On the 4th of October, six leading sustainable development organisations launched the Circular Buildings Coalition (CBC), an initiative to accelerate the transition to a circular economy in the construction industry. The CBC’s formation was announced during a webinar held by its six founding parties: the World Green Building Council (WGBC), the World Business Council for Sustainable Development (WBCSD), the Ellen McArthur Foundation, Arup, Metabolic and Circle Economy.
The construction industry consumes roughly half of virgin resources globally and accounts for nearly 40% of the world’s carbon emissions and solid waste streams. Embracing circular practices targeted at all stages of a building’s lifespan—from design and construction to use to deconstruction—could help cut greenhouse gas emissions and reduce the industry’s impact on nature and biodiversity.
As noted by Catriona Brady, Director of Strategy & Development at World Green Building Council (WGBC), ‘We obviously need to create a market that places financial value on materials that we currently consider waste. We want to challenge business-as-usual thinking and look into market credentials that would allow circular materials to compete with non-circular’.
‘The construction sector needs to see circularity as not a problem but a part of the solution. It helps us achieve a more nature-positive, decarbonised built environment’, said Roland Hunziker, Director of Built Environment at World Business Council for Sustainable Development (WBCSD).
The CBC will focus on three critical roadblocks that hinder the transition to a circular building environment. These can be broadly categorised as issues relating to finance, ownership models and market dynamics, according to Circle Economy CEO Martijn Lopes Cardozo. Real estate financiers still prioritise short-term gains over long-term benefits while developing finance schemes for construction projects, for example. Buildings may also have different owners over the course of their life cycles, often with conflicting incentives: developers, for example, may be interested in building at the cheapest cost, while residents are motivated to pay the lowest energy bills. As of now, ownership models that align all stakeholders’ interests with climate and circularity goals are lacking—and as buildings change hands, information on the materials that have been used during construction is often lost. This impedes future reuse, by concealing building materials’ value and recycling potential from the last owner in the chain. Finally, the market for building materials stagnates: it does not incentivise the use of novel and secondary materials, for example, which are seen as risky: because developers must adhere to strict safety standards, they often prefer to ‘play it safe’ and use virgin materials, notes Lopes Cardozo.
According to Eva Gladek, CEO at Metabolic, maintaining materials’ complexity and value while addressing these issues in a systemic way is key to boosting circularity in the construction industry.
‘The required changes go beyond better waste recycling or reusing materials from buildings; they also require forming new collaborative models’ Gladek points out, adding: ‘We need to create self-replicating solutions, such as business models and incentive structures for projects'.
The founding organisations aim to assess the current systemic challenges in the industry, develop a knowledge base for overcoming them and use their insights to form recommendations for action.
‘Tackling these three key issues won’t solve the problem—but it’ll be a great starting point, and will show that a circular built environment is possible,' concluded Lopes Cardozo.
‘The starting point is to accelerate circular models that are competitive and profitable. At the same time, we need to articulate to policymakers how these models are not only economically superior but superior to the environment and society’, added Richard Boyd, Associate at Arup.
The CBC has committed to the following milestones:
The CBC intends to grow its reach by inviting new members, financially supporting key initiatives and developing new partnerships. Organisations interested in joining the movement or showcasing their circular solutions are invited to get in touch: https://www.circularbuildingscoalition.org/join-our-movement.
We need to start thinking beyond borders to achieve a sustainable, circular economy that matches environmental goals with social ambitions.
Today's understanding of the circular economy fails to address issues of global social equity and threatens to exacerbate the divide between high- and lower-income countries, making it clear that a global circular economy will not be socially just by default. To ensure workers aren’t left behind, labour rights are uplifted and social benefits are maximised for all, we need to be proactive.
In this World Circular Economy Forum side event, Circle Economy will explore how governments, multilateral organisations and civil society, together, can embed social justice in the transition to a global circular economy.
With speakers from the International Labour Organization, Women in Informal Employment: Globalizing and Organizing (WIEGO), the Or Foundation and more, we will discuss the role of three key levers in designing circular economy interventions that are fair and just for all—considering people beyond your own borders, sharing means and knowledge and trading responsibly—and will explore what else is needed to tackle the global inequalities that environmental policies can worsen.
Reserve your online spot on this Eventbrite page.
With a recycling and reuse percentage of 88%, the Dutch built environment appears to be a circular frontrunner. While the amount of cycled waste sounds impressive, it is mainly used for low-grade applications like road construction, which locks away a potentially valuable resource and downcycles its value. Only 8% of materials used for construction come from materials that have been cycled back into use. The Circularity Gap Report for the built environment in the Netherlands, initiated by Circle Economy and Metabolic, was presented to the Ministry of Infrastructure and Water Management as well as FNV, a national trade union centre and CNV, a federation of trade unions of the Netherlands. The report highlights the pain points, but also concrete solutions, for a more circular construction sector.
Problems are piling up in the construction sector
Many of the major crises in the Netherlands converge in the construction sector: the biggest labour shortage seen in years, the nitrogen crisis, a huge housing shortage, the rapid growth of raw material scarcity, and climate change. The construction sector is the largest consumer of raw materials, accounting for 40% of energy consumption and 30% of water consumption. The sector is working in overdrive and has to pull out all the stops to meet demand; the government expects 75,000 new homes to be built every year until 2025. One of the solutions proposed is sustainable and circular construction, so more can be done with less and raw materials are used more efficiently. However, the construction sector is still only at the beginning of the circular process. Different skills are needed, a different way of dealing with waste and a different way of doing business overall, but how? With four what-if scenarios to turn the tide, the report answers this question.
What needs to change
The report shows that the Dutch construction sector is a lot less circular than it appears to be; only 8% is circular and gets an equivalent or even improved application in the construction process. Still, there is cause for optimism. Jacco Verstraeten-Jochemsen of Circle Economy; “The Netherlands is well prepared to enable the shift to a circular economy. The sector has great initiatives, the infrastructure is in place and a mentality change is underway. But the planned actions are not yet being applied on a large scale.” Circle Economy and Metabolic developed – in collaboration with partners – concrete solutions for businesses, national and local politicians, urban planners and trade unions. Some key solutions the report proposes include:
About the report
In 2019, Circle Economy published the first Circularity Gap Report (CGR) with the aim of making the circular economy measurable on a global scale. Circle Economy has also applied the CGR methodology at national and regional levels. This research, which was developed in collaboration with Metabolic and C-Creators and with support from the Goldschmeding Foundation and De Hoge Dennen, is the first to analyse at a sector level. The aim of the Circularity Gap Report for the built environment is to provide insight into how circular interventions could contribute to a systemic change in the built environment. Zooming in on one specific sector helps Circle Economy to get a better insight into the transition and the operational and personnel implications and requirements. The aim of this project is to measure progress towards achieving the Dutch goal of being fully circular by 2050. It also explores the potential employment effects of four key strategies to achieve that goal.
You can find out more here: https://www.circularity-gap.world/sectors
Routinely described as the biggest threat to humanity, the climate crisis continues to worsen and impact vulnerable communities. This is according to the latest IPCC report, launching today. But now, tanks are rolling into cities around the world—from Kyiv to Sanaa—posing a much more imminent threat. We cannot post about the IPCC report as we usually would. At Circle Economy, we stand with the people of Ukraine and all those, including in Russia, who resist war.
Do you also want to support Ukraine? Explore these resources.
In the coming days, our colleagues will delve into the IPCC report together to explore how climate adaptation—and our work—can reduce threats to peace. In a world overrun by tragedy, we continuously choose to support the deep systemic shifts needed to ensure all people can thrive.
#StandWithUkraine
Today we added data on circular jobs in 148 cities from across 30 countries across Europe, Africa, Asia and the Americas to the Circular Jobs Monitor. This includes cities from Quito (Ecuador), to Kampala (Uganda), to London (the UK). We hope this evidence will empower local decision makers, providing them with insights into the relationship between the circular economy and the labour market. It can be used to design evidence-based strategies and policies, based on which sectors have the most ongoing circular activity and potential.
This is the first time that data on employment generated in cities engaging in circular economy activities has been made available. This evidence can be used alongside other social, economic and environmental metrics to help cities build back better and chart a course towards a more sustainable future for their people and the planet.
Circle Economy and UNEP originally joined forces in 2019 to come together on an approach for measuring employment in the circular economy. You can now explore data on circular jobs in over 100 cities analysed using Circle Economy and UNEP's joint methodology. These insights are housed on the Circular Jobs Monitor, a digital tool that maps jobs that drive circular activities.
In the next phase of our work together, Circle Economy and UNEP are developing city typologies. By clustering cities, we aim to fill data gaps and develop transition pathways for groups of similar cities that can be used to share learnings and co-design transformative policies and strategies.
With the circular economy we have an opportunity to shift towards a world where people’s needs are met while being in harmony with nature. We still live in a take-make-waste world where we put pressure on people and our planet, and it is in our cities that these impacts are felt the most. To combat inequality and tackle resource scarcity, cities need to embrace change and ways to provide decent jobs for its people. Governments can no longer afford to continue with ‘business as usual’. We need solutions.
Do you want to know how many circular jobs there are in your city?
Or reach out to us with your data to have your city added:
In its new publication—Roadmap Circular Finance 2030—the Sustainable Finance Platform has developed four concrete actions that will promote cooperation within the financial sector, allowing this sector to become a driver of the circular transition.
The circular economy is a means to an end—our end goal being an ecologically safe and socially just space. And the financial sector plays a crucial role in realising the transition to a circular economy. But it's not easy to go circular in a linear world: companies and projects seeking financing still face many obstacles in transitioning to circularity.
Download the English summary of the study at the bottom of this article.
Circular companies must operate within the framework of a predominantly linear economy, in which negative externalities are not factored into the prices of products and services. And what's more: the risk and return profiles of circular business models are not yet well understood and estimated. The financial sector will have to invest in knowledge development about the dynamics of the circular economy. In the current system, linear investments are largely still prioritised.
The financial sector plays an important role in financing circular companies and thus in accelerating the transition to a circular economy.
Therefore, the Circular Economy working group under the Sustainable Finance Platform (of the Dutch central bank) states that in 2030, circular economy will have to be an integral part of the assessment of financing applications and investment decisions.
Linear risk—the risk incurred by continuing to do business under the unsustainable assumption of infinite resources—must be explicitly included in financing decisions. Circular risk needs to be assessed more realistically by focusing (risk) models on the future and seeking assurances in future cash flows, long-term stability, chain cooperation and contracts.
This can increase transparency, enable external verification and benchmarking, and reduce greenwashing. Standardised circular metrics will lead to a level playing field in which circular activities (or lack thereof) will become visible and accounted for in financing and investment decisions.
…and fine-tuning circular propositions for financing. Financing a company that explicitly pursues circularity and applies at least one new element of circular finance constitutes a landmark deal. Insights gained from the experience—like how best to measure circularity, how to weigh risks and opportunities and how financiers can structurally use this information—can be shared with the sector. This will produce standard and publicly available documentation to spur future deals.
…to make circular financing the new business-as-usual. This means developing appropriate financing with more risk capital for early-stage circular companies. Blended finance, government funding and financial innovation also all play an important role in accelerating the timeframe within which this shift can happen.
The financial sector depends on its customers, governments, regulators and supervisors. All these players will have to work together and share insights with each other so that circular financing is business-as-usual by 2030.
By following these actions, the financial sector can become a lever for and driver of the circular transition.
Are you a financial institution representative, a financial sector advisor or a policymaker? Would you like to accelerate your circular transformation?
Contact us at info@circle-economy.com
The Circular Economy working group was established in 2021 under the Sustainable Finance Platform. Members of the working group are representatives of financial institutions and various other organisations: Circle Economy, Invest-NL, Rabobank, ABN, Ministry of Infrastructure and Water Management, PGGM, ING, Bird&Bird, KPMG, Dutch Professional Organization of Accountants (NBA), NEN, European Investment bank, Nederlandse Waterschapsbank (NWB), Sustainable Finance Lab, Fair Capital Partners, Doen Participaties, Copper8, Nyenrode Business University
Download the English summary of the study below.
Accounting and financing are catalysts for circular change—and adapting them to work for circular businesses is crucial to drive the transition forward. This is according to a new report by the Coalition Circular Accounting*, a collaboration between Circle Economy and the Royal Netherlands Institute of Chartered Accountants (NBA), Financial accounting in the circular economy: Redefining value, impact and risk to accelerate the circular transition. Scaling circular business models is crucial to accelerating the circular transition, unlocking the profitability of businesses in a rapidly changing world and reaching key climate goals, such as net-zero. However, the current challenges associated with financing and accounting for circular business are major obstacles that prevent their wide-spread and successful adoption. This new launch explores practical guidance to overcome these challenges and capture the value of circular business.
Ten years to double global circularity
A circular economy is essential to preventing the worst impacts of climate breakdown—and if carried out on a global level by 2032, it provides the answer to limiting global warming to 1.5-degrees. Excessive pollution and waste, rampant resource extraction, biodiversity loss and fluctuating global temperatures are the markers of our time; but circular strategies and business models, which eliminate waste, keep products and materials in use and regenerate nature, offer solutions. Businesses have a key role to play in mitigating climate change by moving to circular models. They also stand much to gain: in the long term, circular businesses can be more profitable and are resilient to risks. But how can we ensure the transition runs smoothly?
It's hard to go circular in a world dominated by linear practices and mindsets: circular businesses often struggle to entice investors, who may be used to working with linear business models—yet financiers are increasingly searching for financially-safe, sustainable investments. Accountants are also grappling with new roles in corporate disclosure on sustainability and circular impact. Without a shift in financing and accounting practices that accommodate pioneering firms, circular progress may grind to a halt.
With generous support from InvestNL, the Coalition Circular Accounting embarked on a two-year-long research trajectory to begin to uncover and devise solutions. This latest launch—a collection of learnings from a series of four papers—explores the current arsenal of accounting and reporting solutions for circularity through the lens of real-life business case studies, providing guidance for new directions to support the circular economy.
Redefine value, impact and risk to push the circular transition forward and unlock business opportunities
The key to truly reaping the benefits of a circular economy for business? Measuring companies' social and environmental impacts—not just their financials. Doing so will capture the true positive impact of circular businesses. But it will require an overhaul of how we define value, impact and risk: rethinking existing approaches, shifting mindsets and transforming vocabulary to support circularity.
Changing the way we do business, for the better
Everyone has a role to play in making large-scale systemic change a reality: from accountants and auditors to financiers, businesses and regulators, all actors must embrace a shift in mindset to truly change the way we do business. And the time is now: in the wake of COP26, investments to mobilise climate action are more crucial than ever in limiting the impending crisis.
*The Coalition Circular Accounting has been founded by the Royal Netherlands Institute of Chartered Accountants (NBA) and Circle Economy to identify accounting related challenges in the circular economy. The coalition includes experts and scientists in the field of finance, accounting and law, who together create solutions to overcome barriers to circularity.
The Community of Practice (CoP) to ‘innovate finance for the circular service economy’ brought together experts from ABN Amro, Allen & Overy, ASN Bank, Avans Hogeschool, Circle Economy, EY, 4CEE, InvestNL, Rabobank, Startgreen Capital, Stichting DOEN, Sustainable Finance Lab, UncInc, Windesheim Hogeschool, and was supported by Finance and the Common Good.
The CoP looked at the role of the CISE platform, a tool that distributes payments and information to stakeholders that collaborate to co-provide a circular service, and how it could support the financing of circular businesses. CISE technology opens up tons of opportunities for circular finance:
The key learnings from the CoP are presented in this white paper:
But we are not there yet. To come to the radical financial innovation that the circular economy requires we need to join forces and start experimenting.
In a circular economy, revenue models are no longer based on selling as many products as possible but are instead tied to durability and optimal use of products. The user pays for the use of a product rather than for owning it. An incentive arises for de-materialization: material becomes inferior to function.
Whether a product is suitable for a long life of intensive use, however, largely depends on the durability and replaceability of all its parts and thus on the entire supply chain. In the CISE platform, payments are automated and distributed across all chain partners according to their performance. Responsibility for resource use and durability is placed on those that have the most influence on it.
Take Homie, for example, that delivers a circular laundry service. Homie charges the user per washing cycle and takes responsibility for the washing machine. Ideally, however, the company that provides the motor takes responsibility for its functioning and take back and is awarded accordingly. The longer it functions, the longer he earns from it.
Adapted from: Achterberg, Elisa. (2019). The Circular Service Platform [link].
“We believe that with a pay-per-use business model manufacturers are stimulated to design devices for long-term use. At the same, users can be incentivized to use the devices as economically as possible” – Nancy Bocken, Co-founder, Homie
The CISE platform changes the relationship between service providers, consumers, and financiers fundamentally. Users subscribe to a circular service, for example to a laundry service, such as that provided by Homie. In the CISE app, a digital wallet is created in their user accounts. All stakeholders that co-provide or co-fund the service, are connected to the circular asset, the washing machine. When the user consumes a unit of laundry, its wallet is charged. The payment is immediately distributed to all stakeholders involved without a central party coordinating.
Adapted from: Achterberg, Elisa. (2019). The Circular Service Platform.
But could CISE improve the financing of circular service companies? Are new forms of financing possible? This Community of Practice identified three ways that CiSe contributes to better financing options for the circular economy:
“We are thinking many years ahead with this. If you had asked a taxi driver what the (uber) app should look like, they could not imagine it then. For example, you cannot ask the market for the ultimate goal of CiSe, because it does not fit into an existing model. It doesn't do something that's already there. It's going to do something fundamentally different.” - Cees van Ginneken, lawyer, Allen & Overy
“I am excited by the innovative proposal that is presented in this paper. Especially about the design of the service ecosystem where everyone has a stake in successful functioning of an asset. This creates an enormous diversification opportunity: risks that are now treated per customer can be partly mitigated by the diversification.” – Taco de Boer, New Business Manager Vendor Lease at ABN AMRO
There is still a giant step to be taken to get there. Together with supervisors and regulators the necessary space needs to be created to experiment with new financial models and to change the way we value circular service companies and assess their riskiness. Encouraging circular service providers to start using the CISE platform is the first step. With the data that is generated, intelligence can be developed to accurately predict cash flow patterns and create the necessary certainty for finance providers to take the plunge. Subsequently, new financial models can be structured and piloted. Eventually creating the financial models necessary for a circular future. Will you experiment with us?
To learn more on how finance could be innovated for the circular future, download the whitepaper.
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