Comment: sizing up the opportunity for European circular start-ups

Ukrainian firm S.Lab picked up the 2023 Green Alley Award for a sustainable alternative to expandeed polystyrene packaging (image credit: Green Alley Awards).

By Jan Patrick Schulz, CEO of Landbell and initiator of Europe’s largest Circular Economy Prize, the Green Alley Award.

Europe has long been a welcoming home to sustainable minded companies. As one of the early homes of solar energy and wind power, circular economy was also an idea that found early adoption in the continent. In fact, for more than a decade, European start-ups in the circular economy have been vying for corporate and VC support at events like the Green Alley Award, which awards Europe’s most promising circular economy startups with both monetary as well as operational support.

As calls for a shift to more sustainable processes grow louder, and Europe finds itself struggling to comply with the Paris climate accord, the inherent value these startups can drive is continually growing. With this in mind, it is crucial that those in the industry take a closer look at how the circular economy is changing as it scales, and takes measures to optimize the way they are building for the future.

The trend is clear – European industry is going in circles
Europe has actually been trending towards a more circular economy in general, going back as far as two decades. To be precise, over the past 20 years, the total material use in the EU has decreased by 9.4%, with the share of resources derived from recycled waste material increasing by almost 50%. This shows the natural trend towards more sustainable practices – when looking at the decrease in materials used, while also understanding that there was an increase in output, the significance can be clearly understood.

These miniscule data points alone point towards massive potential if the circular economy is properly supported and scaled up in Europe. The logic behind reducing the unnecessary utilization of materials is quite clear, what is important is identifying the best path forward to properly support start-ups in the space, and to achieve maximum impact.

To better understand the state of the circular rollout in Europe, we can examine the types of companies that are currently vying for support from circular minded organizations. When looking at companies competing for last year’s Green Alley Award, there were three distinct types of solutions on display – 40% of start-ups focused on waste production, 33% of companies on Digital Circular Economy Solutions, and 27% on recycling. Understanding the business models of current start-ups in the space is also important – 50% of these companies offer a product, 28% a service and 22% are technology providers. It will be interesting to watch how these numbers look as they scale and the markets mature.

The workforce is already ahead of the trend
While it is valuable to know the types of companies active in the space, it is also crucial that there will be a workforce in place for this emerging sector. Thankfully, in recent years we have seen a distinct increase in interest in the transition to a more sustainable economic system, in particular a circular economy, among scientists, politicians, and industry practitioners across Europe. This gives considerable weight to increasingly present calls to put even more of a regulatory focus and industry push to circular companies. If the technical workforce in Europe has shown an interest in the sector, we can expect that innovation in the field should continue to increase in the years ahead.

The idea of upskilling has been a major issue in Europe’s energy transition. Ensuring workers can seamlessly transition from industries such as coal and oil and has, to wind and solar has been no small task, and stands to remain a topic for decades ahead. Thankfully, many of the main topics in the circular economy are far less technical comparted to the highly specific specialized jobs in the wind and solar sectors. As noted above, these companies focus on waste production, Digital Circular Economy Solutions, and recycling, meaning many of the specific tasks can be adapted from existing industries such as waste management and digital solutions.

The opportunity ahead cannot be ignored
One thing that is impossible to ignore when looking at the circular rollout, is the economic potential that is possible if Europe were to make a more concerted push towards circularity. A McKinsey report which was released to coincide with the first EU Circular Economy Action Plan outlined the potential net economic benefit of adopting circular strategies at a staggering €1.8 Trillion by 2030. This is without taking into account environmental and social benefits that could drive even more value as the broader transition is better understood. This massive potential points to considerable value that can be derived from start-ups in the circular economy, and a future where these emerging companies can play a pivotal role in re-orienting established companies in a more circular economy.

As Europe’s start-up scene has developed over the past decade, it has become increasingly clear that circularity will be a crucial part of their business models, no matter what they may be. Not only will circular-economy focused companies play a more central role in responsibly scaling up key industries in Europe, but companies in many industries will need to embed their own circular practices into their businesses. It is amazing to see the idea of Circular Economy continue to grow in importance in Europe – not only will this position Europe well for the decades ahead, but it will once again allow the continent to accelerate the sustainability movement on a global scale.