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Here's why 2017 will be the year of the circular economy revolution

These 4 reasons recent trends point to closing the loop in the near future.

The circular economy has captured the imagination of brands, cities and innovators. Will 2017 be the year when the concept evolves from aspiration to profitable action? Here are four reasons why, from our view as circular economy investors, we believe this year will mark a shift from idea to action:

1. Focus on local government

If there is one safe bet with the new administration, it is that leadership on circular economy will not be coming out of Washington. Instead, we expect an increasing reliance on the leadership of state and local governments as the feds take a back seat. 

This shift means an increasing focus on the day-to-day realities of costs associated with waste management and profits possible by shifting to a circular economy. This won't just come from the usual suspects. Communities such as Memphis, Tennessee; Waterbury, Connecticut; and Portage County, Ohio; have chosen to invest millions of dollars in their recycling infrastructure in order to reduce costs. Phoenix and New York City have stated circular economy language in their goals and are implementing on a range of programs to get them there.

Further, according to President-elect Trump, "Infrastructure investment strengthens our economic platform, makes America more competitive, creates millions of jobs, increases wages for American workers and reduces the costs of goods and services for American consumers." This could be an important opportunity to build the infrastructure required to advance circular economy principles at scale, enabling real, shovel-ready projects across the country to get built.

We have received over 300 proposals for such projects and are seeing models such as Lakeshore Recycling in Chicago (PDF) and Eureka Recycling in Minnesota's Twin Cities creating high-value local jobs and robust business models that make these infrastructure projects profitable.

2. Recycling is the feedstock of U.S. manufacturing growth

Local manufacturing creates stable, well-paying jobs — jobs that are disappearing in North America. The manufacturing employment opportunities of the future will look different from those of the past. One of the most exciting trends we see across our investment portfolio and pipeline are the scaling of new technologies and manufacturing facilities that turn recycled materials into new, higher-value products. Recycling creates the figurative and literal feedstock of future manufacturing. 

A few companies to keep an eye on: Integrico, a railroad tie manufacturer in Louisiana, is recycling mixed plastics into its ties; and Ultracell, a premium cellulose insulation company near Buffalo, New York, is making high-quality insulation from a low-cost mix of recycled corrugated cardboard and old newspaper.

3. Entrepreneurs lead the way

The path to growth in our economy will be driven by both Main Street and Wall Street. The entrepreneurs, innovators and investors will commercialize the technologies and businesses build the circular economy. We are beginning to see these innovative businesses take shape.

Through Closed Loop Ventures, we have invested in new innovations that we believe will accelerate this breakthrough, including:

  • AMP Robotics, a robotics company that will transform the sorting of recyclable packaging at MRFs.
  • Evrnu, a fiber technology company that converts garment waste into new, high-quality fiber for the creation of new clothing, in partnership with brands and retailers.
  • The Renewal Workshop, an apparel refurbishment service building a "certified pre-owned" business model, saving companies money and diverting thousands of tons of waste from landfills.

4. Municipalities and brands as changemakers, focus on collective action

With uncertainty of U.S. policies and focus on sustainability, progress will continue to happen at the municipal and corporate level. More municipalities including Minneapolis; Washington, D.C.; New York City; Dallas; and Los Angeles are creating zero waste and climate goals. Corporations will continue to see the growing risk to their business and brands.

We see brands beginning to realize that they can't reach their goals unless the system changes.

According to Johnathan Atwood, VP of Sustainability for Unilever NA, in a November GreenBiz article about Closed Loop Fund, leading companies can't reach their goals by going it alone: "We needed to think more transformatively. We needed to think about something that's going to change the way we do recycling in the U.S. A combination of more recycling systems for residential homes, education programs — all were well-intended, but they weren’t moving the needle fast enough, big enough and in my mind, systemically."

Nike, for example, realized that to address the systemic challenge of post-consumer textile waste, it needed to engage cities, recyclers and innovators. It convened a small group last summer to identify collaboration opportunities and collective efforts, such as CurbMyClutter, a platform driving efficient collection of used household apparel that launched its first pilot outside of Philadelphia.

It’s impossible for municipalities and cities to move their large ships on their own. They can work with each other, engage with municipalities and invest in nimble start-ups to prove the model. We see brands beginning to realize that they can't reach their goals unless the system changes. And to do that, precompetitive partnerships are critical.

But not just putting a logo on an initiative. They need to be invested. Cross-sector partnerships are needed.

The seeds of many such partnerships came to fruition in 2016 — CE 100 came to the U.S., the Chamber of Commerce Foundation built a CE focus area for their membership, the Recycling Partnership and Sustainable Packaging Coalition launched ASTRX to drive more high quality recycled material into the manufacturing stream and several brands spearheaded their own cross-sector convenings to solve their waste challenges. All this momentum is setting high expectations for action and outputs in CE this year, proving the hype can create real value.

Looking at these four trends, it seems to us that it could be a big year in the circular economy. Above all else, these investments save money, drive financial performance and efficiency and deliver environmental and social impact. Investors will be hard-pressed to find other opportunities that meet all those requirements.

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