Transitioning towards the circular economy: SMEs from SWITCH-Asia show the way forward in Asia at the first World Circular Economy Forum
As the world is approaching the limits of its natural resources availability, 1,500 representatives from governments, researchers, experts and activists from more than 100 countries around the world gathered at the first World Circular Economy Forum (WCEF) in Helsinki, Finland on June 5-7, 2017, to identify strategies and potential collaborations to switch from the current inefficient and resource-intensive linear economy to a more sustainable, resource-efficient circular economy.
The WCEF 2017 opened on June 5 in celebration of the World Environment Day alongside Finland's 100 year anniversary. The opening session set the conference tone with a discussion on how to integrate the circular economy into the Global Agenda 2030, with prominent speakers such as Ms. Alice Kaudia (Kenya Environment Secretary), Mr. Ibrahim Thiaw (UNEP Deputy Executive Director and Assistant-Secretary-General United Nations), Mr. Matti Vanhanen (Member of Finish Parliament), Mr. Tadahiko Ito (Japan State Minister of the Environment), and Mr. Sergei Ivanov (Russia Presidential Representative).
During the first day it became clear that the circular economy can mean different for each participant, which could be a driver as well as a challenge for its implementation. Without a clear understanding of what the circular economy entails, it is hard to reach synergy among various stakeholder groups at the international as well as national levels.
Policies and, with them, the required incentives for companies and citizens alike were deemed crucial in moving toward a closed loop economy. The significant roles of multi-national corporations and small- and medium-sized enterprises (SMEs) in the circular economy were recognised. Likewise, it was acknowledged that new business models and innovative products and services need to be supported.
The SWITCH-Asia Programme was present at the Forum through its grant projects and Network Facility. The SWITCH-Asia "Sheep Wool Building Materials" project, implemented in Mongolia, was actively involved in a dedicated session titled "17 Circular SMEs Meet the 17 SDGs" where SMEs from three continents presented their circular business models to the interested audience. The project brought an enterprise representative from Eco Wool to make a case for sustainable insulation material from sheep wool, which also contributes to poverty reduction (SDG #1).
Recognising the role of cities in today's world, the forum held a plenary discussion on "Circular Cities", inviting policymakers and representatives from cities and municipalities that are already implementing some circular economy measures. These included Helsinki, Amsterdam, New York, Vancouver and Peterborough. Their experiences clearly showed how cities and their municipal governments can play a role in promoting the circular economy agenda at the local level through, among others, recycling and waste management policies.
What it takes to have a circular economy
The Forum also gathered researchers and economists to discuss on macroeconomic implications of circular economy strategies and their effects on growth and jobs, also in relation to the required policy measures and private and public partnerships. It was acknowledged that in a new, circular economy there will be losers (the ones losing jobs and business due to new business models) and winners (the ones benefitting from new business models), and that governments need to strike a balance in creating new policies to tackle related employment issues as well as to ensure a fair distribution of the benefits and costs that ensure the acceptance of the circular economy.
The event showed that circular business models require new investments in infrastructures and technologies. For major financial institutions such as the European Investment Bank that took part to the discussion, the circular economy is still a relatively new concept. In order to be able to invest, banks and investors first need to understand the elements that make up the circular economy and how they relate to the investment proposals submitted by companies. Innovative startups and enterprises encounter challenges in obtaining financing due to the application of such new business models, which banks are not familiar with, and due to the small business size of the SMEs, which is not attractive for banks. As banks are responsible for their investments, they need to secure safe returns on their investments while reducing the transaction costs.
Innovation and leadership are crucial
The two-day Forum highlighted several important requirements for advancing the circular economy.
First and foremost was the need to strengthen international partnerships, where knowledge and policies can be and should be shared. Further research and innovation need to be supported in relation to identifying new policies, financing schemes, business models and products and services. On top of these, leadership is one factor that would determine the success of the shift to a more circular world society. Committed leaders framing policies (and incentives) that favour a circular economy will speed up its take up by private and public stakeholders alike.
The SWITCH-Asia Event
The SWITCH-Asia Programme together with the Executive Agency for SMEs (EASME) of the EU Commission organised a WCEF side event on June 7, titled "Promoting green investments: Matchmaking opportunities for innovative SMEs from EU-funded projects in the Circular Economy."
Mr. Didier Gambier, Head of Department LIFE and H2020 Energy, Environment and Resources of EASME opened the side event, explaining the current EU's programmes on the circular economy.
Dr. Uwe Weber, Team Leader of SWITCH-Asia Network Facility, highlighted the link between sustainable consumption and production (SCP) and circular economy, and how the EU's support in these two fields is of high relevance for Asian developing economies.
Ms. Carmen Mena Abela, Head of Sector H2020 Eco-Innovation of the EASME, further elaborated on the EU's financial commitments to support European enterprises' switch to the circular economy.
Several representatives from European financial institutions actively participated in the event: Ms. Liesbet Goovaerts (European Investment Bank), Mr. Janne Peljo (Sitra, Finnish fund), Mr. Jan Oker-Blom (Finish Business Angels Network), Ms. Pia Santavirta (Finish Venture Capital Association), and Mr. Kari Homanen (Nordic Environmental Finance Corporation). Gaining information directly from the financial institutions, the audience, which was mostly coming from the private sector, learned about current financing opportunities tailored towards innovative, circular business models as well about the actual interests of financial institutions to invest in an enterprise pursuing a circular economy business strategy.
The session 'Pitching for investment opportunities' took place in two parallel tracks moderated by Ms. Keti Medarova-Bergstrom (EASME) and Ms. Kartika Anggraeni (SWITCH-Asia Network Facility), with European SMEs and Asian SMEs participating.
Around 100 participants split into two tracks of investment pitching of 25 SMEs in front of investor panels. Following a pitch, the investors provided feedback to the entrepreneur, improving his/her chance to obtain green investments. Many of the entrepreneurs expressed their appreciation on the opportunity to present their circular business models to the big players in bank industry - a chance which came only with the support of the EASME and Sitra Finnish Fund.
In Track One, the investor panels included EIT Raw Materials, EIT Food Entrepreneurship, Nordic Environment Finance Corporation, Dutch pension fund PGGM, and Circularity Capital. The Climate KIC, ABN AMRO Bank, ING Bank, Nordic Investment Bank, Zpark Finland, and Ellen MacArthur Foundation were present in Track Two, where five SWITCH-Asia completed projects, Sheep Wool Building Materials, Industrial Symbiosis, Biomass SP, SPIN, and MSME Clusters along with their innovative SMEs presenting the investment pitches. Following the three-hour pitching sessions where enterprises had ample time to convince banks and investors about the soundness of their circular business models, all participants were given the opportunity to arrange one-to-one meetings among themselves, using a dedicated mobile phone application called "Brella". This new way of networking was well received by company and bank participants alike.
SWITCH-Asia, SMEs and the circular economy
As in Europe, Asian SMEs are known to be the backbone of developing economies and represent one of the main beneficiary groups of the SWITCH-Asia programme.
Despite their agility to drive the economy and influence consumers, Asian SMEs have limited capital and capacity to adopt new technology that support, for example, eco-design, cradle-to-cradle business models, which would reduce their 'environmental footprints'.
It became evident that, in order to move to a circular type of economy, special attention and support need to be given to some pioneer SMEs that have already developed circular business models, contributing to the increased use of renewable energy as well as to recycling and waste management.
The SWITCH-Asia projects and their SMEs featured in this side event not only have provided successful examples of local approaches towards a circular economy. They also illustrated how recognising and providing adequate resources for the scaling up of these approaches in the context of national circular economy roadmaps remains indispensable for a successful national implementation.
Author: Ms. Kartika Anggraeni (SWITCH-Asia Network Facility)