Financial Decision-Making in the Circular Economy

Outline the new role financiers have to play to accelerate the transition towards a circular economy
Financial Decision-Making in the Circular Economy

The whitepaper "6 Guidelines to Empower Financial Decision-Making in the Circular Economy"  provides financiers with practical guidelines to prepare for their new role in the circular economy. The whitepaper is authored by Sustainable Finance Lab and Circle Economy and powered by Nederland Circulair!

This guide will help financiers thrive in the circular economy through 6 practical guidelines:

  1. Assess Different Securities

  2. Emphasize Relationship-based Financing

  3. Value Natural Capital Gains

  4. Become a Knowledge Partner

  5. Have a Long-term Vision

  6. Become a Financial Chain Director

The circular economy is a way in which we make efficient use of the resources that we already have. Resources must remain functioning at their highest potential so that they are not consumed, but re-en-tered into a system that creates value again and again. This economy requires a different way of doing business and hence has different financial needs.

This system shift fundamentally changes the role of both the entrepreneur as well as the financier. In order to overcome this change, entrepreneurs and financiers need to find each other in the new circu-lar economy. What can they expect from each other? How are circular businesses different from their linear competitors? What are specific financial bottlenecks as a result of this? How can financiers adjust their ways of operating so that they enable circular innovations?

This report aims to guide financiers towards their new role in a circular econ-omy. It is the third white paper in a series that Sustainable Finance Lab (SFL) and Circle Economy (CE) have written for Nederland Circulair! about the financing of circular business.

The first white paper, Master Circular Business With the Value Hill (Achterberg, Hinfelaar, and Bocken 2016), gave a good understanding of what circular business models are. Whereas, the sec-ond white paper, Create a Financeable Circular Business in 10 Steps (Fischer and Achterberg 2016), showed how entrepre-neurs can do their part to attract inves-tors by making their business model as appealing as possible for financiers, while staying true to their circular values.

This third report focuses on the lessons for financiers. How can they change their own operations to better align with cir-cular entrepreneurs? How should they judge risks and opportunities of circular business models? What new dangers and securities do these bring? What roles can they play in this new economy?

The report starts with a description of the Dutch financial landscape and the country’s wide array of financiers and their specific role in the economy. It then analyses the way the financial sector assesses requests for finance and the specific problems that circular entrepre-neurs run into, especially those using a Product-as-a-Service (PSS) business model. Which complications and oppor-tunities does this model bring to finan-ciers? With these obstacles in mind, 6 guidelines are set out to help financiers thrive in a circular economy and we con-clude with reflecting remarks.

Interested to learn how financiers can play a role in the circular economy?

Download the full whitepaper on the 6 Guidelines 

This guide is a part  of a finance reporting series, 3 Essential Steps to Financing Circular Business Models

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