Closing the Loop to Create a Circular Future

A Conversation with Kate Daly of Closed Loop Partners, Managing Director of the Center for the Circular Economy

With a population nearing 8 billion and an economy contributing to cascading impacts on the natural systems upon which our lives rely, the planet is buckling under the weight of humanity’s influence. Fortunately, a movement is underway, challenging communities, companies, and governments to solve the waste challenge, eliminating the concept of solid waste altogether with a circular economy.

The investment firm Closed Loop Partners plays a central role in the transition to circularity, where waste is eliminated, and materials are continuously cycled back into the economy through product and process innovation. Kate Daly, Managing Director for Closed Loop Partners’ Center for the Circular Economy, provides a window into the transition in the following conversation with PYXERA Global’s Senior Editorial Coordinator, Lars Battle.

What is Closed Loop Partners and how do you see your approach leading to the needed change?

Closed Loop Partners is an impact investment firm that invests in the circular economy across multiple funding vehicles, driving a transition from our current linear take-make-waste economy towards a model of circularity that is regenerative and profitable. At Closed Loop we focus on touching each part of the value chain to have a holistic impact on the transition to circularity.

Closed Loop Partners is comprised of venture capital, private equity, credit funds, and an innovation center, focusing on emerging technology, new circular business models, and new circular business products. Our venture fund is focused on early stage businesses. Our credit fund, called the Closed Loop Fund, focuses on investing in infrastructure, and our partners/investors include all the major beverage companies and most of the major [Consumer Packaged Goods] companies: Coca-Cola, PepsiCo, Amazon, Walmart Foundation, and Unilever. The goal there is to accelerate improvements in infrastructure so that materials generated by these companies can be captured in the value chain and then brought back for multiple stages of their life as a valuable commodity.

I manage the Center for the Circular Economy, Closed Loop Partners’ innovation center. We focus primarily on pre-competitive collaboration among major brands that are all trying to solve similar material challenges. They all need to identify ways in which their packaging or products can get through the infrastructure in a way that the lifecycle is extended and circular.

Circular supply chains reduce costs, provide pricing stability and protect our environment. Image courtesy of Closed Loop Partners.

Closed Loop Partners is seeing what’s working and what isn’t in the transition from the linear economy to the circular economy. What have you seen that gives you hope we can effectively make this transition?

For me the hope comes both from the emerging innovation and the global commitment that we are seeing from government and corporations.

In terms of the first, we are seeing incredible innovations every day, whether at a lab scale, like nano-cellulosic material that can act like plastic but that is made of cellulose, or more fully developed business models based on service products and/or leasing rather than ownership, which are aligned with consumer preferences and the need for convenience. What’s critical is understanding the way people engage with consumption, and asking ourselves, “Is this delivery system the way it needs to be? Instead of sachets of personal care products, could we use vending machines where you can bring your own receptacle and get these products as you need them in a way that is absolutely affordable?”

We are also witnessing incredible, creative entrepreneurship every day through our investment pipeline. We are seeing the amount of regulation in Europe that creates stable, predictable expectations for global brands; this means that risks can be mitigated in advance and that there is an understanding of the terrain.

In the United States we are still in early days and it remains to be seen, state by state, and city by city, what approaches will achieve zero waste goals. It gives me a lot of optimism that we are starting to see the efforts of cities. To date, circular economy in the US has primarily been led by global brands and NGOs. But each year, more US cities announce their zero waste goals and some of those cities have circular economy hubs, for example in Phoenix and Charlotte. In the absence of the funding, regulation, or political will in much of the US, cities play an even more important role in the transition to circularity (in addition to leadership of the global brands).

What do you see as some of the biggest barriers to accelerating this process?

Capital investment is critical, both for infrastructure and emerging technology. This is what we hear across sectors: there are barriers because of a need for early-stage as well as late-stage capital. That really drives a lot of our work in supporting infrastructure and new technology through investments.

We need investments at every stage of the life cycle of a material. Not just investing in the exciting new alternative material, but always having an astute understanding of how that material will be treated at its end of life or the circular business model works to allow for the return of that material. How will the reverse logistics actually work on the ground? How do we make sure that we’re investing appropriately among different types of technologies, some of which are not unique to the circular economy—like reverse logistics—but that are needed in order to drive circularity? Reverse logistics, digital identity, even block chain to some extent—a lot of these solutions are going to be critical in helping to drive circular goals but aren’t necessarily under the same umbrella as emerging circular companies. We need to be strategic in these capital investments to make sure we’re identifying all the pain points throughout the value chain.

There is so much excitement around the potential of the circular economy, whether it’s in the private sector, social sector, and in government. What prompted this?

The private sector, of course, is playing a critical role, especially in the United States. Global consumer brands in particular are setting ambitious goals for post-consumer recycled content and recyclability, because they are facing stricter regulations in Europe, including the ban on single-use plastics. As the impacts of climate change accelerate and the negative consequences of our linear economy become more apparent, the risks to supply chains increase. Risk mitigation is a huge part of what companies are assessing, as they rethink their business models and material production.

Risk mitigation is a huge part of what companies are assessing, as they rethink their business models and material production.

In the public sector, municipalities are facing increased costs to landfill what is now record-setting and unprecedented volume of packaging, electronics, and clothing that we all throw in the garbage. These increased risks and costs are among the factors driving circularity as the economically viable long-term approach, because it enables a reduced dependence on virgin resources and reduces the amount of resources lost to our leaky linear system.

As Managing Director for the Center for the Circular Economy, you convened leading retailers in the ‘NextGen Cup Challenge’ to develop fiber cups that are truly circular and scalable. As many participating retailers are direct competitors, what were the barriers to collective progress?

NextGen has been such a positive experience, and through it we reinforced the belief that pre-competitive collaboration is one of the key tools for the transition to circularity.

In the NextGen Consortium we’re not driving toward one solution, but rather focusing on ecosystem innovation. That generates options for all the competitors to pursue, if they want to introduce innovation into their supply chain and retail stores. So rather than saying that we’re driving toward this one solution—this is THE cup that everybody would use—we’re promoting innovation and identifying multiple technical solutions at different stages in development as well as the time required to commercialize. That opens the space for competitors to really work together to identify which of the solutions works best for their own business model, as opposed to an effort where all these competitors have to drive toward one shared solution. A diversity of solutions has really been a key to get past some of those challenges that might exist with competitors working so closely together.

A diversity of solutions has really been a key to get past some of those challenges that might exist with competitors working so closely together.

Can you share one or two specific highlights that have emerged from the challenge thus far?

We were very excited about the 12 winners we announced earlier this year, and the range of innovations we saw in the 480 responses to the NextGen Cup Challenge. There was the mix of innovative new liner systems within the paper cup itself, and three of our 12 winners are reusable cup models, which really shows how these brands are moving toward innovative delivery systems. Right now, we are working closely to identify opportunities to get some of these new technologies, new materials, and new delivery systems piloted in retail stores and start that really exciting, innovative, and experimental process of seeing what works and what doesn’t.

What has been Closed Loop Partners’ strategy for and learnings from managing partnerships among diverse stakeholders?

What a lot of Closed Loop’s partners and investors, global brands in many cases, have in common is that after point of sale, they lose track of their products and how they interact with the infrastructure that exists for collection and conversion, feeding back into the value chain. What we’ve found is that, whether it’s a plastic beverage bottle, fiber cup, or cardboard box, strengthening the infrastructure and systems overall contributes a larger benefit to the whole ecosystem. This is something that is really tangible for many of our investors and partners.

In managing the partnerships, we look at the holistic value to the system and how each of our partners play a role in enhancing and accelerating improvements in that system through our work. It has been very rewarding to see that regardless of type of material,  the companies we partner with are really looking at improving the infrastructure holistically. In terms of our partnerships and pre-competitive collaborations, we are seeing many shared challenges, and brands are recognizing that these cannot be solved on an individual basis. Through collaboration we can together achieve holistic solutions to systemic challenges that result in positive impacts that cut across sectors, brands, and products.

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