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The Role of Fintech in the Circular Economy
Circular Economy | Oct 8, 2024
Image: Freepik
Manufacturers and fintech firms are driving sustainability and circular economy innovations to reduce waste and boost efficiency
Many manufacturers and sellers have prioritized sustainability and circular economy concepts in response to environmental regulation, institutional pressure, and the need for more resource-efficient manufacturing.
A study published on ResearchGate, conducted by Abdul Gani, Neeraj Bhanot, Faisal Talib, and Mohammed Asjad, shows that small and medium-sized enterprises are the most important part of the global economy where sustainability practices are gaining worldwide attention. A prominent example of this would be Evergreen Solar (which specializes in designing and installing solar energy systems for residential and commercial customers in Canada.) and Tentree (a Canadian clothing brand that plants ten trees for each item sold and uses materials that are eco-friendly.)
See: Alternative forms of capital will be key to develop sustainable economic systems
However, large-scale industries are also following sustainable practices. Resolute Forest Products is an organization that is committed to sustainable forest management and is investing in renewable energy projects aimed to reduce carbon footprint.
Sustainability and the Circular Economy?
The Circular economy works upon three principles based on sustainability:
- Eliminating pollution and waste
- Circulating products and materials to maximize their value
- Regulating the environment
This model promotes the leasing, sharing, repairing, reusing, refurbishing and recycling of used products and materials for the longest time period possible. This way, the lifespan of goods and articles manufactured is prolonged. This also lowers waste production at a significant rate.
See: Sustainable Business and The Regenerative Future
By shifting to the circular economy, organizations can boost their productivity and profits at a significant rate. For example, Loop Industries has seen substantial profits and growth thanks to the high demand of its recycled polyester products.
How Technology is Powering the Circular Economy
Since the 70’s, technology has become the most important part of this economic model. This was the time when the first Earth Day was commemorated in April 1970. This is when the term “Recycling” was gaining momentum, with revolutionary processes and machinery that paved the way for material recovery.
By the 90’s, the term “Extended Producer Responsibility” was introduced, which ensured responsibility took the centre stage. It focuses on the responsibility of the producer for their product’s impact in the last stage of its life cycle and after consumption. It also encourages manufacturers to create products that significantly lower the impact on health and the environment.
EPR programs, often equipped with technology, incentivize manufacturers to create and manage their products in a responsible manner. They do so by identifying the impact of the life cycles of the products. This, on the other hand, promotes circularity through mindful designing and end-of-life planning.
See: CSA Backs New Sustainability Disclosure Standards
The introduction of blockchain technology in 2010 brought a revolutionary era in the circular economy altogether. This technology enabled manufacturers to tackle the long-standing issues in the transparency of the supply chain, addressing accountability and traceability- the most important elements for encouraging circularity by ensuring responsible and efficient sourcing and disposal of materials. Blockchain technology also helps customers make well-informed decisions and deem companies responsible for the practices followed by them.
However, the story doesn’t end with blockchain. Today, there are various other technological advancements that are energizing the circular economy, such as:
- Circular Economy Token Systems - Gamification and tokenized systems are used to promote sustainable choices by offering rewards and incentives to individuals and companies to increase green user engagement, thus contributing to the circular economy.
- Sorting Robots Powered by AI - There are various AI robots specializing in sorting. They are programmed in such a way as to improve the efficiency and accuracy of the recycling process of a material. By doing so, these robots are helpful in tackling global waste crisis in an impactful manner. These robots enhance the transparency of supply chains by providing real-time data on the quantity, quality, and value of any product. Fintech platforms can leverage this level of transparency to offer more transparent and accurate financial products. Furthermore, it also helps you reduce the financial risks associated with investing in recycled products, thus enabling manufacturers make data-driven decisions.
- Blockchain Traceability offers a decentralized ledger to record each transaction and movement within a supply chain. All the people participating in the supply chain, such as raw material suppliers, manufacturers, retailers, and customers, contribute to the blockchain data. This level of transparency helps in tracing the journey of any product with the utmost accuracy, encouraging sourcing and efficient recycling. There are many global organizations like IBM Food Trust and Provenance, that track the origin of products and ensure sustainability and ethical sourcing.
- AI-enabled Circular Design is also helping in product designing and recycling processes. These tools use machine learning algorithms that recognize patterns and the correlation to the data. Furthermore, AI promotes the creation of products that are aligned with the principles of circular economy.
Fintech Poised to Grow the Circular Economy
- Market Growth - According to a recently MarkNtel Advisors study, fintech was valued at approximately US$553 billion in 2023 globally and is rising at a CAGR of 6.6% from 2023 to 2030.
See: Sustainability: A Must for Fintech Growth
- Investment - In recent years, investments in startups specializing in fintech have risen. A significant part of these investments have been allocated to areas that prioritize sustainability and circular economy solutions. A Canadian company that meets this definition is CoPower, a Toronto-based fintech firm focused on sustainable investing (purchased by Vancity Community Investment Bank). CoPower focuses in offering investment possibilities for clean energy and green infrastructure projects that adhere to the concepts of sustainability and circular economy. CoPower provides 'Green Bonds' to fund projects such as energy-efficient retrofits, solar energy, and geothermal installations, making it a pioneer in integrating financial solutions with a sustainable effect.
- Regulatory Promotions - Many governments across the world are introducing regulations that are supportive of fostering the growth of fintech in the circular economy. For example, The European Union has a Circular Economy Action Plan that promotes sustainable finance and investment for various circular economy projects. The United Kingdom also has a Green Finance Taskforce that promotes finance and investments for sustainable projects.
More Examples That Utilize Fintech in a Circular Economy
Below are a couple of Canada examples that have adopted fintech solutions to support a circular economy:
Loop Industries
Loop Industries is a chemical company based in Terrebonne, Canada. This company has developed a technology that recycles plastic waste into polyester fibre. This company has utilized fintech solutions to boost its supply chain, manage financial risks, and secure funds for its revolutionary recycling technology. Loop uses a technology that provides a sustainable and eco-friendly alternative to the traditional production of plastic. This technology contributes to a more circular economy as it encourages the reduction of waste and the conservation of resources.
CarbonCure Technologies
Based in Halifax, Nova Scotia, CarbonCure Technologies has developed a process that captures and stores carbon dioxide in concrete. This company has utilized fintech to attract investment and secure funds for carbon capture solutions. CarbonCure’s technology is helpful in lowering carbon emissions and making the construction more sustainable and eco-friendly, thus promoting sustainable economy.
Conclusion
Sustainable practices are impactful in lowering the carbon footprint and saving a lot of money. It enables people to discover and follow the best solutions that can be helpful in conserving resources. Technologies like AI, Blockchain and Fintech are advancing the development and impact of the circular economy by promoting the conservation of resources while streamlining transparent production process that reduce pollution and enable people to adopt sustainable practices.
About the Author
Amir Waheed is the co-founder & CEO of SEO Toronto Experts. He intends to bring a massive transformation to eCommerce SEO Services. His team of talented IT professionals knows the secret of getting huge conversions.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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