It’s worth trillions, apparently. Global corporations are keen advocates of it. So why is a lot of circular economy pilot work still reliant on government and charitable funding? Perhaps a clue lies in a conversation I had with a specialist sustainability investor recently.
This brave new world of circularity, he said, was “too dreamy” a business proposition. He went so far to call it a turn-off to the investment world. There has been a lot of excitement around the circular economy, and rightly so, but like any rising star it must start to prove that it has the necessary staying power to be credible (i.e. profitable). If it doesn’t, it will risk fading from view.
One of the investor’s main concerns centres around the language associated with the circular economy – a heady mix of heightened intellectualism and jargon. The sustainability movement does love talking to itself, it tunes into phraseology with gusto, and sometimes it does itself no favours because of that.
“The language is something you have to be very careful about … and the circular economy has that in steroids,” the investor told me. Faced with a radical idea, packaged in complex terminology, would you back it to win? Remember, sustainability doesn’t come easy to this community – many a private equity firm is still hurting from a clean-tech failure or two.
The technology that underpins any circular business model is bound to be scrutinised, as is the resilience of the stakeholder network that must work together to support it. The system – the direction of travel for this circular flow – must also be correctly aligned. That might be impossible to alter until certain legislative or regulatory barriers are lifted.
And then there is the growth forecast. The assumptions made here may be too premature, especially for a fledgling pioneer just starting out. Scale-up viability is crucial and must not be overlooked. Intentions may be admirable, but skill sets may be lacking. The hoped-for market might not materialise within the investment timeframe. It pays to know your niche, and to know it well.
For now at least, innovation-type funding that enables exploratory work is very welcome. Perhaps as circular thinking matures it will look to attach itself with more conservatism, at least in terms of marketing, as a means of mainstreaming its appeal. But others would argue that the circular economy presents a great opportunity to challenge traditional investors on what profit, and ultimately value, really is.
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