Investing in infinity: advancing U.S. circular economy
Learn about the role of financing in the transition away from the "take, make and waste" model.
FEBRUARY 2024
By Anthony Casciano and Nikitha Radhakrishnan
The concept of a circular economy has gained substantial traction in recent decades as companies adapt to reach sustainability goals. Yet our global economy is still only 7.2% circular, with over 90% of materials either wasted, lost or unavailable for reuse based on research by the Circle Economy Foundation for 2023.
Traditionally, the global economy has followed a linear model of “take, make, and waste.” The circular economy concept challenges this model, focusing on restoration, refurbishment, reuse and recycling of materials across all areas of the supply chain. This approach aims to create a closed loop system that reduces environmental impact, promotes sustainability, and supports economic resilience by decoupling economic growth from finite consumption.
Through the lens of its DEGREE (decarbonization, ethics, governance, resource efficiency, equity, and employability) model, Siemens is committed to using resources responsibly and recognizes that the circular economy benefits business, the environment, and society. Together with its suppliers, the company relies on a competitive and transparent supply chain in order to act with foresight and responsibility, and helps enable its customers to do the same.
Siemens' VP & Head of Supply Chain Management in the Americas region Patric Stadtfeld expressed that the shift from linear to circular business models is critical as Earth Overshoot Day — the date when our natural resource use surpasses what Earth can regenerate annually — comes earlier and earlier each year. "Circularity is key to ensuring long-term supply chain viability and profitability."
Central to the circular economy is the principle of fostering sustainability through a holistic approach that spans the entire lifecycle of products and services. This approach begins with the innovative design phase — such as with Siemens' Digital Twin Software — where a primary focus is on eliminating waste and pollution right from the outset.
A key aspect is the emphasis on amplifying product utility through sharing models, allowing for more efficient use of resources, and reducing the overall demand for new products. It also extends to ensuring that products are built to last longer, thus prolonging their usage and reducing the need to constantly replace them. At the end of a product's lifecycle, the focus shifts to repurposing or recycling in a manner that maximizes resource efficiency.
Siemens USA's Head of Sustainability Matt Helgeson explained that the circular economy advocates for the integration of renewable energy sources and sustainable materials into production processes, reinforcing its commitment to minimizing environmental impact. “This paradigm shift toward circular practices also includes initiatives aimed at rejuvenating natural ecosystems, thereby creating a symbiotic relationship between economic development and ecological conservation.”
Financing solutions are pivotal in catalyzing the transition to a circular economy by providing the necessary capital and financial incentives for businesses and consumers to adopt circular practices. These solutions can range from green bonds and sustainability-linked loans — which finance projects with clear environmental benefits — to innovative leasing models that support product-as-a-service offerings, encouraging the design of durable and repairable products.
For example, Covanta is a world leader in providing sustainable waste and energy solutions and is the largest operator of waste-to-energy plants in the U.S. Siemens Financial Services (SFS), helped provide Covanta with a sustainability-linked loan with KPIs to incentivize the growth of waste sustainably processed by 2.5%, and to increase waste recycled and reused by 25%, between 2020 and 2025. The fulfillment of these specific KPIs will divert more waste from landfills, significantly reducing emissions and supporting the development of the circular economy.
By facilitating investments in recycling infrastructure, renewable energy and circular supply chains, smart financing can reduce the upfront costs associated with sustainable business models, making them more accessible and attractive. Additionally, by aligning financial returns with environmental performance, sustainable financing solutions can incentivize companies to innovate and adopt practices that minimize waste and maximize resource efficiency, thereby accelerating the shift to a more sustainable and circular economy.
The circular economy is not just an alternative model; it's a necessary evolution for a sustainable future. At SFS, we're excited to continue working with customers, not only in the U.S. but globally, on their journeys from a linear to a circular business model and together, forge a path toward an economy that works in harmony with the environment.
Anthony Casciano is president and CEO of Siemens Financial Services, Inc.
Nikitha Radhakrishnan is the Sustainability Strategist at Siemens Financial Services, Inc.