'More focus is needed now on a circular economy'

Expert blog - 11 July 2023

StartGreen wants to help build a sustainable economy. That is why our funds invest in three impact areas: the Energy Transition, Diversity and Circularity. 'There is a lot of social attention on the first two, but circularity remains underexposed,' says Laura Rooseboom, co-founder and Managing Partner of StartGreen in this blog. 'This needs to change soon. Companies, governments and consumers must work together to prevent resource depletion.'

Insufficient supply

Too little attention is still paid to a circular economy, even though it is at least as important as the energy transition. After all, what good will energy be in the future if you run out of raw materials to process? It is still too often thought that the supply of primary (extracted from nature) and secondary (reclaimed, reusable) raw materials can meet the growing demand. For this reason, the Resource Wende Coalition for a widely supported Future Agreement that takes a critical and scientific look at the consequences of the impending resource scarcity.

Use of raw materials not reduced

The Dutch government aims for a fully circular economy by 2050. By 2030, the consumption of primary raw materials should be halved. From the second Integrated Circular Economy Report (ICER 2023) - commissioned by the government and produced by the Netherlands Environmental Assessment Agency (PBL) - shows that this goal is far from being in sight. Indeed, the use of most raw materials has not decreased at all in recent years.

Reducing consumption

To reduce the consumption of raw materials, the government has formulated three sub-objectives. Raw materials should be used more efficiently in production processes so that fewer are needed. In addition, more sustainably produced raw materials should be used, such as biomass: raw material made from plants, trees and food waste. New products and production methods should also be designed to be circular.

Investing in circularity

StartGreen in particular can help achieve the third goal by funding innovative enterprises. A number of our funds invest in circular impact businesses. For instance, Fairphone smartphones with recycled and responsibly sourced materials. MUD Jeans is the world's first circular denim brand. By recycling jeans and offering a leasing option, they prevent denim from ending up in landfill. Chaincraft converts organic residual waste into high-quality acids for the chemical industry.

All contributions

Such investments accelerate the transition to a circular economy. But it is not enough. I believe a total system change is needed to achieve a truly circular economy. We all need to play our part in this. As consumers, we should not immediately throw away unused or broken items and clothes, but recycle them or have them repaired. For more luxurious clothes or furniture, this is already happening, for example through The Next Closet or Reliving. For technical devices, recycling is now often still more expensive than buying new. To really tackle raw material depletion structurally, I think the most important thing is for governments to start taxing in a different way.

Tax on extracted value

Large manufacturing companies will only really start looking critically at their resource consumption when they start feeling it in their pockets. As long as labour is still highly taxed and consumption of natural resources and pollution are hardly taxed at all, little will change. I therefore strongly agree with the Ex'tax Project Foundation which argues that our tax system needs to start offering different financial incentives, and fast. The extraction of value, i.e. pollution and depletion of natural resources, should be taxed high, while the burden on labour should be lowered. Or as António Guterres, Secretary-General of the United Nations nicely puts it: Tax pollution, not people.

Balance ecological upper limit and social lower limit

If we as companies take a critical look at our own operations, together we can make a significant contribution to a circular economy. Very inspiring I find the book Donut economy by Kate Raworth. In it, she outlines an economic model in the shape of a donut. The outer circle represents the ecological ceiling, the inner circle represents the social foundation. The space between those two circles forms the donut or 'sweet spot': a circular economy that is good for people and the environment.

Regenerative design

To those sweet spot to achieve, Raworth says companies should, among other things, pay attention to 'regenerative design': this shifts the focus from designing to consume, to designing to reuse. By doing so participate as a company, together we can meet the needs of everyone within the possibilities of the planet. Manufacturing and construction companies in particular can contribute significantly to a circular economy in this way. StartGreen, as a financial services provider, can make a difference mainly through the investments we make. Naturally, we also try to do everything we do ourselves as sustainably and inclusively as possible.

This blog previously appeared in our Impact Report 2022.