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This article was originally published by Illuminem
Today, as we are faced with the ever-growing threat of the climate crisis, many consumers associate ‘going green’ with buying a Prius or a Tesla, their climate anxiety making the demand for electric vehicles skyrocket. However, if the solution to the climate crisis was simply buying a new car, it wouldn’t really be a crisis, would it? Still, the green tech industry is a multi-billion dollar market and is projected to grow rapidly in the coming years with the global electric vehicle market alone expected to grow to US $1,318.22 billion by 2028.
While electric cars may be en vogue, studies show that 70% of greenhouse gas emissions are in fact the result of material handling and use—not transportation and energy. A ‘circular economy’ is widely considered a key approach to reducing the material use that causes these carbon emissions. Yet, Verdantix reported that the circular economy digital solutions market was only worth around US $468 million in 2021. One would assume that securing funding for circular tech—which aims to keep material resources in the value chain for as long as possible—would be a no-brainer. But in the grand scheme of green technology, circular economy businesses are struggling to rise to the top.
Why is the circular industry lagging behind other sustainable tech markets? To get to the bottom of this glaring disparity, I sat down with serial entrepreneur and CEO of the Circle Economy Foundation, Martijn Lopes Cardozo, in Amsterdam. Along with founding multiple tech start-ups himself, Cardozo spent around ten years mentoring upwards of 200 cleantech start-ups and scale-ups. Needless to say, he knows a thing or two about what makes a circular business work and, maybe more importantly, not work.
‘If you want to do something quite radically different’, asserts Cardozo, ‘then circular economy is quite radical’. In a fundamentally linear system, one built on a take-make-waste model, circular ventures come with inherent risk. However, if we don’t make some big changes fast, the future of human life on Earth is at risk—a gamble many are not willing to make.
Cardozo learned about the risks of circular tech start-ups the hard way when his business Black Bear Carbon went up in flames—literally. The venture developed technology to extract carbon black from old tyres for reuse in new products, and after nearly 10 years of development, an oil leak caused their first factory to burn to the ground. ‘
'I think we had underestimated what it takes to build a reliable production system using quite new technology. And if you look at how a lot of technology develops—the windmills we see now offshore are the 10th or 11th generation windmills…The challenge here is that you typically don't have the luxury to go through all these different iterations as a startup.’
When it comes to climate change, time is certainly of the essence.
The latest report from the UN’s Intergovernmental Panel on Climate Change warns that Earth will surpass the 1.5-degree threshold outlined by the Paris Agreement in the next decade. The circular economy is highlighted in the report as a key solution to the climate crisis. With the evidence base for circularity ever-expanding, the question remains why circular tech ventures struggle to really take off.
‘I think for these massive transitions you need quite long and patient capital, but generally, investors are more interested in something that has very low capital cost, like an internet intervention. Whereas for more the deep tech and infrastructure plays, it's very hard. Even Tesla went bankrupt a couple of times…In general, I think there’s a role for industry and there's a role for government to enable that [circular transition] because otherwise, the change will not go fast enough’.
According to Cardozo, there are several obstacles facing circular tech ventures from policy to consumer experience. First things first, he says ‘I think the trick is: how can you leverage the existing [linear] system as much as possible to de-risk your venture, and then focus on risks in areas that you can really control’ and, time willing, ‘the more you can de-risk and test before you're at scale is of course extremely valuable’.
In terms of legislation, Cardozo defers to the Ex’Tax Movement which aims to tax pollution, not labour. ‘I think one of the areas on the policy side is the pricing of materials versus labour. Typically if you do something on the material side, it tends to be quite labour-intensive. And if you're competing against very cheap virgin alternatives, it's harder to compete because there is a lot of tax on labour.’
Finally, Cardozo argues that the key for circular businesses to truly succeed is customer-centric thinking. ‘You really have to create a good value proposition that goes beyond just being ‘green’. So ideally, you have a superior end-user or business-user experience. A great example would be Swapfiets, right? A lot of people like that experience more than buying their own bikes. So they're basically combining a circular, product-as-a-service model with a superior consumer experience. And I think that's very powerful’.
As we look towards the future, in the midst of what has been called ‘the greatest threat facing humanity today’, it’s easy to lose hope. But solutions to the climate crisis abound, and many of them involve taking advantage of technology. Cardozo argues that certain circular trends will emerge in the coming years, and considering that food systems and construction contribute the most globally to greenhouse gas emissions, Cardozo sees the future of green tech in these industries. ‘One way to think about the future is in terms of where, potentially, the biggest impact is, right? So you can look to big interventions in the built environment and in the food system, which is partially already underway’.
Cardozo points to new trends in what people eat. ‘Big interventions in the food system in terms of new sources of protein is a theme.’ One example comes from Thai start-up Global Bugs, which has harnessed the unexpected power of crickets into a new superfood. In terms of construction and buildings, Cardozo goes on:
‘I would call a trend ‘productisation of buildings’...I think in the future there will be much more productised, modular components that can be reused or 3D printed in advance.’
A British start-up, TopHat, is already providing modular construction services in the UK, with firms all over the world following suit. These are just a few cases from the Circularity Gap Report 2023 which found that the world is only 7.2% circular—proving that now, more than ever, we need to advance circular tech.
At the end of our conversation, I asked Cardozo what advice he had for entrepreneurs in the world of circularity. His answer: collaborate. ‘Entrepreneurship is a mindset and I think you can apply that mindset to different things. I think bringing in different perspectives—people coming more from the government side, people coming more from thought leadership—and sort of bringing those worlds together. That's where you can achieve a lot of progress’.
Collaboration doesn’t always come naturally to our linear world that worships competition. But in the race against the clock of climate change, collaboration must usurp competition as our modus operandi. So next time you’re thinking of ways to ‘go green’, put down the car keys and ‘go circular’ instead. As Cordozo aptly put it: ‘If you want to do something quite radically different, then circular economy is quite radical’.
