The Issue — And The Possibility
Over 45% of global emissions today come from making stuff. Some of this stuff is superfluous — think mink coats and selfie sticks. But the vast majority of this stuff needs to be manufactured to meet essential human needs, like shelter, medical care, and nutrition.
That’s why we can’t outsmart the climate crisis through collective austerity. The material waste and emissions our industrial systems create can’t be pegged to a consumerism problem. Rather, our modern industrial system has a design problem.
Most products today aren’t designed to be reused or upcycled at their end of life. Even worse, many products are built to be obsolete within a few years, and companies make it prohibitively costly to repair them in order to funnel you towards buying a new product (sound familiar, personal electronics consumers?). Limited supply chain monitoring and transparency makes it even more difficult to source cost effectively and responsibly, and even more difficult to know how to upcycle materials at their end of life.
Companies are caught in a linear take-make-dispose production cycle. Many manufacturers don’t hold responsibility for products at their end of life, and instead have shifted the burden for waste management to taxpayers over the last century. More broadly, they have externalized the costs of waste and environmental degradation. This arrangement allows manufacturers to profit on making easily disposable, quickly obsolete products that optimize for continued re-purchasing rather than continued use. Meanwhile, our oceans are engorged with plastic, an estimated one third of food produced in the world goes to waste, and close to 14 million acres of land in the US are used to grow cotton for clothing that is only worn, on average, seven times before being tossed. The way we produce and sell products today benefits the few at the expense of the whole. Earth Overshoot Day, the annual day when our ecological resource consumption outweighs the planet’s capacity to regenerate, happened on July 29 in 2021 — one of the earliest ever. Within the past 50 years, human activities have become remarkably extractive and deplorably linear: in 2000, we reached Earth Overshoot Day on September 22, and in 1970, it didn’t reach it until December 30.
Resource constraints aren’t some Malthusian folly: we’re already facing shortages of key materials we need to accelerate the transition to a cleaner world. The price of lithium more than tripled during 2021, in part due to persistent supply chain shortages and underinvestment in new mining projects. If the US goes full speed ahead in transitioning to renewable energy, our lithium needs would surpass US lithium reserves by 2037, according to a new article from Yale researchers. However, the researchers note, demand for virgin lithium can be mitigated by recycling, which could provide up to 47% of 2050 demand if heavy investments in collection and recycling infrastructure are made.
To move away from the linear paradigm, we can’t just make products “less bad” or “more efficient.” This is about rethinking our relationship with design, the material world and “end of life”. We need to shift to a Waste-to-X mentality — in other words, designing products and systems that eliminate the concept of “waste” altogether.
What if we had the opportunity to design products in a way that negates emissions, preserves resources and ecosystems for future generations, and brings health and joy to the people who use them? And what if that opportunity could create economic value to the tune of $4.5 trillion dollars, the amount of economic growth Accenture has predicted adopting circular economy solutions will generate by 2030?
At Valo, we believe there’s one thing that will take us to that world: ingenuity. We are investing in creative solutions that design away waste and emissions, and meet people’s — and the Earth’s — needs in a way that preserves health and happiness.
Principles for a Circular World
We’re asking ourselves, “What would a world without waste look like? Which aspects of today’s thinking about materials and design would we have to shift? What would the principles of this new world be?” Here are some of the design principles for circular economy that we would like to see:
One helpful framework for thinking about design in a circular world is Bill McDonough and Michael Braungart’s classic 2002 book Cradle to Cradle. McDonough and Braungart distinguish between two major categories of materials:
- Biological nutrients — these are materials or molecules that can be consumed by microorganisms or fungi. Biological nutrients are food for the biosphere. For example, mycelium-based packaging that can be fully composted with food waste is a biological material that can be renewed.
- Technical nutrients — these are materials or molecules that can be used in industrial processes, or the technosphere. For example, lithium in a battery that can be extracted at the battery’s end of life and used in a new battery is a technical material that can’t be renewed but it can be recycled.
There is no hierarchy between biological and technical nutrients, just different ways to use them. Isolating technical from biological nutrients allows technical nutrients to be continuously upcycled and retain their high quality in a closed-loop industrial cycle, and keeps the technical nutrients from contaminating ecosystems.
What follows from the distinction between technical and biological nutrients is a menu of business models and design ideas — illustrated neatly in the Ellen MacArthur foundation’s classic circular economy diagram:
In addition to promoting perpetual cycling of materials, an important point that sometimes gets overlooked in the circular economy conversation is energy. Which fuels will power our transition to a circular world? How will we design products and systems that preserve the embodied energy of materials?
Embodied energy is the total energy expended to make a product or material, encompassing the extraction, processing, fabrication, and delivery phases. Materials with higher embodied energy have more energy-intensive steps in their lifecycle. Preserving embodied energy of the materials we have helps us avoid unnecessarily expending energy on new products. For example, one way to “close the loop” on apparel would be to break down an old polyester t-shirt using chemical recycling technologies and use the fibers to create a new t-shirt. But chemical garment recycling processes, powered on the fossil-heavy grids of today, are often more energy-intensive than solutions like reselling or repairing the t-shirt.
For this reason, it’s important to think about circular economy solutions in the context of how much they preserve embodied energy, thereby avoiding additional fossil fuel emissions. Today, recycling can sometimes emit more greenhouse gases than sourcing virgin materials can. A 2020 study in Nature Sustainability showed that if all waste paper were recycled today, global emissions would actually rise by 10% because current paper recycling is fossil-fuel powered and chemical-intensive.
The flip side of this coin is an exciting proposition: abundant, cheap renewable energy will unlock recycling. As we move towards a grid powered completely by renewables, business models based on recycling will suddenly become economically viable.
What would a product look like that kept all these principles in mind? Let’s start with the example in the apparel industry: a polyester t-shirt and the paper packaging used to ship it to the customer. We choose two products because one represents the life cycle for technical nutrients while the other represents the life cycle for biological nutrients.
There’s another key aspect of circularity that’s not captured by this diagram. It’s design. Circular design isn’t necessarily about taking an existing product and back-calculating how to keep it in circulation for longest. It’s also about redesigning products and business models to keep them in the “use” phase for as long as possible. Going along with the t-shirt example, this could mean designing a durable, stain-proof t-shirt that lasts for decades. It could mean a t-shirt as-a-service business that’s contracted to repair your shirt when it frays. The best ideas in circularity are yet to come.
How Technology Is Accelerating the Circular Economy Transition
Today’s technology is rapidly unlocking our ability to transition to a circular economy. For example, Li-ion battery startups have scaled rapidly in the past five years. Dominant industry players like Ascend Elements (formerly known as Battery Resourcers), Li-Cycle, and Redwood Materials were founded in 2015, 2016, and 2017 respectively. In 2021, private funding flowing into battery recycling increased more than eighteen-fold as compared to 2020. Meanwhile, AI and ML are allowing us to match byproduct producers to users at a more efficient — and geographically distributed — scale. Take for example Valo’s portfolio company RoadRunner Recycling, who uses an AI-based platform to efficiently route recycling trucks, making it easier — and more lucrative — for businesses to recycle.
Our Focus Areas for 2022
There are so many materials and products that need a design rethink. Where to start? At Valo, we’re looking at five main areas in 2022: plastics, food, buildings, apparel, and lithium-ion batteries. How did we choose those areas? Here are the criteria we used:
- High waste generation rates
- Low recovery rates of waste
- High sector emissions rates
Specifically, we looked at materials that hit those categories in the US and the EU, the areas where we invest. Here’s what we found:
It’s worth digging into why we included lithium-ion batteries, which didn’t neatly fit into our criteria. Affordable, widely available battery storage is key to advancing development of renewables, which will influence emissions at all levels of the supply chain. According to the International Energy Association, 10,000 gigawatt-hours of batteries and other storage will be required worldwide by 2040 to keep temperature rise below 2°C. This is 50 times the size of the current market. Recycling will be key to keeping lithium-ion batteries in circulation at affordable costs.
Already, we’re seeing (and investing in) exciting new ventures in each of these segments.
Over 2022, we will publish spotlights on business models and companies that are revolutionizing circularity in plastics, food, buildings, apparel, and batteries. We’ll also spotlight the tools we use to evaluate the circularity of a potential investment (no easy task). As we develop our circular investment theses, we welcome input and feedback from entrepreneurs, investors, and anyone else who believes in a circular world.