Financing the Circular Economy
A circular economy is increasingly recognized as a crucial to deliver on goals related to climate change and other global challenges. The circular econmy is a system of production and consumption that seeks to minimize waste, maximize resource efficiency, and promote sustainable economic growth.
The role of finance in the circular economy is essential, as it provides the capital and investment necessary to support the development and implementation of circular business models and initiatives. Circular business models involve designing products and services to be more durable, reusable, and recyclable, which can require significant investment in research, development, and new production processes.
Finance can provide the capital necessary for business to transition to circular models, such as by investing in new recycling technologies or funding the development of sustainable products, incentivize circular practices through financing options. Through finance, it is also possible to promote transparency and accountability in the supply chain, by investing in supporting measures and technologies that encourage companies to report their environmental impact and progress towards circular goals.
Nevertheless, challenges around the relationship between circularity, risks, investment decisions and returns have become increasingly obvious. Building on aspects of the value-based approach in financial management, we therefore aim to extend the rational of economic linear value drivers to develop and include a value-based perspective on the drivers for circular economy.
We do this by disaggregating the total value creation of (mostly resource intensive) firms and by exploring the role that accounting and finance plays in increasing firms’ circularity. Our research approach is applied across value chains, and within specific industries.
Key topics include:
- What barriers are hindering a circular economy transition in practice and how can they be overcome?
- What (financial) mechanisms are needed to create sufficient incentives for transition to circular economy?
- How are circular economy projects financed and how is this related to risks (along the value chain)?