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Exclusive Interview with Circulate Capital

Ahead of next month's Sustainability in Packaging Asia 2022 conference, we recently spoke to Regula Schegg, Managing Director, Asia at Circulate Capital.
Our exclusive interview offers insigns on her presentation on 'Systematic approach to drive a circular economy', key challenges and opportunities facing the sustainable packaging sector and more. Take a look below now to find out what was said...

Q1. You are going to be delivering a presentation on the systematic approach to drive a circular economy, why do you think this is an important topic now? 

The plastic crisis we face today is a systems problem that requires a systems solution. What I mean by this is that we need an ecosystem of players to work together to create a circular economy for plastics. At Circulate Capital, we seek to catalyze systems change by removing capital as a barrier to critical waste and recycling infrastructure development.
Investment across the plastic value chain is needed now more than ever to prevent pollution, fight climate change and advance the circular economy. If no action is taken, the flow of plastic into the ocean, which is now growing at a staggering 13 million tonnes per year, is expected to triple by 2040. The subsequent cost to businesses, communities and ecosystems is significant.

Q2. What do you think will be the biggest challenges to packaging sustainability in the next 12-24 months? How is your company/organization dealing with this challenge?

A circular economy approach to materials such as plastics entails keeping them in the economy for as long as possible - to reduce the need for new materials - and to maximize use and value. Notably, as much as 95% of plastic packaging’s value, worth US$80 to US $120 billion annually, is lost to the economy after a short first-use cycle (Ellen MacArthur Foundation). This means designing products with long lifetimes and necessary warranties; avoiding single-use plastics unless where necessary; adopting business models and social solutions that enable reuse, repair and product sharing; and recycling plastics to sufficiently high-quality grades to substitute for virgin materials, among other interventions.
For us, the main challenge is to attract the billions of dollars of capital needed to help the industry shift to such circular models.  According to a recent study by Google (Closing the Plastics Circularity Gap), more than US$430 billion needs to be invested over the next two decades to ensure circular supply chains can meet the growing demand for plastics. At Circulate Capital, we aim to demonstrate the power of catalytic capital to scale solutions, prove the investment case and unlock the billions of dollars needed to create lasting solutions to the plastics crisis.

Q3. What does your company/organization hope to achieve over the next 5 years with regards to the future of packaging industry?

Our aim is to attract more institutional investment into the waste management and recycling industry in South and Southeast Asia, as they have a critical role to play in the drive towards sustainable packaging . We have recently announced the European Investment Bank’s commitment of up to $20 million to Circulate Capital Ocean Fund I-B (CCOF I-B), which supports both disruptive innovations at the nexus of climate-tech and plastics as well as best-in-class solutions across the recycling value chain in South and Southeast Asia.

In addition to more capital, we are also hopeful that individual efforts in plastics circularity will begin to add up to more than the sum of its parts. We are starting to see more opportunities to close the loop on circularity. For example, our corporate investors benefit from our portfolio companies’ market-ready solutions to deliver against sustainability and extended producer responsibility (EPR) targets. Similarly, our partnerships with global corporations provide portfolio companies with access not only to real market opportunities for scaling innovation and growth, but to global supply chains and offtake agreements.

Q4. As consumers and end-users continue to push for more sustainable/greener solutions, what do you think is the biggest concern regarding packaging?There needs to be greater clarity on the source of recycled materials as well as on the environmental and social impact of the methods by which these materials were created, collected and sorted. This is why one of our key focus areas is on filling the data gap. We do this by investing in solutions that scale digitization by applying big data, deep tech and AI to drive efficiency, traceability and transparency across the supply chain.
Recykal, for example, is India’s first waste-commerce platform that provides end-to-end digital solutions to facilitate material flows and transactions for all stakeholders across the value chain. Not only do their digital solutions help to drive greater efficiency along the waste recycling process and enable brands to plan, manage and track their EPR fulfillment from end-to-end, but they also drive more transparency on pricing, which contributes to improving the livelihoods of waste workers. Recykal has gone from strength to strength, having recently raised an additional $22 million from Morgan Stanley. 

Q5. What do you think will be some of the most interesting advancements in materials or packaging types in the near future?

What we are excited about is the range of plastic waste that is now able to be recycled and transformed into valuable products.  We recently invested in Deluxe, a leading Indian plastic recycling company that recycles multilayer plastics (MLP) and Used-Beverage-Cartons (UBC) into new, valuable products. Typically considered of no value and almost impossible to recycle, Deluxe is creating a market for MLP waste with the development of a range of products such as pallets for warehousing and rickshaw seats. Deluxe currently supplies 90% of the recycled seat board market, which means nearly every rickshaw driver sits on a Deluxe-recycled seat.
We’re also excited to see more unique, scalable and disruptive innovations in materials and deep technology solutions with the potential to transform the global plastics and recycling supply chain. Through our climate tech investment strategy, Circulate Capital Disrupt, we’ve already invested in 3 companies - Arzeda, Circ, and Phase Change Solutions, which implement solutions in the sustainable fashion, biotechnologies and smart materials sectors. When it comes to sustainable fashion for instance, one of the main technical challenges facing the industry today is the high proportion of garments made from material blends such as cotton and polyester, which make them hard to separate and recycle. Circ has the only proven and scalable solution for recycling polycotton textile waste into reusable raw materials, with the potential to keep significantly more materials in a closed-loop.

Q6. What sort of partnerships and collaborations do you think will be necessary to drive the industry forward on sustainability?

We need an all-hands-on-deck approach to creating a circular economy for plastics and other materials used for packaging – investors, policymakers, innovators and corporations all have a role to play. India is a great example of innovation that takes place when all the building blocks are in place. We’ve recently made our seventh investment in India, which has a dynamic entrepreneurial ecosystem with a highly skilled workforce. This is being supported by a strong local and international demand for quality recycled materials from brand owners as well as supportive regulatory frameworks like its EPR policy, which have set the stage for transformation and investment opportunities.

With all these enabling conditions in place, we can skip incremental change of outdated linear systems - with waste management systems focusing on landfilling/incineration like in Europe and in the US - and drive straight to scaling circular value chains.

Srichakra Polyplast is an example of this potential in action. India's first recycling company to establish a bottle-to-bottle recycling facility, it has recently received positive European Food Safety Authority evaluation for the use of its recycled plastic in sustainable food packaging. At the same time, the Food Safety and Standards Authority of India (FSSAI) is set to approve the use of rPET for food packaging, which would reduce the need for virgin plastics and pave the way to a circular economy for plastics in India.