Exhibit: From a Linear Economy to a Circular Economy
Source: Oliver Wyman
Recent research examined this question within the context of the Netherlands which consumes more than three times what the Dutch ecosystem can produce (globally, consumption is 1.7 times what the Earth can produce). The research identified a range of solutions, which the Dutch financial sector can use to accelerate the circular transition. To make this happen, it will be essential to see close cooperation between businesses, banks, institutional investors, and the government.
The opportunities are significant. Circular businesses focus on “closing the loop” in supply chains by reusing end‑of‑lifecycle products as raw materials, sharing idle resources, using renewable resources, or extending the product lifecycle. Estimates of economic contributions of the circular economy vary, but all point to substantial change by 2030: a contribution of €6 billion to €30 billion to Dutch GDP, and the creation of 15,000 to 80,000 new jobs1. Changes on this scale will create many winners and losers in established industries.
At the moment there are a few hundred circular Dutch businesses, most of which are in the pioneering phase. Start-ups in particular are hindered by a lack of reasonably priced risk capital (such as equity). Circular start-ups will require roughly €500 million in risk capital over the next five years. Only a part of this demand is expected to be covered by traditional risk capital providers.
Improving the circular funding climate in the Netherlands – as well as other countries – without creating any market distortions requires a concerted public-private response whereby financial institutions, the government, and corporates reinforce each other’s efforts. The most significant obstacle regarding financing is a lack of knowledge of circular business models. Research identified a set of actions for different stakeholders.
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This is an extract from Supporting the Circular Economy Transition: The Role of the Financial Sector in the Netherlands, Oliver Wyman, 2017.
Cornelia Neumann is a principal. Andreea Achimescu is an associate at Oliver Wyman. Both are based in the Netherlands.