Investing in digital infrastructure to accelerate the circular economy

This article is sponsored by Cisco.

To move from a linear take-make-waste economy to a resource-efficient, circular economy, companies need to avoid waste and pollution, keep products and materials in use, and restore natural ecosystems. However, moving systems is a difficult task and requires collaboration with many stakeholders in both the public and private sectors.

The European Green Deal is a strategic growth plan that aims to make Europe the first climate neutral continent by 2050 – by restoring biodiversity, reducing pollution and moving towards a circular economy. Even in responding to the global pandemic, sustainability remains a top priority in many European governments, and the pandemic has fueled a determination to reshape business as usual.

Digitization is an essential part of the European Green Deal. The plan calls for at least 37 percent of total spending on restoring the pandemic to go into investments that support climate goals and 20 percent into developing digital infrastructure. Digitization technologies provide many important building blocks for the circular economy.

The role of digital infrastructure in the circular economy

The transition to a circular economy for physical goods requires resource management that is geared towards conserving resources from the start. The physical mechanisms of the circular economy – for example the reprocessing and recycling of products or the improvement of infrastructure in cities to minimize resource consumption and waste – are made possible by digital technology. Technology can help us reduce energy consumption, and collaboration tools can reduce the need for travel. Digital technologies like the Internet of Things (IoT) and Artificial Intelligence (AI) are accelerating the transition by delivering data and insights on an unprecedented scale.

Digital technology also enables companies around the world to reduce their emissions and be resource efficient within existing systems. Examples are smart buildings, such as ASHRAE’s new headquarters near Atlanta, Georgia, are leveraging digital technology to deliver improved and optimized operational efficiency, connectivity, health and safety all rolled into one. In a smart building, the systems that control internet, lights, heating and security can be used to optimize the use of heating and lighting, and they can run over the same wiring, saving material and money.

Intelligent building systems can become “round” buildings, ie the networked systems of a building know what they are made of and have product passes for their components. Product passports provide transparency and digital information that enables access to information that ensures optimal use and maintenance and enables components to be reused in the event that the building is dismantled. Digital technology generates data on energy and materials so that they can be optimally used and reused instead of being wasted.

Digital technologies open up a whole new dimension for circular business models. For example, in the fashion industry, Ferragamo has a digital platform for customers called “Sustainable thinking”, Created to host, nurture, and reinforce discussions about sustainability, inclusivity, and community support. COVID-19 made Ferragamo rethink the entire personal retail process, breaking it down into many pieces and deciding which components could be done virtually, and contributed to the conversation that focused on sustainability. It was also an opportunity to show that it is possible to create a highly personalized and unique digital experience in the customer’s home.

The circular economy needs digital technologies. Digital tech needs funding and partnerships.

The awareness of the need to build for the climate and digitization at the same time is growing. Government policies like the European Green Deal show investors that there are opportunities in funding circular economy projects, and investors recognize that their investments can go ahead with partnerships.

The latest report from the Ellen MacArthur Foundation, “Financing a circular economy” highlights the opportunity for investments related to the circular economy. It found that assets managed through public equity funds with the circular economy as the sole or partial investment focus increased six-fold from $ 0.3 billion to over $ 2 billion since early 2020.

In addition to the growth of public equity and private market funds with a focus on the circular economy, there is a similar path with bank loans and project finance. Intesa Sanpaolo, a large European bank, has built its own circular economy $ 7.3 billion credit facility to support companies in their search for circular efficiency and the introduction of circular business models.

All types of companies are eligible for funding, from startups to multinationals and across all lines of business, and many of them have circular business models based on digital technology.

Intesa Sanpaolo works with Cisco to provide end-to-end support from finance to technology for companies making a circular transition. “We rely on the expertise of a partner like Cisco so that we can not only better support companies that are investing in their cycle change, but also benefit the entire ecosystem through the catalysts of innovation,” said Maurizio Montagnese, Chairman of Intesa Sanpaolo innovation center.

Intesa Sanpaolo has financed nearly 200 circular economy projects since the end of 2018. Some refer to new factories and closed loop manufacturing machinery that will reduce the overall carbon footprint of a product by optimizing the use of materials and reducing the use of raw materials and waste. Some projects are dedicated to circular product design, e.g. B. the integration of new materials (recycled and recyclable or bio-based) and the extension of the product lifespan. Other projects are using funds to upgrade to new sensor technologies for reverse logistics, bringing products back for repair or resale, and IoT to develop predictive maintenance and pay-per-use models.

Both Maurizio Montagnese and Angelo Fienga, technology solutions architect at Cisco, formed the partnership in large part because working together is the ideal way to nurture an ecosystem that promotes circular economy solutions.

What happens next?

Systems change when they are disrupted by new tools, new opportunities, or new restrictions. Today we see the positive upheaval from digital technologies, new funding models and government policies accelerating the circular economy transition for Europe and beyond.

Partnerships with like-minded business leaders such as Intesa Sanpaolo and Cisco offer companies of all sizes the opportunity to introduce circular business models. In the wake of the global pandemic, businesses, governments and other stakeholders are eager to shape reconstruction to support the green goals we have been talking about for decades, and partnerships will be key to delivering on that promise.

Learn more about Cisco’s approach to the circular economy Here.

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