot of old technology and processes which lead to a lot of waste. Technology transfers and innovation are huge opportunities.”

Read also: Plastic wrap: private markets, public policy for circularity

Rob Cameron, Vice President, Global Head of ESG Engagement, Nestlé², agreed. At the upstream end of the value chain, he explained, waste on farms can be reduced. “There’s nothing more circular than the natural world – there’s no waste in nature. Everything on a farm has a value of some sort, the question is finding out how to use it,” he said.

In manufacturing, he continued, waste by-products can be turned into new products – such as sweeteners made from cocoa husks. Meanwhile, on the delivery side, there’s an opportunity to innovate by redesigning packaging to reduce plastic waste, using alternative materials where possible, and boosting re-use and recycling rates.

Value first

When it comes to plastics, in particular, delegates heard that many large corporates are clamouring for governments to reach agreement on a global treaty to tackle plastic waste. However, Binder said, “Companies don’t need to wait for regulation.” If done right, “circularity means using less resource so companies can be more profitable, more resilient, and de-risk supply chains. There are massive business advantages in circularity.”

The LOIM Plastic Circularity private-equity strategy is built on this growth focus, where circularity is as much about innovation, efficiency and profitability, as sustainability. Recognising that plastic, while problematic, is indispensable, our strategy aims to deliver long-term returns by investing in companies specialising in innovative plastic alternatives, new usage models for plastic, and improved collection, sorting and recycling.

Better for consumers

Our approach recognises that the transition to circularity can’t be forced onto consumers: it will only be sustainable for the long-term when circular models provide an improved customer experience.

This essential point was recognised by Cameron, who noted that some packaging re-use pilot schemes had failed at the pilot stage. For such schemes to work, he said, the entire sector, including manufacturers and retailers, need to work together to ensure that re-use and recycling is convenient and desirable.

Binder agreed, noting: “For a long time we believed there to be a ‘green consumer’ – now we know this doesn’t exist. It needs to be an improved customer experience.” To date, she said, the global community has positioned the circular economy too much in the realm of sustainability. “That’s wrong,” she continued. “Circularity will help us achieve our climate targets, but businesses that are successful in circularity see it as a means to profitability and growth. It needs to not be something we do for good, but to future-proof our business and tap into exciting new markets.”

Echoing this sentiment, Philipp drew together the threads of innovation, growth, and sustainability. “In conclusion,” he said. “Circularity is not only the pathway to environmental sustainability, but also to economic resilience and innovation. Only together can we lead the charge towards a future that values regeneration over depletion, collaboration over competition and sustainable growth over short term gains.”