Circular Economy and PFAN
Is your business or project circular? Learn about the Circular Economy and how PFAN can support you.
Introduction from Petar Ostojic, a circular economy champion and an entrepreneur
Introduction from Petar Ostojic, a circular economy champion and an entrepreneur
From linear to circular — the circular economy
The circular economy is a system inspired by nature’s biological cycles. It is restorative and regenerative by design; this means that for circularity, waste is a design flaw. A circular economy seeks to replace the current linear economic model with a circular approach that allows the efficient use and reuse of resources, and use of the clean energy.
Circularity seeks to maintain the value of materials and products
as long as possible.
Petar Ostojic, a circular economy champion and an entrepreneur
A circular economy is a model based on three principles:
- Design out waste and pollution
- Circulate products and materials (at their highest value)
- Regenerate nature
In a circular economy, material loops are slowed, closed, and narrowed to decrease the resources in a system/business and outputs (waste and emissions).
The butterfly diagram: Visualising the circular economy
Why is a circular economy important?
A radical transformation in the way natural resources are used is central to meet the Paris Agreement objectives and the Sustainable Development Goals (SDGs). Current trends in global resource management are not compatible with internationally agreed targets to limit the rise in global average temperature to below 1.5°C above pre-industrial levels.
The extraction and processing of materials, fuels and food account for about half of total greenhouse (GHG) emissions and more than 90% of biodiversity loss and water stress. The annual global extraction of materials grew from 27 billion tons in 1970 to 92 billion tons in 2017, leading to their gradual depletion. At the same time, non-renewable resources are indispensable for the production of low-carbon technologies, including e.g., solar panels or electric vehicles.
In a circular economy, the value of products and materials is maintained for as long as possible. Waste and resource use are minimized, and when a product reaches the end of its life, it is used again to create further value. This can bring major climate and economic benefits, contributing to innovation, growth and job creation.
A circular economy is underpinned by a transition to renewable energy and renewable materials. It is a resilient system that is good for business, people and the environment.
Is your project idea or business circular?
PFAN supports projects and businesses that align with the circular economy principles and fall under one (or more) of the following categories of business models:
Circular Design & Production
Design and produce products that are easy to maintain, repair, upgrade, refurbish, remanufacture. Prioritize secondary and renewable materials as inputs.
Examples
- Modular design
- Design for disassembly
- Products made with recycled material
Circular Use
Maximizing product lifetime and number of users of the same product.
Examples
- Product-as-a-service
- Sharing economy
- Leasing
- Renting
- Maintaining
- Repairing
- Refurbishing
Circular Value Recovery
Extract the value from the products at the end of their use.
Examples
- Separate collection of waste
- Remanufacturing
- Reusing
- Recycling
- Recovering
Circular Support
Services and tools that can facilitate circularity.
Examples
- ICT (e.g., blockchain)
- Reverse logistics
- Virtual marketplaces
If you are in climate domain, your business is probably
more circular than you think.
Petar Ostojic, a circular economy champion and an entrepreneur
Want to know more about circular business models ? See the short videos below:
An example of 'Circular Use' business supported by PFAN: Sokofresh
SokoFresh™ offers affordable cold storage services to Kenyan farmers and agribusinesses, connecting them directly with markets. In fact, it is the only company in the market to offer first-mile off-grid pay-as-you-go cold storage. More than 800 farmers have been onboarded and 3 cold storage systems deployed.
PFAN-supported project of SokoFresh is expected to link 100 cold storages, thereby helping 30,000 farmers, 50% of which are women, have access to cold storage solutions.
Ready to apply for PFAN Support?
Are you looking to scale up your low-carbon, climate-resilient project/business with a circular element?
PFAN’s expert network of advisors can help you get there. Selected PFAN projects undergo intensive one-on-one coaching to perfect their business plans, financial structures and investment pitches. Once investment-ready, projects may be invited to present at PFAN and partner events or receive tailored investment facilitation services.
We accept applications for projects and scale-up businesses in low- and middle-income countries in the Pacific, south, central & southeast Asia, sub-Saharan Africa, eastern Europe, and Latin America and the Caribbean. See full list of eligible countries here.
To be eligible for PFAN support, your project or business must provide climate change adaptation benefits, or offer or use clean energy technologies, products or services in addition to the circular economy dimension. Projects should comply with the following eligibility criteria:
- Maturity: Commercially and technically viable projects
- Investment ask: between USD 1-50 million
Please visit our Eligibility Criteria page to learn more about eligible countries, technologies and sectors. PFAN particularly encourages applications from women-led businesses.
Tips for the circular project developers
How can I know if my project idea/business is circular?
Understand your process by mapping your business’ activities. Ask yourself and your team the following questions: Where do your resources come from? How and where is value being created or destroyed throughout your project? How much waste is your process producing? Have a look at the types of business models pfan supports in the section above.
How should I communicate my project idea?
Be clear and use data to back up your project, such as economic impact and how much investment you require, project maturity and measurable climate adaptation and/or mitigation benefits. See how PFAN can support you on this here.
Are investors interested in circular economy projects?
There is an increased investor interest in a circular economy. The circular economy assets under management in public equity funds grew from USD 0.3 bn in December 2019 to over USD 8 bn at the end of the first half of 2021. In turn, the number of public equity funds dedicated to the circular economy grew from two in 2018 to 13 funds in 2021, including funds by leading institutions.
There is an increased investment towards the circular economy and circular businesses, including venture capital, private equity, debt, project finance and insurance. Regarding the debt capital market, over 35 corporate and sovereign bonds were issued to finance the circular economy from the beginning of 2019 until mid-2021, underwritten or supported by large banks.
According to research, circular economy has a de-risking effect and drives superior risk-adjusted returns: the higher the level of circularity the lower the probability of default and the higher the risk-adjusted returns on the company stock.
What are the key aspects for investors to invest in circular economy projects?
Investors interested in circular projects are looking for a good business case with environmental benefits. They would like to see a robust business model with a clear demonstration of cash flows, resource efficiency, and use of clean energy.