The chip shortages in 2020-21 increased awareness that, from steel and aluminum to rare earth minerals, the U.S. market has far fewer processed materials available than we need to meet the growing demand for electric vehicles, battery storage and transmission lines needed to maintain a 1.5-degree future. And the push to secure access to a finite, price-competitive global materials supply was only heightened by the Inflation Reduction Act’s domestic sourcing requirements for assets like electric vehicle batteries.

This growing need has prompted efforts to fund new extraction domestically and to secure feedstock from international regions––often with challenging environmental and human rights records but higher volumes of available supply. Onshoring and near-shoring of key aspects of manufacturing––once seen as cost prohibitive––are now seen as cost-of-doing-business to access the U.S. market. Less prevalent is the consideration of how to create more sustainable domestic sourcing channels for the critical minerals needed to support the manufacturing being announced in the U.S.

That is not to say that “recycling” is absent from the conversation. Indeed, a handful of large battery recycling companies have garnered significant attention and capital––the most recent being a $2B conditional loan commitment from the Department of Energy Loan Programs Office to Redwood Materials. However, much of what is being invested in today relies upon energy- or chemical-intensive processes that prioritize recovery of the highest-value-by-dollar-amount materials. The result is that other materials––steel, aluminum, copper––can be left behind in the process. Those materials that are recovered––like lithium, cobalt, nickel––may end up requiring significant re-processing to be re-usable in a new battery.

It is important to advance the “large loop” circularity narrative of recycling materials all the way back to their base, raw material form; however, enabling smaller, cost-competitive loops alongside this can move the needle on material availability in the near-term. These include optimally leveraging used materials and minimizing processing costs to get these materials back to the manufacturing lines where they are needed. This is essential as we redefine our hierarchy of mineral recovery––from one that leads with extraction to one that leads with recovery as the primary source for materials.

At Closed Loop Partners, we see significant opportunity to elevate recovery as a core part of the critical minerals conversation. Namely that (1) valuable streams of recoverable domestic materials are currently overlooked; (2) existing processing techniques are leaving value on the table; and (3) geographic silos are disadvantaging both suppliers of recovered materials and manufacturers.

• Valuable streams of recoverable domestic materials are being overlooked

It is no secret that there are major concerns about the near-term availability of end-of-life batteries to feed existing recycling lines. At the same time, sourcing newly mined materials for electric vehicles has become a challenge for many automakers, and recent announcements demonstrate a push toward net new, domestic extraction for materials like cobalt.

There are diverse used material streams that can serve as the feedstock needed by new battery manufacturers. This includes everything from scrap created during the initial battery manufacturing process to end-of-life electronic waste and, even, recovery from seawater, clay or waste streams from other manufacturing processes.

Innovation that takes the country’s natural endowments into account is better positioned to move the needle on critical minerals access. These include not just minerals under the ground, but also those above it––being scrapped off the line, waiting in line at an end-of-life electronics processor, or even in our junk drawers at home. And there is an investment opportunity in recovery technologies that view those waste streams not as liabilities but as feedstocks for the energy transition.

• Existing processing techniques are leaving value on the table

While current methods for battery recycling, such as pyro and hydrometallurgy, are well suited to recover cathode materials––lithium, cobalt, nickel and manganese––there is still opportunity to innovate and improve recovery mechanisms, ideally that preserve and catalyze reuse of anode materials or casings––graphite, iron, copper, steel, aluminum––many of which may not be fully recaptured in processing.

We know it is possible to extract more value from existing waste streams to loop materials back into supply chains––and de-manufacturing is a core enabler of that. Instead of starting a recovery process by shredding the existing product, we can prioritize deconstruction. This allows for the preservation of materials in a usable form rather than a return to the base elements (for example, direct cathode-to-cathode recovery, versus a reversal to lithium carbonate that needs to be reprocessed to be usable in a battery again). Not only does this require fewer steps for reintegration, but it may also be less energy intensive––and still gets domestic materials back to the manufacturers who need them most.

Similarly, existing operations in traditional industries, such as mining and oil and gas, have room for incremental recovery of materials that are currently viewed as waste products. Mine tailings, for example, are a natural waste product of the mining process and there are thousands of tailing dams––both active and inactive––around the world. There is an opportunity for innovation that focuses on reprocessing and recovering the critical minerals still present in those tailing dams. These “waste” streams from traditional extraction processes can become valuable sources for materials needed in battery manufacturing. They can also have secondary benefits, such as improved water quality, revitalization of biodiversity loss and more.

• Geographic silos are disadvantaging both suppliers of recovered materials and manufacturers

North American electric vehicle battery manufacturing has continued to accelerate, with nearly 1,000 GWh/year of manufacturing capacity expected to be online by 2030. The manufacturing footprint is broad––stretching from California to Eastern Canada, Texas to Florida to Massachusetts. Unfortunately, the planned capacity for critical minerals recovery is less distributed.

As operators of the largest private recycling company in North America, Closed Loop Partners knows well that the most important aspect of profitability in waste recovery is the ability to optimize the full ecosystem processing cost––and transportation is a significant part of that equation especially when an end-of-life product is heavy. There may be opportunities for more proximate, localized or modular processing, as well as more structured recovery infrastructure.

Putting Recovery at the Center of the Debate

We have the opportunity today to build the new supply chain for electric vehicle battery manufacturing with circular economy and recovery principles embedded from the beginning. Prioritizing recovery over additional mineral extraction allows us to localize supply chains and feed new capacity for domestic manufacturing of semiconductors and batteries for electric vehicles. It hedges over-exposure to finite supplies of raw materials that have, historically, only been accessible in specific, higher risk geographies around the world and, in doing so, creates a hedge against pricing volatility in those markets. If done well, it does all of that at a lower cost than full lifecycle mineral extraction and with a lower emissions footprint than legacy recycling infrastructure while diverting high value waste from landfill. It builds long-term resilience––all while driving transparency, connectivity and agility into our domestic processing capacity for critical minerals.

Core to our investment approach at Closed Loop Partners is a belief in the power of the ecosystem. The circular economy, by definition, requires collaboration across stakeholders. It requires a shared understanding of fully loaded costs to get something back in circulation and a commitment to make it work in the least emissions-intensive, most cost-efficient way possible––not just for a single entity in the value chain but for all of them. Sourcing critical minerals is no different. Now is the time for a new wave of collaborative innovation that puts novel recovery front and center in our journey toward sustainable, cost competitive, low carbon and low waste materials for the energy transition.

Special thanks to the GreenBiz23 team and my fellow panelists from the Future Proofing Critical Minerals Supply panel, to my Closed Loop Partners team––especially Jessica Long, Danielle Joseph, Andrew McColm, and Anne-Marie Kaluz––and to the countless corporate partners, investors, and start-ups innovating across this ecosystem that have already pushed my thinking here. I look forward to many more discussions on the topic!

Disclaimer:

This publication is for informational purposes only, and nothing contained herein constitutes an offer to sell or a solicitation of an offer to buy any interest in any investment vehicle managed by Closed Loop Capital Management or any company in which Closed Loop Capital Management or its affiliates have invested. An offer or solicitation will be made only through a final private placement memorandum, subscription agreement and other related documents with respect to a particular investment opportunity and will be subject to the terms and conditions contained in such documents, including the qualifications necessary to become an investor. Closed Loop Capital Management does not utilize its website to provide investment or other advice, and nothing contained herein constitutes a comprehensive or complete statement of the matters discussed or the law relating thereto. Information provided reflects Closed Loop Capital Management’s views as of a particular time and are subject to change without notice. You should obtain relevant and specific professional advice before making any investment decision. Certain information on this Website may contain forward-looking statements, which are subject to risks and uncertainties and speak only as of the date on which they are made. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”, “aim”, “will” or similar expressions are intended to identify forward-looking statements. Closed Loop Capital Management undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Past performance is not indicative of future results; no representation is being made that any investment or transaction will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided.

Looking back at 2022  

Last year, most reuse success stories for foodware and packaging happened in closed or semi-closed environments, where logistics management and returns are simpler to handle. Think of the cups and food containers used in venues such as restaurants, college campuses, stadiums, or office buildings. While reuse models in these closed or semi-closed spaces suffered during the height of COVID-19, due to increased sanitation concerns and venue shutdowns, 2022 saw them rebound, with significant momentum among reuse innovators in this space. Some examples include: 

• r.Cup continued their partnership with AEG and NIVA, expanding past Denver to launch wash hubs in Seattle, Los Angeles and San Francisco, bringing reusable foodware to venues, movie studios, museums, sports arenas, universities and corporate campuses.  
• TURN, a long-time partner of Live Nation and C3 group, continues to roll out reusable cups across their US venues, stadiums, and music festivals. Programs with Oak View Group and Delta Airlines went live last month. TURN also announced building two new US-based wash hubs, supporting growth in Atlanta and Los Angeles.   
• Re:Dish worked with corporations, cultural institutions, and K-12 schools across the New York DMA to replace their single use disposable packaging with reusable containers, plates and cups. In 2022, Re:Dish expanded their Brooklyn-based industrial washing hub to enable the washing and delivery of 75,000 units daily per line.  
• Bold Reuse now offers reusable food trays for the Portland Trail Blazers at the Rose Quarter and partnered with Park City, Utah to collect reusable takeout containers from local restaurants. 

Closed or semi-closed environments are a key starting point for the transition from single-use to reuse. They offer optimal conditions to introduce customers to reuse systems, and pave the way for expanding reuse into open environments and moving the needle on eliminating single-use plastic packaging waste. In 2022, we saw progress here too, with companies launching open environment pilots throughout the U.S. and beyond. In these pilots, customers could “borrow” reusable packaging on-the-go––whether a bag, cup or foodware––and later take it back to a return bin (instead of a trash bin) in stores or select drop off points in transit hubs or public spaces once the packaging was no longer needed. Some examples include:  

• Starbucks launched multiple reusable cup pilots globally, building upon the learnings from its 2021 Seattle pilot.  
• Coca-Cola and Burger King partnered with Loop to test reusable cups and containers in the U.S. 
• Loop also worked with major brands to launch reuse pilots at Kroger in Portland, Giant in Washington, DC, and Walmart in Arkansas.  
• DeliverZero, in New York and Colorado, and Dispatch Goods, in the Bay Area, continued to expand their offerings of returnable takeout containers.  
• The Rounds, a zero-waste refill and delivery service that launched in 2020 in Philadelphia, expanded its offering of home delivery of everyday goods in reusable containers to three more cities, DC, Atlanta and Miami, in ’21 and 2022. They partnered with Topanga, a software company, to track its reusable containers throughout their lifecycle. 

• Topanga also partnered with Grubhub to pilot zero-waste dining on campuses nationwide, and is continuing to build track-and-trace technology to power reuse systems at scale.  
• Returnity continued to grow reuse programs for major brands across diverse industries such as New Balance, Rent the Runway, and Estee Lauder while expanding into food delivery with The Rounds and others.   
• Goatote launched their borrow-a-bag program at select CVS Health, Target, and Stop & Shop stores in New Jersey, expanded their program in Colorado, and launched in Ontario, Canada. 
• In Canada, Muuse partnered with DreamZero and the Government of Toronto to launch a Neighbourhood Zero Waste Zone for Muuse Reusables in Toronto East, and integrated its first pizza box for takeaway customers. 
• In Vancouver, Tim Hortons launched a reusable cup pilot operated by ShareWares and Return-It launched a multi-brand reusable and single-use cup collection pilot.   

Getting these open environment pilots off the ground is a huge step in introducing reusable packaging to customers and operators in the field. To accelerate uptake and scale of these solutions, continued collaboration and experimentation are more important than ever.  

So, what will it take in 2023 and beyond to enable uptake of reusables in open environments?  

1. Legislative policies need to evolve to incorporate more explicit language around reuse and lessons learned from single-use plastic bans to avoid potential unintended consequences  

In 2022, we saw regulatory pressures from single-use plastic bans growing, with many cities and states either passing or considering single-use plastic bans utilizing California, New Jersey, and Massachusetts ordinances and legislation as leading examples. Public policy plays a critical role in driving meaningful impact and oftentimes is the first step to inspire broader change. For example, in New Jersey, single-use bags were banned from grocery and super stores to help enable reuse, resulting in a significant decrease in purchase of single-use plastic bags. However, our customer research found that 87% of customers in New Jersey said they have enough, more than enough or too many reusable bags. While the policy has resulted in a significant decrease in the use of single-use plastics bags, we need to ensure complementary interventions, incentives and tactics are implemented that support customers to bring their own bags back into store so that reusable bags achieve their intended reuse. Looking ahead, policy will be a key enabler to promote a cultural shift towards reusables. Policymakers, advocacy groups and industry players will need to work together to pass regulations that advance reuse models that are measured and tracked and learn from existing examples of where policy has or hasn’t worked. 

2. Widespread consistency in messaging and education for customers around reuse systems will make the difference in adoption rates

Asking customers to return packaging can be challenging.  In 2022, we saw engagement growing slowly, but it will take consistent messaging over time and across industry players to create a cultural shift. Besides messaging and education, most reuse programs are still refining their business models to make their systems more convenient for customers. While many programs started with technology requirements (account creation, app download, sign-up process and more), we are seeing a shift towards solutions that, despite being tech-enabled, do not require additional digital steps from customers.  

3. Identifying opportunities for shared reuse infrastructure, for example washing or transportation partners, and shared collection points will help create economies of scale  

It will take more than one company to create a sustained and scalable system to collect and prepare reusable packaging for its next life cycle. Low volumes within reuse systems create challenges for financial viability, whereas shared infrastructure could drive efficiencies in the system. Ways to build shared infrastructure can include aggregating washing vendors for multiple reuse products and leveraging empty trucks on their way back from delivering goods (known as “milkruns”), among other things.  

4. Data transparency and measurement will be critical in ensuring new reuse systems achieve their intended environmental, social and economic impact  

Packaging material choices and end-of-life considerations are foundational to ensuring that a reuse system is better for the environment. For example, a stainless-steel cup with a return rate lower than 95% could be worse for the environment than a single-use cup given the high carbon footprint for steel production. In 2022, many brands identified polypropylene plastic as their go-to material for food-service containers. In 2023 and beyond, continuous exploration and careful evaluation of materials based on their intended use and actual (not aspirational) rates of reuse will continue to be critical. Important considerations around end-of-life recovery pathways, how energy intensive the material is to extract, cost and customer happiness need to be weighed before scaled production begins. 

What’s ahead  

There is a lot to look forward to in 2023 when it comes to reuse. The landscape is rapidly evolving and growing, and the continuous learning and experimentation yields new insights and upends assumptions. At Closed Loop Partners’ Center for the Circular Economy, within our NextGen Consortium and Consortium to Reinvent the Retail Bag, we continue to deploy reuse solutions in the field, measuring the impacts of different policy, material selection choices, customer engagement strategies and reverse logistics mechanisms. The insights and data gleaned directly informs our strategy ahead, as we continue our focus on reuse as a critical means to addressing single-use plastic waste.  

The company is at the center of one of today’s most pressing opportunities, as supply chain bottlenecks and logistics challenges elevate the need for streamlined, efficient movement of goods into and out of our homes and businesses. Today’s complex logistics system is coupled with a manufacturing system weighed down by overproduction, opacity and waste. The fashion industry alone has an average 40%[1] overproduction rate. This overloads production facilities and raises costs for brands as they hold unsold inventory for long periods. Eventually, most surplus products are landfilled or destroyed, wasting valuable resources. While legacy supply chains went unquestioned for many decades, their inefficiency has been apparent amidst the bottlenecks of the last two years.

The COVID pandemic accelerated the growth of e-commerce, and in its wake, return rates soared to over 20%[2]. Brittle retail supply chains bogged down by overproduction were unable to handle the spike. Today, if a garment is returned at all, it takes weeks or months until it is available for sale again––if it ever makes it back on shelf at all. This means that unsold and returned inventory can sit in a box for half of the apparel markdown cycle, and when it finally goes back to the retailer for sale, it is often already shopworn and damaged. This says nothing for the excess carbon emissions associated with the transport of that good through the network as returns make their way back to central distribution hubs.

The retail system operates as an omni-channel network and its weakness lies in its silos. If 100 pairs of jeans are shipped, they travel in one direction before branching into different sales channels: wholesale, retailer and e-commerce. These silos are often disconnected and managed by different parties. When items across these three channels are unsold or returned, they end up in consolidation centers mixed with different products. Brands have little to no data on that inventory. Without the backend infrastructure to connect these three channels and consolidate information, a holistic view of managed inventory is impossible––making it similarly challenging to reallocate products into the optimal sales channels. Inventory ends up in holding patterns instead of getting where it needs to go.

Networks, technology and infrastructure need to change quickly, but it’s never been more expensive to do so. Industry is looking for ways to use existing infrastructure more efficiently. That’s where Fillogic comes in.

Breaking Down Silos

Fillogic recognizes that if the same product (for example, a pair of jeans) is allocated across a brand’s wholesale, retail and e-commerce channels, then the three channels should be connected on the backend. That way, outbound, unsold, returned or lightly worn inventory can be reallocated to a channel where it will most likely sell, helping brands reach business goals and meet customers where they are while minimizing inventory idling in warehouses or backed up in transit.

Their technology intercepts unsold garments at the middle mile and redirects them across the appropriate channel. This reduces the need for retailers to markdown in stores to move inventory. Instead, they can resell these products––which are often part of the nearly 40% of inventory that’s sold at discount––at full price or at a slight markup, through a different channel or in a different store, and more quickly than should these items have languished in the existing logistics infrastructure.

To add speed and efficiency, Fillogic operates within existing spaces close to retailers and customers. They repurpose shopping malls and under-utilized retail spaces into local market logistics hubs that connect the retail network. They see opportunity in forgotten spaces: the truck tunnels and elbow joints––bringing value back into overlooked assets rather than building more infrastructure. They optimize existing inventory, both outgoing and returning, to unlock new revenue streams for brands, enable better margins on the sale of unsold items and the resale of returned goods, advancing reuse and meeting customer demand in the process. Ultimately, this keeps valuable products that otherwise could have gone to landfill in the hands of consumers.

Paving the Path for Growth

Closed Loop Partners’ Ventures Group invested in Fillogic in early 2022, recognizing the need for supply chain transparency to increase utilization of goods and keep those materials in circulation. According to the Circularity Gap report, 70% of greenhouse gas emissions are related to material production and use, bringing the circular economy, and increasing utilization rates of manufactured products to the center of climate conversations. Advancing more circular supply chains plays a key role in increasing resource efficiency and resiliency to bring products to market while limiting waste.

As more retailers cross geographic boundaries, Fillogic faces growth opportunities in North America and beyond. Bill Thayer, Founder and CEO of Fillogic, is developing retail partnerships alongside a close-knit team, many of whom have had long careers in logistics, store operations, ecommerce and technology. In Bill’s words, “[Other players have] spent hundreds of billions of dollars building logistic networks. At Fillogic, we feel that network already exists. By connecting [those sites] with technology, operations and infrastructure, we can use under-utilized infrastructure more efficiently…operating as nodes on existing supply chains and making that middle mile more efficient.” Fillogic’s technology platform connects these heavily siloed, disparate systems, a hub network that uses underutilized spaces, and a delivery marketplace that connects those two assets. Together, all three assets create an affordable, efficient, cost-effective and sustainable network using existing infrastructure where people live, buy new clothes and make returns.

Ultimately, Fillogic is helping to increase the resale and recapture of consumer goods. By doing this, Fillogic is optimizing existing processes––reducing costs, timelines and the percentage of excess or unsold inventory. This is a win for both financial officers and sustainability managers––and that’s the circular economy.

[1] https://www.voguebusiness.com/sustainability/fashion-waste-problem-fabrics-deadstock-pashko-burberry-reformation

[2] https://www.cnbc.com/2022/01/25/retailers-average-return-rate-jumps-to-16point6percent-as-online-sales-grow-.html

Disclaimer:

This publication is for informational purposes only, and nothing contained herein constitutes an offer to sell or a solicitation of an offer to buy any interest in any investment vehicle managed by Closed Loop Capital Management or any company in which Closed Loop Capital Management or its affiliates have invested. An offer or solicitation will be made only through a final private placement memorandum, subscription agreement and other related documents with respect to a particular investment opportunity and will be subject to the terms and conditions contained in such documents, including the qualifications necessary to become an investor. Closed Loop Capital Management does not utilize its website to provide investment or other advice, and nothing contained herein constitutes a comprehensive or complete statement of the matters discussed or the law relating thereto. Information provided reflects Closed Loop Capital Management’s views as of a particular time and are subject to change without notice. You should obtain relevant and specific professional advice before making any investment decision. Certain information on this Website may contain forward-looking statements, which are subject to risks and uncertainties and speak only as of the date on which they are made. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”, “aim”, “will” or similar expressions are intended to identify forward-looking statements. Closed Loop Capital Management undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Past performance is not indicative of future results; no representation is being made that any investment or transaction will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided.

1. In 2020, Just Salad became one of the first US chain restaurants to show the estimated carbon footprint of every item on its menu, why was this so important to do and what have been the impacts on your business to date?

In 1994, the Nutrition Facts panel began appearing on food products. Today it is one of the most ubiquitous labels in the world and many of us depend on it to make purchasing choices. Nearly 30 years later, we know that food systems represent more than 34% of total greenhouse gas emissions (according to a 2021 paper published by Nature). Our food choices affect the temperature of the planet and its long-term habitability. So, food labels should help us evaluate ecosystem impacts, as well as nutritional content. That is the perspective that went into our carbon labels. They indicate the estimated quantity of greenhouse gas emissions associated with each item on our menu. Several research studies show that people will change their purchasing behavior in response to carbon labels. When we were developing our carbon labels, I wanted a term to describe eaters who consider taste, nutrition, and environmental sustainability when ordering from our menu. We chose the term Climatarian. Today, Just Salad’s digital menus feature a “Climatarian” dietary filter showing our lowest-footprint items. Carbon labels give us ingredient-level insight. We’ve worked with our third-party verifier, Planet FWD, to quantify the impacts of specific sourcing decisions. For example, we found that by switching from conventionally cultivated quinoa to Regenerative Organic Certified (ROC) quinoa, we’ve reduced the greenhouse gas emissions associated with two menu items by 3.29%, which will add up to approximately 1.83 tons of CO2e over the year 2022. With Planet FWD’s help, we’re generating similar calculations demonstrating the impact of other ingredients, like vegan feta cheese, and more resource-efficient packaging, like our reusable bowl program. We’ve also partnered with researchers at University of Pennsylvania and Harvard on a survey that assesses customers’ engagement with our carbon labels.

2. While we know reuse has an important role to play in reducing single-use plastic waste, how do you think about the carbon footprint attached to these reuse systems that typically require more energy and material during manufacturing, as well as complex reverse logistics?

It takes energy to produce a piece of packaging, whether reusable or disposable. Reusable packaging needs to be durable and long-lasting. Therefore, the carbon footprint from manufacturing it will be higher than for a flimsier, disposable container. What we’re optimizing for is the overall, lifecycle footprint of our reusable containers. We want it to be lower than disposables after the smallest possible number of uses. One factor affecting this is the type of material from which your reusable container is made, and how frequently your customers will reuse it. The less resource-intensive your material, and the more frequently your customers reuse it, the faster you’ll achieve the lifecycle emissions savings versus disposables. As for reverse logistics, we incentivize customers to keep bringing back their reusable containers by providing a free topping with every reuse. We offer additional rewards throughout the year to keep the reuse cycle going. For example, when we launched plant-based Beyond Chicken, customers who brought in reusable bowls received that item for free. At new store openings, we hold “$5 salad days” for reusable bowl customers. I’m proud of the fact that we tie rewards to circular, resource-conscious behaviors.

3. What kind of data have you uncovered to support the environmental case for reusable packaging? How do you verify this and what are some of the biggest challenges regarding impact measurement?

In 2022, we completed a third-party lifecycle assessment comparing the environmental impacts of our reusable and disposable packaging. We estimated the greenhouse gas emissions and water use associated with every stage: materials, manufacturing, the packaging they arrive in, distribution, first use and end of life. The LCA concluded that after two uses, the Just Salad reusable bowl has less global warming impacts than a disposable fiber bowl. These findings are substantiated through Monte Carlo uncertainty analyses with 95% confidence. If you were to eat at Just Salad every week for a year using our reusable bowl, your carbon footprint would be 89% lower than if you’d eaten out of a disposable container. The results also show that the reusable bowl results in less water consumption impacts after the second use (though uncertainty in the underlying water consumption data prevents these estimates from being substantiated at the 95% confidence level). To maximize the water-conservation and greenhouse gas emission benefits, we recommend that customers wash the Reusable Bowl in a full dishwasher at the most energy- and water-efficient setting possible.

Of course, lifecycle analyses are only as good as the assumptions upon which they’re based. We worked with our LCA partners over the course of a year to collect and verify our data. That was challenging, if only because of the time investment required. We were privileged to work with experts who cared deeply about data quality and rigor. They performed sensitivity analyses on our base assumptions (for example, our assumptions about the proportion of containers that are washed by hand versus dishwasher). The sensitivity analysis gave us even more confidence in the final results.

4. How have your reusable bowl programs evolved over time? What’s the customer experience look like?

Since 2006, when we opened our very first store, Just Salad has offered an in-store program that works as follows: Buy a reusable bowl for $1, and every time you bring it back, you get a free salad topping, like avocado. In 2022, we piloted a digital version of this program: In the Just Salad mobile app, you can opt in to our “BringBack” program. When ordering your meal, simple toggle BringBack Bowl Pickup. Your salad will be packaged in a reusable container that you can then bring back to Just Salad on your next visit. We will handle the washing and sanitation. BringBack is currently live at two stores and will roll out to a total of 10 stores in the coming months.

5. What would your advice be to a foodservice provider considering a shift to reuse? What are the different kinds of benefits they could anticipate, beyond simply environmental?

This year, we gave a comprehensive course on our reusable packaging program. (Companies and individuals can sign up for updates on future courses through the course site, www.thenewgreennormal.com). Summing up that course, I would advise anyone to take a systems-level perspective. Think about every stage of the packaging’s journey including Production, Consumption, Collection, and Processing. Then, consider how your customer interacts with the packaging at each of those stages. Finally, put a data collection system in place so you can measure and track environmental impact. Separately, seek out a support network that is as passionate about reuse as you are. That has helped me a lot.

Across Closed Loop Partners and our Center for the Circular Economy, we are testing, piloting and investing in reusable packaging models in order to accelerate their pathway to scale. We see reuse as a primary means to addressing the mounting single-use plastics waste challenge, reducing the need for virgin plastic extraction and keeping valuable materials in play.

The circular economy is the most significant restructuring of global commerce and supply chains since the industrial revolution. The goal? To produce, consume and manage resources so that valuable materials do not go to waste, and damage communities and ecosystems. Since its founding, Closed Loop Partners has made progress to reach this goal across plastics & packaging, organics, textiles and electronics. However, driven by a range of compounding factors, we are at a point where we need to go deeper, and expand this list of materials to include one that is arguably one of the most valuable: water.

Water is fundamental not only in terms of consumption––human beings cannot survive more than three days without drinking water––but clean water is also essential to production. Most of the groundwater we pump is used by farmers to irrigate agricultural land and industries to manufacture the goods we consume. But with the rates of production and consumption fueling today’s linear economy, wastewater treatment is more important than ever. Groundwater is pumped out of aquifers faster than it can be naturally replenished. Increasing frequency and severity of extreme weather events also mean that long periods of drought are exacerbating already diminishing amounts of water, while periods of excessive rainfall are overwhelming the absorption capacity of soil and water treatment infrastructure, causing overflows in sewage and stormwater systems and massive amounts of consequent damage to ecosystems and infrastructure.

Insufficient supplies of water could reduce production capacity for businesses by 44%, disrupting the availability of essential resources like energy, clothing and food and resulting in millions of dollars’ worth of stranded assets. Earlier this year, droughts in Mexico drove a shortage of chili peppers, threatening the production of Sriracha around the world. Sriracha could just be the tip of the iceberg. Droughts are also exacerbating shortages of staple crops like cotton, wheat and corn, which could drive price increases. On the other hand, increasingly frequent deluges of water threaten the systems our societies run on. For example, the recent floods in Pakistan have already resulted in damages reportedly worth over US$10 billion, affecting millions of people and breaking and overwhelming key infrastructure. Overall, according to a CDP report, 69% of publicly listed companies around the world stated that they are exposed to water risks that could generate a substantive change in their business, with the potential value at risk topping out at US$225 billion.

Consumption patterns coupled with climate change are stressing our water sources and systems, threatening the continuity of those very consumption patterns. Amidst this, the diamond-water paradox is glaring––the availability of water directly affects the longevity and quality of our life yet has been one of the most mispriced assets. While water’s historical undervaluation has made investing in it notoriously difficult, we are now seeing market signals that water pricing and value are changing, and this is creating an opportunity for investors.

A sea change in water investing

Wastewater treatment has largely improved over the years, driving up water-associated costs in much of the U.S. and Europe. In New York, alone, the price of water and sewer have both increased nearly 5% YoY, and increased over 26% over the last 10 years (over 2x the rate of inflation).

Source: New York City Water Board Rate History Data

The cost to transport heavy wastewater to water treatment facilities, and then transport the leftover sludge to landfill, ensures that operational costs stay high. Sending wastewater sludge to landfills also opens up new environmental and social risks––unleashing a slew of hormones and chemicals from agricultural and industrial waste into the soil. More capacity is needed at treatment plants, but building new water infrastructure requires significant costs: land, new pipes and labor. As it stands, it is more expensive for customers to get rid of water than to buy it. In fact, for anyone hooked up to a municipal water treatment plant, that is often the case. Water disposal in New York City is 159% more expensive than supply (and has been for the last 30 years).

Despite rising costs to treat water, businesses are faced with numerous pressures to keep used water in circulation. Growing policy––including the EPA’s new regulation that holds polluters accountable for cleaning up PFAS contamination, as well as a new plan that reduces water releases from Lake Powell––is raising accountability standards. Industry collaborations––such as Ceres’ Valuing Water Finance Initiative (VWFI), which engages 72 companies with a high water footprint to value and act on water as a financial risk and drive the necessary large-scale change to better protect water systems, and the UN Water Resilience Coalition, a CEO-led initiative committed to reducing water stress by 2050––are driving broader market attention. Water-related public health crises around the U.S.––in Jackson, Las Vegas, Baltimore, Flint and New York––are pushing additional attention onto expanding potable water sources and addressing outdated water infrastructure. With all these forces at play for industries that output water, investing in water management can reduce waste management costs, and provide a consistent and reliable water input stream. If companies can recycle water back into the system and reuse it as an input, they can reduce costs and relieve municipalities of capacity challenges.

A groundswell of new innovations

Across the board, alternative water sources are increasingly interesting––and importantly, increasingly viable from an investment perspective. This includes on-site generation of water, such as SOURCE Water’s technology to produce potable water from sunlight and surrounding air. This also includes on-site filtration technologies that could create potable, grey or functional water, depending on the end user.

Most recently, Closed Loop Partners’ Ventures Group invested in Accelerated Filtration, a water filtration company based in Midland, Michigan that develops industrial water filtration technologies. The company’s technology helps address the pain point of industrial customers, delivering packaged turn-key filtration solutions for the consistent removal of fine suspended solids in variable water streams.

As investable opportunities in the water space continue to grow, Closed Loop Partners’ Ventures Group continues to watch investment opportunities in water filtration technologies that could provide a strong return on investment to commercial and industrial customers, and allow for water reuse. As water becomes increasingly scarce and increasingly valuable, we look forward to seeing the evolution of the space, and championing the integration of water as one of the most important materials to keep within a circular economy.

Interested in learning more about work to keep key materials in circulation? Visit Closed Loop Partners’ website here.

Closed Loop Partners was active throughout town as the link between the circular economy and climate change mitigation becomes increasingly clear. These discussions included one that I participated in alongside Amy Duffuor at Azolla Ventures and Allison Hinckley, PhD at Fine Structure Ventures on the Future of Climate Venture Capital Investing, facilitated by Co-Founder of Climate Tech VC, Kim Zou, at the HolonIQ Impact Summit.

The fundamental question for so many is how the current geopolitical and macroeconomic climate will impact climate VC in the coming months and years. As Kim and her colleagues have written, plenty of earmarked dry powder remains to be deployed. The question that remains is how climate VC’s evaluation criteria will shift in light of the relative uncertainty.

As investors in the circular economy, Closed Loop Partners has long been mindful about the underlying economic models that persist today and their link to climate change – namely those that link perpetual economic growth with extractive and emissions-intensive practices, reliance on long, brittle supply chains for energy and finite raw materials, and excessive waste within those existing supply chains. Given the macroenvironment of rising costs of capital, ongoing wars in the East, tariffs, and trade tensions with China, exacerbated climate conditions and an overhang from the worst pandemic in our lifetimes, the old way of production and economic “prosperity” is being called into question – and is now poised for disruption.

The sensibility across multiple conversations and events attended by Closed Loop Partners was that these forces have pushed climate-related innovations out of the silo of Corporate Social Responsibility (CSR) programming or parallel initiatives designed with a primary mandate to “give back.” Instead, we are seeing broader integration of circular economy and climate-related initiatives and investments entering the C-suite through supply chain, procurement, operations, and shareholder expectations. This means we are seeing corporations adopt transformations with an explicit economic mandate that can simultaneously facilitate a lower carbon, more circular future. Companies with this multidimensional mandate are those that Closed Loop Partners’ Ventures Group partners with and we are proud of the companies in our portfolio that are shepherding the economy into its next, more circular future.

As these transformations accelerate, so too does the need to drive mutual benefits for players further up and downstream from the products and services that we consume every day. In that spirit, value chain resilience continued to be top-of-mind across Climate Week events. Late last year, my team published a report outlining the catalytic power of mutually beneficial supply chain transparency in the next generation circular economic model. Whether from building up new, localized ecosystems through domestic or nearshored manufacturing or from actively creating value for legacy suppliers in an established ecosystem (e.g., parts manufacturers in automotive, mills or cut-and-sew players in the fashion value chain), companies can enable innovations that reduce waste, reduces full value chain liability, and – ultimately – facilitates a just transition for the ecosystem more broadly and builds future resilience.

This is no small task ahead of us; however, it is one that we – and much of the climate tech community – are embracing with open arms a transformation of how industry works. We are energized by novel solutions to tough problems and there is no shortage of both problems and solutions to take on in the coming months and years. Above all, the climate VC community is one of unfailing optimism. At the cusp of this transformation, we’re honored to be thought leaders on the circular economy and look forward to playing a small part in advancing the world toward the next generation of circular ecosystems.

Source

Amidst an increasingly urgent climate crisis, and growing inequity in food distribution, our inefficient food system is called into question. For investors and community organizations alike, finding circular solutions to reduce food waste across the supply chain is now a top priority.

What happens when food is wasted?

As much as 10% of global greenhouse gases comes from food wasted across the supply chain. Sending food to landfills misses the opportunity to convert that resource into any number of productive end uses––from compost and biogas to animal feed to packaging inputs and other products––that support the environmental, economic and social sustainability we seek in our economic system. Current practices that do not keep organic material in circulation are fundamentally unsustainable––locking in our society’s dependence on fossil fuel-based products and continually depleting soil’s regenerative capacity.

What does an ideal food system look like?

For effective strategies to manage food waste, we can look to nature. Natural agricultural cycles are some of the best examples of an efficient, closed loop system. When we harvest produce, we also take minerals and nutrients from the soil. That’s what makes our food nourishing. Importantly, food that is not eaten––surplus food and inedible remnants––contain nutrients too. Those remainders, when returned to the soil in the form of compost, enhance important microbial activity and replenish the soil for the next growing period. Food scraps are a resource that can also be transformed into clean energy and liquid fertilizer through anaerobic digestion. If managed optimally at each point of the supply chain, farming can have a reversing effect on climate change and soil depletion.

Landfilled food waste has negative value due to unpriced externalities. Diverted, it can be a valuable soil amendment, a source of energy, or input into other finished food and packaging products. This is an arbitrage to explore through financial capital and community initiatives.

What types of solutions are needed?

All manners of solutions are needed to move away from current linear processes that drive materials to landfill, as well as stop leaks in existing circular systems. Both holistic, far-influencing solutions––from public policy to childhood education––as well as technical innovations that address specific problems within the supply chains––such as developing end markets for unsold agricultural products––are critical. Until widespread public policy (with appropriate incentives) is in place, the first fundamental realignment requires risk-tolerant funding to capitalize solution providers and municipalities willing to be ‘first movers.’ The second set of solutions, which solve specific supply chain circularity challenges, will have more immediate impact and can be accelerated through a range of innovation services, including but not limited to the provision of flexible capital.

Today, investment and interest in food waste reduction are growing, and there has never been a better time to consider the range of impact solutions that need funding. In fact, in mid-May, Closed Loop Partners and ReFED announced a new Circular Food Solutions Platform that aims to catalyze an array of capital types that can support a wide range of solutions.

Let’s take a closer look at how investors and community organizations are addressing the challenge, and the impact that can be achieved when the entire value chain is engaged.

Seismic changes in regional food systems

In 2015, in the middle of San Diego County, a six-month pilot was run to take food scraps from a quick-service restaurant to a local farm with depleted soil less than one mile away, to compost and land-apply. The pilot aimed to prove the viability of closed loop regional food systems––that there is value in uneaten food, and it can be used to replenish surrounding agricultural soil. Findings from the pilot showed that the compost created from the fresh food scraps was five times more nutrient-rich than the finished compost the farm had been trucking in from 25 miles away. It not only saved the restaurant $250 per month on hauling fees, but also prevented 30 metric tons of greenhouse gases from being emitted.

This pilot was run by Solana Center for Environmental Innovation, a California-based nonprofit that has been advancing community initiatives to reduce food waste for many years. Among many other initiatives, this program planted the seed for what could be achieved through regional food systems. Today, San Diego County is now removing restrictions that previously prevented the replication of similar programs. Solana Center was awarded California’s highest environmental honor for this program, the Governor’s Environmental and Economic Leadership Award (GEELA), which recognized food waste as an environmental issue for the first time in the award’s history. More recently, Solana Center’s Executive Director, Jessica Toth, was recognized by the San Diego Business Journal as one of 50 Over 50 Influential Women, celebrating the impact of the programs run by the Center. With these developments, new technology, education and transport systems are needed to maximize and accelerate the economic and environmental benefits of these programs.

Catalytic funding funneled into circular food solutions

On the other side of the country, Closed Loop Partners, a New York-based investment firm and innovation center, has been focused on accelerating a circular economy across a range of sectors, including food and agriculture. Together with leading brands, industry groups, NGOs and investors, the firm funnels much-needed capital and network insights into industry-wide solutions and technical innovations that build a circular food system grounded in regenerative agriculture practices, recycling and transparent value chains. This includes upstream solutions that reduce food waste from the outset, and downstream solutions that can ensure uneaten food does not go to waste.

For example, Closed Loop Partners provided venture funding to ucrop.it, a company that operates as a blockchain farming and crops traceability platform that ensures certainty across crop cycles. It connects crop growers with corporate stakeholders from the agriculture value chain to agree on farming objectives for sustainable crop production, competitive financing and quality crops sourcing, to achieve greater profitability and incentivize sustainable agricultural practices. The firm also invested in ThriveLot, a company that installs and maintains edible, ecological landscaping and more for homeowners, creating a yard-to-table food system. More recently, Closed Loop Partners’ innovation center, the Center for the Circular Economy, launched a collaborative Composting Consortium to pilot industry-wide solutions and build a roadmap for investment in technologies and infrastructure that enable the recovery of compostable food packaging and food scraps.

Across the food system, financial investors, corporate strategic investors and philanthropists are deploying more capital into emerging companies creating solutions to reduce food waste and ensure that, at every stage of supply and consumption, food is used as a resource that brings value back to communities, the environment and the local economy.

Get involved

ReFED estimates that $14 billion in investment is needed annually to cut food waste in half by 2030, the goal set by the US EPA and driven by international targets. Over 20% of that $14 billion is needed for risk-tolerant funding for far-reaching initiatives, like those driven by community organizations such as Solana Center. The annual impact of $14 billion in investments per year is estimated to drive $73 billion in net financial benefit and reduce 75 million tons of GHG emission; over ten years, it could also create 51,000 jobs annually.

Investors and community organizations play distinct yet critical roles in advancing shared goals. Mitigating food waste will require consumer, producer and government engagement as well as financial investment. Effective deployment of capital and policy, with stakeholders from across the value chain collaborating on shared goals, can make a notable difference in driving economic, social and environmental benefits for communities and investors, addressing climate change, and building a more resilient, waste-free food system.

Interested in learning how Solana Center for Environmental Innovation is monetizing seismic change or to hear about the next big project? Visit here or contact Jessica Toth at [email protected].

Interested in a further discussion on this important topic? Please contact Closed Loop Partners here.

In the U.S., 35% of the food we produce goes unsold or uneaten. Whether this is because of too much food produced, too little harvested, food spoilage, or not recognizing the economic value of food byproducts, most of this surplus food ends up in the 1,000+ landfills operated around the country. If we look at U.S. landfills today, food makes up almost a quarter of the materials in them. A lot can be done to improve the resource efficiency of our food system today––and within this work lies a critical path to positive environmental impact and significant economic opportunity.

According to the leading food waste non-profit organization ReFED, uneaten food is a major driver of greenhouse gas emissions today, generating 4% of U.S. and up to 10% of global emissions annually. These emissions come from many sources, ranging from unnecessary forestland conversion to excess energy use in food over-production to methane emissions during food waste decomposition.

To address climate change holistically, we need to look across the supply chains that move food through our economy today and transition them from take-make-waste supply chains to circular ones. Ultimately, a circular food system reduces food waste – and its associated greenhouse gas emissions – fundamentally linking it to climate goals. In fact, it is one of the top solutions to avoiding a global two degree warming scenario today, as reported by climate education non-profit Project Drawdown.

Investments in solutions that prevent food from going to waste, such as predictive software that allows retailers to match supply with demand more precisely, as well as composting infrastructure or anaerobic digestion technologies, are critical. According to ReFED, an annual investment of $14 billion – including $3 billion in catalytic capital that is patient and flexible – is necessary to cut food waste in half in the U.S.

But why invest in food waste reduction now?

1) Investable Innovations Already Exist

For more than five years, Closed Loop Partners has been publishing research, investing in and advancing circular solutions that cycle nutrients and eliminate food, organic and agricultural waste. These solutions span upstream food reduction solutions to midstream consumption solutions to downstream processing infrastructure – knowing that interventions at every stage of the supply chain are required to build a circular food system. As an upstream example, one of our portfolio companies, Mori, has developed a silk-based and edible coating that extends the shelf life of fresh food, reducing food spoilage and waste.  Rebound Technologies, one of our midstream portfolio companies, designs and manufactures freeze-point cooling systems, reducing food spoilage by boosting the efficiency of cold storage. Further downstream, our portfolio company HomeBiogas creates household and commercial-sized anaerobic digester units that convert food and yard waste into renewable energy and liquid fertilizer that can both be used onsite. Closed Loop Partners also invested in Atlas Organics, a growing composting company. In 2021, we successfully exited our investment in Atlas Organics, following its sale to Generate Capital, a key investor aligned with impact outcomes and growth of the company.

2) Demand for Investment Is Increasing

We are now at an inflection point, with several clear tailwinds that have convinced us that the investment case for deploying capital into the sector has never been more attractive. What are the tailwinds? We bucket them into three categories:

• Environmental and market forces are directly driving revenue opportunities: Climate change has been headline news for years, but it’s never garnered the level of attention in the U.S. that it has today––and its link to food and agriculture has never been clearer. Climate change-induced droughts and severe weather are impacting agriculture cycles and food supplies, and organic waste in landfills is increasing greenhouse gas emissions. Additionally, amidst rising inflation, geopolitical instability and challenged supply chains, retailers are searching for more resilient ways to manage food supply chains: including sourcing more locally and reducing food waste to decrease costs while providing affordable products to consumers.

• Industry leaders are driving action toward shared goals: Many Fortune 500 companies have set public net zero commitments, and more than 20 of them have set food waste reduction commitments with target reduction levels by target dates. As of early 2022, more than 40 large global corporations have signed up to the EPA’s 2030 Food Loss & Waste Champions program to reduce their food waste by 50% by 2030. Furthermore, there are several large cross-sectoral corporate, government and NGO partnerships for food waste reduction now in place, from 10x20x30 to the Pacific Coast Food Waste Collaborative to promote knowledge sharing, innovation and pool sources of demand for solutions. Kroger also launched their Zero Hunger | Zero Waste social and environmental impact plan to help create a more efficient, equitable and charitable food system. We are closely watching and excited by all three sets of development: consumer demand, corporate demand and public-private partnerships for knowledge sharing and innovation.

• Policy is indirectly driving revenue opportunities: Many of us in impact investment have been watching regulatory and voluntary bodies work to standardize and create accountability for ESG disclosure for years. Those of us in the food waste space, particularly in the U.S., have also honed in on the uptick in legislation and updated mandates introduced at every level: federal, state and municipal, including the food waste bill passed this year and local organic waste bans. In 2021, the EPA updated its food waste data baselines to align with international goals outlined in Sustainable Development Goal 12.3, and it expanded the scope of the food scraps it considers waste that must be addressed. More than 10 states and D.C. have enacted food diversion mandates. In the nearly seven months that have passed since January 2022 alone, more than 70 bills were introduced in state legislatures to mitigate or repurpose food waste, calling for measures ranging from making it easier to donate excess food, to updating expiration date label approaches to funding compost collection.

• Signals that traditional investors are starting to pay attention are rising: Investors poured more than $10 billion in venture capital into agricultural technology (known as ‘ag tech’) solutions in 2021. They even invested $2 billion into food waste solutions last year as well. But $2 billion trails the capital needed to cut food waste in half in the U.S., which ReFED found to be a $14 billion annual need.

3) Opportunities to Invest Are Growing

Having invested in food waste solutions since 2016 through Closed Loop Ventures Group and ongoing strategies within growth equity and private equity, Closed Loop Partners and ReFED have recognized the need to bring additional catalytic capital into the space. The two organizations have joined forces in a long-term partnership to begin to close the funding gap and to connect innovators with large players in the food system for transformational, sustainable systems change. Our new Circular Food Solutions Platform aims to provide the necessary capital, connectivity, market insight and support for innovation, to accelerate a variety of emerging food waste reduction solutions and bolster infrastructure for recovery. Ultimately, the Platform aims to scale a more circular food system that reduces organic waste and its associated greenhouse gas emissions, minimizes the economic burden on municipalities of unnecessary landfilling and waste incineration, and contributes to hunger relief – all with the larger goal of a more sustainable, circular economy.

Our new Platform is an investment and innovation platform that aims to drive traditional capital into the sector through two catalytic vehicles: a catalytic investment strategy and catalytic grant strategy. The Platform will be jointly managed by Closed Loop Partners & ReFED, intending to: (a) provide patient, catalytic capital; (b) de-risk solutions through innovation support and research; and (c) bring critical stakeholders to the table to collaborate in a cross-supply chain, cross-sectoral manner toward shared sustainability goals. The proposed hybrid structure seeks to activate solutions across three categories: Prevention, Rescue and Recycling. The Platform’s proposed design includes philanthropic and catalytic, flexible investment capital – debt, equity and grants – with the intention of meeting organizations where they are in their development cycle and a purpose of accelerating the efforts of not just private start-ups, but also public sector entities, project operators and non-profit organizations.

Collaboration is Key to Solving the Problem

This initiative is unprecedented. Knowing that collaboration is key to solving this complex challenge, it brings together an industry-leading data provider on U.S. food waste and impact methodology to assess solutions, and an experienced circular economy-focused investment and innovation firm, with unparalleled collective industry knowledge, network, and investment experience. By working together, we can collectively have a much bigger impact on the system, in activating supply chains for sustainability.

Closed Loop Partners is already seeing many circular solutions in the food and organics space, seeking capital ranging from grants to early-stage equity funding to later-stage project finance debt. Since 2016, we’ve invested in 10 food waste mitigation or recycling companies ranging from solutions to sequester carbon in agricultural products, to cold chain storage, to industrial organic composting and anaerobic digestion.

With targeted funding of $100M – of which $80M would be allocated to an investment strategy, and the remaining $20M to grants for non-investment-grade (or non-profit) solutions – the new Circular Food Solutions Platform aims to contribute to the diversion of up to 10 million tons of food waste from landfill, which would result in 15M mtCO2e avoided, and save nearly 800 billion gallons of water. All while supporting innovators of all types to benefit from our nearly 10 years of work investing and partnering with large global retailers, consumer goods, technology companies and local municipalities to build more sustainable supply chains.

If you are interested in learning more about this important topic, please contact us here.