Why We Invested in Found Energy: The Importance of Circular Energy Solutions

By Danielle Joseph

November 27, 2023

At Closed Loop Partners, we focus on investing in the circular economy––advancing solutions that reduce waste through material reduction, alternative materials, reuse and end-of-life solutions like recycling. 

Through our work, we help reduce the 45% of all emissions derived from the way we make and use products––and where relevant to materials management, we also address the 55% of emissions that are tied to energy production.

Our most recent investment through the Closed Loop Ventures Group in Boston-based company Found Energy embodies this crossover between energy production and materials management. Found Energy upcycles contaminated aluminum into clean hydrogen fuel, while also returning the aluminum to its pre-processing state, creating a fully circular loop for the material. By treating aluminum scrap with a catalyst and then activating it with water, Found Energy creates 1) energy in the form of hydrogen and steam and 2) alumina trihydrate (ATH), a raw material used to manufacture aluminum.

The process unlocks two major benefits:

  • Onsite Energy Generation: Any equipment manufacturer, processor or even materials recovery facility can produce their own on-site, clean hydrogen fuel and steam using energy dense aluminum as a means of energy storage. On-site production helps alleviate the challenge of expensive hydrogen transportation and storage.
  • Upcycling: Aluminum alloys otherwise destined for downcycling may be reintroduced into the supply chain as alumina trihydrate that can then be processed into virgin-grade aluminum.

Why does aluminum recovery matter?

Aluminum is already one of the most abundantly recycled metals on the planet and can be recycled many times over. More than other classes of recyclables, there is broad consumer participation in aluminum recovery (by recycling cans), and the prevalence of aluminum as a lightweight structural element in manufactured goods (such as automobiles and appliances) means that ample end-of-life aluminum is processed every year. In fact, 75% of all aluminum ever produced is still in use today. Recycled aluminum only takes ~5% of the energy needed to make new aluminum and reduces the need to mine for bauxite––the most common ore needed for aluminum.

However, while recycling rates for aluminum are generally high, they differ substantially by product, alloy and region, ranging from as low as 20% to as high as 80% for some packaging products. We have learned that in the depths of smelters, aluminum recycling is limited to recovery within established alloy classes (meaning two or more metals or a metal with another non-metallic addition). Given that aluminum is 2x more energy dense than diesel and 5x more energy dense than methanol, there is value in finding opportunities to keep more aluminum in circulation as both a material and energy source.

The main challenge with recovering scrap aluminum is removing tramp elements, which cannot be separated easily by current smelting processes given the high melting temperature of aluminum (660° C). This means contaminated aluminum is often downcycled or ends up in landfills.

Found Energy has discovered a clean energy solution for scrap aluminum, working at the intersection of circular economy principles and the clean energy transition. After building this technology for years during his time at MIT and motivated by his work at NASA, co-founder and CEO Peter Godart brought Found Energy to life in 2022.

Unlike other energy solutions we have seen, Found Energy considered end-of-life from the very beginning of their development process, while using scrap aluminum as a wholly recoverable material source for energy generation plus storage. We fully support the transition to renewable feedstocks for clean energy, while recognizing that the structures required to facilitate clean energy transfers, like solar panels and wind turbines, often utilize extractive or single-use resources that frequently end up in landfill after they are decommissioned. We believe that it is better both economically and ecologically to keep these materials in circulation, and up until recently, had yet to find an energy technology that is inherently circular––inclusive of the materials used in the machinery and the renewable feedstock.

We were impressed with the elegance of a solution that uses a ubiquitous metal as a novel hydrogen source, is highly mobile, and can be distributed. Distributed assets will continue to be a priority in places where heavy materials would otherwise be transported long distances, or where permitting and absence of transmission infrastructure can keep manufacturing operations from scaling up their energy loads as needed.

To create a truly waste-free future for renewable energy, we must support the circularity of materials, alongside clean energy innovation. Reducing carbon through circular processes like material recovery and re-manufacturing is critical to reaching our CO2e mitigation goals and living in an ecosystem that is resilient to further climate shocks. Found Energy is helping pave the path forward.

About Closed Loop Partners

Closed Loop Partners is a leading investment firm advancing the circular economy. The company is comprised of three key business segments: its investment arm, Closed Loop Capital Management; its innovation center, the Center for the Circular Economy; and its operating group, Circular Services. Closed Loop Capital Management manages venture capital, buyout private equity and catalytic private credit investment strategies. The firm’s venture capital group, the Closed Loop Ventures Group, has been investing early-stage capital into companies developing breakthrough solutions for the circular economy since 2016. The Closed Loop Ventures Group’s portfolio includes companies developing leading innovations in material science, robotics, agritech, sustainable consumer products and advanced technologies that further the circular economy. Closed Loop Partners is based in New York City and is a registered B Corp. closedlooppartners.com.

About Found Energy

Found Energy is a Boston-based company building rechargeable aluminum fuel power systems aimed at eliminating carbon emissions from heavy industrial applications ranging from industrial heating (7% of global CO2 emissions) to maritime shipping (3% of global CO2 emissions). Building off technology developed at MIT that enables metallic aluminum to split water, our energy delivery systems safely generate hydrogen and/or industrial heat on-site at >5x the volumetric energy density of liquid hydrogen, >3x that of methanol and ammonia, and >25x that of Li-ion batteries. By integrating storage, transport, and generation into a single package, our technology solves some of the biggest pain points in renewable energy transmission and storage.

Designing for Disassembly: How Molg Is Supporting the Circular Economy for Critical Minerals Through Electronics Recovery

By Aly Bryan

May 31, 2023

This blog is part of our “Why We Invested” series, which offers a deep dive into our most recent investments and the growing circularity trends in the space. 

Over the past few months, the dialogue around sourcing critical minerals for the clean energy transition has reached a fever pitch. In March, we highlighted the three pain points to critical mineral recovery that have been largely absent from discussions: (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. Today, we’re excited to share how one of the newest portfolio companies of Closed Loop Partners’ Ventures Group, Molg Inc., is moving the needle on critical mineral recovery through advancing design-for-disassembly and deconstruction.

Molg uses robotics and design software to ensure one product’s end is another’s new beginning––enabling a circular manufacturing process. Led by Co-Founders Rob Lawson-Shanks and Mark Lyons, Molg provides a full suite of solutions to improve the disassembly of existing electronic products––from servers to laptops to handheld electronics. We invested in Molg because circularity is at the core of why and how this team operates. They think outside the box of traditional, linear systems, understanding that just because products have always been designed one way, doesn’t mean that process should continue. They are also committed to recapturing as much material as possible––including those previously designed in non-recoverable ways––recognizing that even products lacking optimized designs can be recovered profitably at scale. That’s a circular economy.

  • Molg is targeting a historically overlooked source of critical materials in the U.S.: end-of-life electronics. Much of the unused critical materials needed for advancing the clean energy transition are not domestically available at scale in the U.S. and may be sourced from regions challenged with human rights breaches, water scarcity or geopolitics. However, much of the minerals needed already exist in our end-of-life electronics in the U.S.––both in commercial and individual use cases. Molg is committed to capturing and recovering the materials from these sources and, through direct CAD integrations, has a pathway to do so for a diverse variety of products.
  • Molg’s robotic disassembly processes maximize the value from recovered materials. Traditional recovery processes prioritize shredding materials and then using chemicals to deconstruct those materials down to monomers, capturing only those worth the highest value, and losing value in the process. By starting with disassembly, Molg can close a tighter loop––keeping still usable materials in their original form factor––and accelerating reuse while ensuring feedstock that can be recycled.
  • Molg’s micro-factory approach allows for localized recovery where the materials are most needed––minimizing transport costs that may otherwise challenge recovery economics. End-of-life electronics are heavy and transporting them costs money. By advancing pathways to disassemble electronics on-site through their micro-factories, Molg allows processors to get to single source feedstocks sooner, removing the need for sortation and processing that may have required transport before recycling could take place.

 

What the Molg team is building is just one part of the broader recovery ecosystem. The involvement of the entire value chain is needed––from aggregators, sorting and recertification infrastructure, metal processors and manufacturers who are prepared to use recycled feedstocks in their processes. This also includes designers prepared to take on the challenge of designing for disassembly, and regulators who view these waste products as a primary source of materials and worthy of being prioritized. There is a promising opportunity ahead for critical minerals, and at Closed Loop Partners, we’ll continue to invest in companies that strive to push circularity for these materials forward.

Interested in learning more about Molg? Tune in to Circularity23 where the team will be pitching for Accelerate for Circularity!

 

About Closed Loop Partners

Closed Loop Partners is at the forefront of building the circular economy. The company is comprised of three key business segments. Closed Loop Capital Management manages venture capital, growth equity, buyout and catalytic private credit investment strategies on behalf of global corporations, financial institutions and family offices. The Center for the Circular Economy unites competitors and partners to tackle complex material challenges and implement systemic change to advance circularity. Circular Services employs innovative technology within reuse, recycling, remanufacturing and re-commerce solutions to improve regional economic and environmental outcomes, and build resilient systems that keep food & organics, textiles, electronics, packaging and more, in circulation and out of landfill or the natural environment. Closed Loop Partners is based in New York City and is a registered B Corp. For more information, please visit www.closedlooppartners.com.

About Closed Loop Ventures Group

Closed Loop Partners’ venture capital arm launched in 2017 with one of the first venture funds dedicated solely to investing in early-stage companies developing breakthrough solutions for the circular economy. The Closed Loop Ventures Group targets leading innovations in material science, robotics, agritech, sustainable consumer products and advanced technologies that further the circular economy.

The Closed Loop Venture Fund II builds on the venture capital group’s first fund’s strategy, supported by an existing portfolio with strong financial performance, coupled with robust environmental and social impact. HomeBiogas, one of the early investments of the Closed Loop Venture Fund I is a leader in developing biogas systems that transform organic waste into clean energy and bio-fertilizer. They announced their $94 million initial public offering (IPO) in Israel in 2021, accelerating the company’s growth into additional markets, including North America. To date, the company has sold over 10,000 systems in more than 100 countries. Algramo, another investment of Fund I, developed a reuse system powered by vending machines that dispense household products into smart reusable packaging. With the investment and support of Closed Loop Partners, the Chile-based company expanded into North America, now piloting their reuse systems in New York City, while also having piloted with leading brands such as Walmart and Unilever in other geographies.

About Molg Inc.

Molg tackles the growing e-waste problem by making manufacturing circular. The company’s robotic microfactory can autonomously disassemble and reassemble complex electronic products like laptop PCs, servers, and handheld electronics, helping keep more valuable materials within supply chains. Molg partners with leading electronics manufacturers to design the next generation of products with reuse in mind, ensuring that one product’s end is another’s beginning. To learn more, visit molg.ai.

Putting Recovery at the Center of the Critical Minerals Sourcing Debate

By Aly Bryan

March 22, 2023

Over the past few months, sourcing critical minerals has been at the forefront of conversations about how to support the renewable energy transition. 

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!

 

With Investment from Closed Loop Partners, Hyran Technologies Aims to Increase Agility in Fashion Supply Chains and Reduce Textile Waste  

By

February 14, 2023

New York, NY, Feb 14 – Hyran Technologies (Hyran), a collaborative, AI-driven fashion supply chain planning and production platform, announces investment from Closed Loop Partners’ Ventures Group. Through their platform, Hyran aims to optimize product development and manufacturing while reducing excess production and textile waste. The company envisions a future that disrupts traditional methods for inventory planning and enables collaboration between factories, suppliers and brands with value chain alignment and shorter design-to-shelf cycles.

Overproduction is one of the primary sources of waste in the fashion industry today, as waste has historically been seen as a cost of doing business in a globalized supply chain with strong competitive pressures that strained brand and supplier relationships. Orders are often overestimated and misaligned with demand signals, resulting in large volumes of overproduced apparel that are ultimately sent to landfill. Not only does this exacerbate the global waste crisis, but it also results in economic challenges for both fashion brands and suppliers. Rapid trend changes, increased geopolitical risk and pressures to adopt more sustainable practices have increased risk for those who continue to operate with legacy supply chain infrastructure.

Hyran’s platform intends to leverage real-time upstream and downstream supply chain data, providing brands and suppliers with visibility into raw material availability and manufacturing capacity, and connecting them with point-of-sale demand signal. This aims to better match production with customer demand by using artificial intelligence and machine learning techniques to generate optimal, real-time production plans spanning multiple tiers in the supply chain. Led by co-founders Ahmed Zaidi, University of Cambridge Computer Science PhD with decades’-long family business in apparel manufacturing, and Jordan Zhang, software engineer who built robust machine learning platforms that scaled within leading tech ecosystems, Hyran is bringing together the best of fashion and computer science to build a solution for the industry and for the planet. Ultimately, they aim to help brands build data-driven supply chains, minimize unsold inventory and reduce waste.

“The fashion industry accounts for an estimated 8-10% of global greenhouse gas emissions and is under increasing pressure to address its contribution to global waste,” said Caroline Brown, Managing Director at Closed Loop Partners and former CEO of global fashion houses. “In the face of a great need for new technologies to support a sustainable transition in the retail supply chain, the entrepreneurs at Hyran are envisioning the future of production.”

“Hyran Technologies’ vision is to reduce waste and excess inventory in the fashion industry by enabling speed and flexibility in the supply chain, rather than by trying to predict demand months ahead of time, as is standard practice now,” said Ahmed Zaidi, Co-Founder and CEO of Hyran Technologies. “By breaking down historical silos and strengthening connections between manufacturers and brands, we aim to tackle fashion’s overproduction problem with a fundamentally new approach. Our team of fashion industry and AI experts looks forward to working with manufacturers and brands across the industry, as we build the more transparent, connected, agile fashion supply chains of the future.”

“To build efficiencies and reduce waste in supply chains, we must first build connectivity across shared interests, and Hyran’s platform aims to make this possible,” said Danielle Joseph, Managing Director and Head of the Ventures Group at Closed Loop Partners. “Hyran’s focus on breaking down long-standing silos in the fashion supply chain can enable collaboration and unlock shared economic benefits, ultimately aiming to minimize waste generated through the supply chain. We look forward to working with the team to scale solutions advancing a waste-free future for the fashion industry.”

As Hyran takes flight in the coming months, they are seeking partnerships with manufacturers, brands and retailers with the interest and ability to explore data-driven supply chain management within their operations. Hyran has now begun discussions with brands and manufacturers to find partners keen to integrate these capabilities into their supply chains.

 

###

 

About Hyran Technologies

Hyran aims to help fashion brands minimize unsold inventory and waste and maximize profit by increasing the speed and flexibility of the supply chain. Emboldened through the challenges of a decades’-long family business in apparel manufacturing, combined with deep expertise in AI, the Hyran team brings novel technology to antiquated systems––helping fashion brands and suppliers collaborate toward a more agile, connected and waste-free future for fashion. This supplier-led, AI-optimized planning approach helps meet consumer demand while minimizing excess production and waste, and the costs that go with it, throughout the supply chain. Better for people, better for brands, better for the planet.

If you’re a supplier looking to differentiate your value proposition and better serve brands in your network, or a brand trying to get consumers the products they want when they want them, reach out here to explore if you could be a strong candidate for early product discussions with Hyran.

 

About Closed Loop Partners 

Closed Loop Partners is at the forefront of building the circular economy. The company is comprised of three key business segments: an investment firm, innovation center and operating group. The investment firm invests in venture, growth equity, buyout and catalytic private credit strategies on behalf of global institutions, corporations and family offices. The innovation center, the Center for the Circular Economy, unites competitors and partners to tackle complex material challenges and implement systemic change to advance circularity. The operating group, Circular Services, has twelve recycling facilities in operation today, and provides holistic, circular materials management to close the loop on valuable materials for municipalities and businesses throughout the United States. Employing innovative technology within reuse, recycling, remanufacturing and re-commerce solutions, Circular Services improves regional economic and environmental outcomes by building resilient systems to keep food & organics, textiles, electronics, packaging and more, in circulation and out of landfill or the natural environment.

Closed Loop Partners is based in New York City and is a registered B Corp. For more information, please visit www.closedlooppartners.com.

 

About the Closed Loop Ventures Group at Closed Loop Partners 

Closed Loop Partners’ venture capital arm launched in 2017 with one of the first venture funds dedicated solely to investing in early-stage companies developing breakthrough solutions for the circular economy. The Closed Loop Ventures Group targets leading innovations in material science, robotics, agri-tech, sustainable consumer products and advanced technologies that further the circular economy. The Closed Loop Venture Fund II builds on the venture capital group’s first fund’s strategy, supported by an existing portfolio with strong financial performance, coupled with robust environmental and social impact. To learn more about the Closed Loop Ventures Group, visit the Closed Loop Partners’ website.

That’s the Circular Economy: How A Logistics Company Uses Empty Retail Spaces to Fix Supply Chains and Reduce Waste

By Closed Loop Ventures Group

December 20, 2022

A full logistics center inside a shopping mall––this is how Fillogic infuses agility into supply chains.

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

How the Inflation Reduction Act Will Accelerate the Case for Investing in the Circular Economy in the United States

By Aly Bryan

August 18, 2022

Earlier this week, the United States Congress passed the Inflation Reduction Act (IRA), the most sweeping collection of climate change-related programs in decades. The bill is being heralded as helping to get the U.S. back on track with the country’s Paris Agreement commitments––among these, limiting temperature rise to 2 degrees Celsius, with an agreement to aim for a 1.5 degree Celsius limit.

With 70% of greenhouse gas emissions associated with the production and use of products, this bill will also have sweeping implications for the transition to the circular economy. As a leader in the earliest stages of circular economy investing, Closed Loop Ventures Group (CLVG) set out to identify the primary ways the IRA will accelerate the transition to a climate-positive future with circularity at its core:

  1. The IRA may provide an accelerant for new, circular markets domestically

To advance a much-needed renewable energy transition, the IRA directly encourages investments in solar and wind generating assets and energy efficiency upgrades in commercial and residential buildings. These new installations will not only require ample raw material – they will also accelerate the need for end-of-life solutions for energy infrastructure being replaced or systems being repowered. In solar, for example, annual capacity additions are expected to increase from 10 GW in 2020 to nearly 50 GW per year in 2025-6.[1]

As supply chain constraints continue, especially for products sourced from challenging geopolitical climates, recovering materials already in use will become increasingly desirable – and economically viable. This is a huge opportunity for companies focused on effective, at-scale reclamation and recycling – such as CLVG’s portfolio company, SOLARCYCLE. SOLARCYCLE is focused on recovering solar panel materials for resale, ultimately providing materials that can be sourced into new, domestic manufacturing.

Many of the tax credits introduced or expanded by the IRA have specific provisions related to domestic manufacturing – including for electric vehicle batteries. As domestic manufacturing scales to take advantage of these tailwinds, access to low-cost, locally sourced input materials, including those that are reclaimed from the value chain, will be paramount. This creates opportunities for companies focused on recovery of hard-to-recycle materials that can be incentivized with IRA rebates or credits – everything from battery materials to boilers and air conditioners, insulation, roofing and windows. Early-stage companies that are seeking scalable solutions for recovery and reuse across these markets may capitalize on opportunities from the legislation.

Not only does the IRA amplify the need for companies that can help reclaim products at end-of-life, but it also reinforces the opportunity for low-carbon, circular solutions for energy-intensive industries – such as steel, iron, concrete, glass and chemical production. Indeed, nearly $5B in capital is allocated to continue the push for low-carbon building materials, especially in public infrastructure projects. This is following on previous Executive Orders related to net-zero government procurement which aspire toward net-zero public procurement by 2050, including for carbon-intense materials like steel and concrete.[2]– To date, there are few – if any – commercial scale, low-carbon solutions for much of this procurement, meaning significant innovation will be needed in the coming years to make at-scale, carbon neutral production possible.

Beyond investment in renewables, the bill also has provisions that seek to enable investment into waste-to-energy and biogas operations, including expansions and modifications to existing tax credits. This creates opportunities for new, waste-generated, clean energy sources. Green hydrogen, which can be produced from waste biomass and other reclaimed sources, is well positioned with additional production tax credits. Through provisions for residential homeowners, home energy efficiency upgrades for electric heat pumps or window replacements can be much more accessible, even creating opportunities to bundle with circularity-enabling products like home anaerobic digesters, such as those developed by CLVG’s portfolio company, HomeBiogas. The biogas company creates modular household and commercial anaerobic digester units that convert food and organic waste into renewable energy and liquid fertilizer.

  1. The IRA may facilitate environmental remediation on an unprecedented scale

The bill is heavily focused on the identification and remediation of pollution to air, water and soil systems, as well as the fortification of soil and water for the future – including a specific focus on ports. CLVG’s portfolio company, Accelerated Filtration, supports this mandate by offering fine particle filtration across a range of industries and applications, helping reduce the flow of wastewater into the environment. Nonetheless, there continue to be pollutants – PFAS and 1,4 dioxane among them – that do not yet have commercialized solutions for remediation. More innovations are needed to mitigate the future risk of all types of pollutants leaching into the environment upon disposal.

Additionally, more than $20B is provided in the IRA to support the uptake of sustainable agricultural practices, including regenerative farming solutions and financing for innovations that can improve conditions for livestock raising. The question of how best to engage farmers on these topics continues to be top-of-mind – after all, the intent is to create a win-win situation, where farmers can both increase profits and enhance the quality of the land that they are growing on for today and the future. Ucrop.it, a CLVG portfolio company, has developed a novel solution to this problem with a free platform that fully tracks crops throughout the development cycle, leveraging blockchain to prove the application of climate-positive agriculture practices, which flows through to customers, enabling full transparency and traceability. Companies innovating upstream in the food and agriculture value chains – from soil health and vertical farming to livestock management, have a strong dual mandate that is reinforced by the innovation capital in the bill.

  1. The IRA may allow for other enablers of circularity – notably, financing

There continues to be more demand than supply of financing for circularity-enabling solutions to accelerate a climate-positive future. In particular, asset-heavy solutions that require commercialization of large-scale manufacturing or materials recovery facilities find it difficult to scale from pilot stage. This is yet another space in which the IRA is helping to close gaps and accelerate progress on circularity. By providing additional capital – in the form of grants, loans and concessionary capital – through national labs, the Department of Energy LPO, and even the formation of a Federal Green Bank, the IRA may enhance the dry powder available for early-stage climate tech and circularity-enabling solutions that accelerate our progress toward a climate-positive future. Closed Loop Partners continues to be energized about the crowding in of additional capital into the earliest stages of the space to facilitate the transition to a fully circular ecosystem––one that brings us closer to achieving our shared climate goals.

 

[1] https://repeatproject.org/docs/REPEAT_IRA_Prelminary_Report_2022-08-04.pdf

[2] https://www.sustainability.gov/federalsustainabilityplan/procurement.html

Accelerated Filtration Closes $1.5M Pre-Seed Funding Round, Led by Closed Loop Partners

By

July 12, 2022

A new era in fine particle industrial water filtration is here with the launch of the VelRay XTM, the debut product of Accelerated Filtration, Inc.

Midland, Mich. (July 12, 2022) – Accelerated Filtration, Inc. (AFI), a water filtration company based in Midland, Michigan that develops industrial water filtration technologies, announced today that it has raised $1.5 million in pre-seed funding. Closed Loop Partners’ Ventures Group led the financing round, with participation from Michigan Capital Network, Anthropocene Ventures and Oxcart Equity Partners.

The company will use the funding to advance product development, marketing and launch its first water filtration solution into the market later this year. AFI delivers packaged turn-key filtration solutions for the consistent removal of fine suspended solids in variable water streams. AFI’s innovative technology offers fine particle filtration for large and small water processing challenges across a range of industries and applications.

“Our product offers customers a compact, robust solution for removing fine particles from water and wastewater streams. Its ability to economically filter out low and high levels of suspended solids sets it apart as an extended range, fully automatic, fine particle filter,” said Scott Burr, President and CEO, Accelerated Filtration. “The VelRay XTM filter is an essential product needed to address growing global water challenges, enabling greater capability in processing source water, recycling and reusing process water, and treating wastewater. We’re thrilled our investors see the incredible value for the marketplace.”

The investment takes place amidst an increasingly urgent global water crisis. Already water stressed regions are becoming more so due to the effects of climate change and population growth. With world populations expected to exceed 9 billion by 2040, the increase in both urban and industrial demand will be competing for limited water resources. Technology developments in water processing are needed to enable a resilient and robust global water management capability.

“Building a circular economy that reduces waste means ensuring that all resources are efficiently managed and kept in circulation. As we face intersecting challenges with a growing world population and the critically urgent climate crisis, water has become one of the most important and valuable resources we need to manage,” said Danielle Joseph, Managing Director and Head of the Ventures Group at Closed Loop Partners. “Our investment in Accelerated Filtration is a key step forward in our work to advance a waste-free water management system. We look forward to working with their team to scale their technology for more efficient water recycling and reuse.”

###

About Closed Loop Partners
Closed Loop Partners is a leading circular economy-focused investment firm and innovation center. The New York-based investment firm manages venture capital, growth equity, private equity and catalytic capital funds. The firm’s business verticals build upon one another, bridging gaps and fostering synergies to scale the circular economy. Learn more at closedlooppartners.com

About the Closed Loop Ventures Group at Closed Loop Partners
Closed Loop Partners’ venture capital arm launched in 2017 with one of the first venture funds dedicated solely to investing in early-stage companies developing breakthrough solutions for the circular economy. The Closed Loop Ventures Group targets leading innovations in material science, robotics, agri-tech, sustainable consumer products and advanced technologies that further the circular economy. The Closed Loop Venture Fund II builds on the venture capital group’s first fund’s strategy, supported by an existing portfolio with strong financial performance, coupled with robust environmental and social impact. To learn more about the Closed Loop Ventures Group, visit the Closed Loop Partners’ website.

About Michigan Capital Network
Michigan Capital Network (MCN) MCN exists to educate, grow, and diversify the base of early-stage investors in communities across the state. Wealth creation through early-stage investing done well in turn helps create healthier, thriving communities and economies. To learn more about Michigan Capital Network, visit the Michigan Capital Network website.

About Anthropocene Ventures
Anthropocene Ventures is a global, early-stage venture capital firm investing in founders that leverage exponential technologies & hard science to make humanity more resilient. To learn more about Anthropocene Ventures, visit the Anthropocene Ventures website.

About Oxcart Equity Partners
Oxcart is a stage-agnostic private holding company investing to help catalyze a more just, equitable and ecologically sustainable future for the planet and all its inhabitants.

Contact:
Scott Burr, President and CEO
Accelerated Filtration, Inc.
www.acelfil.com

Source: Accelerated Filtration 

SOLARCYCLE Raises $6.6 Million Seed Round to Rapidly Accelerate Buildout of Advanced Recycling Platform for the Solar Industry

By

June 01, 2022

OAKLAND, CA, JUNE 1, 2022 – SOLARCYCLE, a tech-driven solar system recycling platform, today announced that the company has raised $6.6 million in growth funding from leading renewable energy and circular economy investors – including SolarCity founders Peter and Lyndon Rive, former CEO/CTO of Sunpower Corporation Systems Tom Dinwoodie, Urban Innovation Fund, and Closed Loop Partners.

“At SOLARCYCLE we are driven by the urgent challenge to maximize the sustainability of the raw minerals needed to power the clean energy revolution,” said SOLARCYCLE CEO Suvi Sharma. “It is exciting to have the financial backing of investors who helped launch and scale the solar industry, as well as venture funds specializing in creating the needed infrastructure for the circular economy. This funding will allow us to scale our advanced recycling operations in North America, enabling us to start handling the millions of solar systems that will be retiring in the coming years.”

“Solar energy is the fastest-growing energy source in the U.S.,” said Julie Lein of Urban Innovation Fund. “But with more solar panels comes more waste. SOLARCYCLE has an exciting vision to transform the way we recycle and re-use solar panels – and they have the right team to pull it off. The Urban Innovation Fund is thrilled to back SOLARCYCLE.”

“Increasing amounts of solar panels are being replaced with newer versions. The older panels have high value metals like silver, aluminum, and high-grade silicon,” said Peter Rive, Co-founder and CTO of SolarCity. “I invested because SOLARCYCLE has a recycling system that could enable high volume, cost-effective recycling of solar panels at scale.”

“I was involved with commissioning the first wave of large and utility-scale solar installations, and I am excited to be involved with SOLARCYCLE,” stated Tom Dinwoodie, co-founder of Sunpower. “I firmly believe the transition to a renewable economy must be coupled with full attention to developing a circular economy for addressing the mineral scarcity and looming waste problem coming our way. The team at SOLARCYCLE is well positioned to turn this emerging problem into an opportunity, and I welcome them bringing their technical insight and innovation to address the recycling needs of the industry. I am confident that their success will ensure a better world for us all.”

“We are thrilled to invest in the visionary and accomplished team at SOLARCYCLE as they help build out circular economy infrastructure for the solar industry,” said Danielle Joseph of Closed Loop Partners. “As the demand for solar energy grows with an increasingly urgent climate crisis, it is critical that materials used for solar panels do not go to waste in landfills. SOLARCYCLE has the technology, operational experience and mission-driven passion to help address this emerging and pivotally important challenge at scale. We look forward to seeing them advance their climate-friendly and cost-effective platform to return more than 95% of all the valuable materials back into the solar supply chain.”

About SOLARCYCLE

SOLARCYCLE, Inc (www.SOLARCYCLE.us) is a technology-driven platform designed to maximize solar sustainability by offering solar asset owners a low-cost, eco-friendly, comprehensive process for recycling retiring solar panels and technologies and repurposing them for new uses. The company’s proprietary technology allows it to extract valuable metals such as silver, silicon, copper and aluminum and to recycle or repurpose 95% of panels currently in use. SOLARCYCLE was founded in 2022 by experts in solar technology, recycling and sustainability to accelerate build-out of the circular economy for solar and renewables.

Contact: Susan DeVico ([email protected] | +1 415 235-8758)

 

Source

Closed Loop Partners’ Venture Capital Group Raises $50+ Million Fund II to Scale Breakthrough Circular Economy Solutions

By Closed Loop Partners

December 13, 2021

Fund II surpasses fundraising targets & extends Closed Loop Partners’ first venture fund strategy across sectors to build circular supply chains

NEW YORK, Dec. 13, 2021 — Closed Loop Partners’ venture capital group––the Closed Loop Ventures Group––announced the successful close of its second fund, surpassing its $50 million target to scale breakthrough circular economy solutions across plastics & packaging, fashion, food & agriculture, and supply chain technology. The firm continues its pioneering position as a dedicated circular economy-focused capital provider, investing in sustainable and profitable solutions that reduce waste, increase operational and material efficiency, and protect the planet.

Closed Loop Partners’ second venture capital fund, Closed Loop Venture Fund II, is driven by the success of its Fund I. The strategy of both funds capitalizes on the growing need to shift away from inefficient, linear and extractive supply chains and toward healthier, waste-free circular systems. The Closed Loop Venture Fund II is strategically positioned within the firm’s broader ecosystem that includes growth equity, private equity and project-based finance, as well as the Center for the Circular Economy. The Ventures Group benefits from a broad range of investors including multinational corporations like Microsoft and GS Group, foundations like the Autodesk Foundation, and single and multi-family offices from across the United States, Asia and Israel.

“At Microsoft, we’re advancing a more sustainable and resilient way of producing and consuming products and services. The breakthrough solutions that the Closed Loop Ventures Group invests in help pave the way toward a more circular future, one that aligns with our vision of a zero waste world,” says Brandon Middaugh of Microsoft’s Climate Innovation Fund, an investor in Closed Loop Partners’ funds. “Our investment in the Ventures Group’s Fund II is a key part of our efforts toward our 2030 zero waste goals, driven by the innovators and emerging companies that help make this possible.”

“Venture capital plays a key role in accelerating the circular economy, seeding the next generation of solutions to overcome legacy take-make-waste systems, encourage innovation and help transformative companies scale,” says Taehong Huh, Managing Director of GS Futures, corporate venture arm of GS Group of Korea. “The Closed Loop Ventures Group is blazing a trail for some of the most innovative circular solutions in the market today, and we are proud to be investors in the Closed Loop Venture Fund II––supporting companies that advance the circular shift of our economic system.”

“The need for solutions that advance the circular economy is coming into focus, and investment is key to scaling their impact. Closed Loop Partners’ venture capital team continues to be at the forefront of this work, supporting founders and businesses that are transforming our systems and supply chains for the better,” says Jennifer Kenning, CEO and Co-founder of Align Impact. “Our partnership with the Closed Loop Ventures Group is mission-critical to our work, advancing investments that have massive positive outcomes for people and our planet.”

“Our support of Closed Loop Partners’ venture funds has been a key part of our work to transition our markets to a full circular economy model by investing in the technologies and solutions that overcome barriers to change,” says Joe Speicher, Executive Director of the Autodesk Foundation and Head of Sustainability at Autodesk. As the philanthropic arm of Autodesk Inc., the Autodesk Foundation was an investor in Closed Loop Partners’ first and second venture funds. “We are proud to have been an early investor of the Closed Loop Ventures Group and are doubling down on our commitment to help scale the emerging design and manufacturing approaches that make end to end circularity possible.”

Led by Danielle Joseph, Managing Director at Closed Loop Partners, Closed Loop Ventures Group demonstrates that builder capital with a hands-on, active approach to building the Circular Economy is what many of the most ambitious entrepreneurs are seeking. The dedicated team brings a combined skill set of entrepreneurial, operating and investing expertise. “Closed Loop Ventures Group enables Closed Loop Partners to activate the most innovative solutions emerging in the circular economy and provide those solutions the full support of the Closed Loop Partners network,” says Ron Gonen, Founder and CEO of Closed Loop Partners.

“The Closed Loop Partners team is unique in the venture capital space, proactively bringing to the table their extensive operating experience, network, and strategic expertise on the circular economy,” says Rich Mokuolu, Co-founder & CEO of Partsimony. “We are proud to be among the first portfolio companies of Closed Loop Venture Fund II and we look forward to the continued growth spurred by their investment, as we expand Partsimony’s reach to build more intelligent, resilient, and local supply chains.”

To date, the Closed Loop Venture Fund II has invested in solutions including Partsimony, ucrop.it and dimpora––investments that span supply chain technology, food & agriculture and fashion. Partsimony‘s SaaS network unifies disparate data to help product designers manufacture more locally and with more sustainable materials. ucrop.it operates a collaborative traceability platform that connects farmers to stakeholders across the agriculture value chain, incentivizing supply chain transparency, best agricultural practices and greater value sharing to advance sustainable agriculture on a global scale. dimpora develops sustainable and PFC-free non-harmful membranes to waterproof clothing, to reduce waste and chemicals from apparel production.

“The successful raise of Closed Loop Partners’ second venture fund signals the increasing understanding that circular supply chains represent the future of industry and materials. We are seeing more founders building businesses in the circular economy, and a growing need for early-stage capital,” says Danielle Joseph, Managing Director of the Closed Loop Ventures Group at Closed Loop Partners. “We look forward to collaborating with the broader venture capital community, fostering transparency and open insight sharing to advance breakthrough innovations.”

Across its investments, the Closed Loop Ventures Group sees transparency and digitization as critical tools in building the supply chains of the future, and will continue to support cutting-edge innovations that reimagine and redesign current systems, driven by data and scientific input. They are focused on furthering localized and distributed manufacturing to build resiliency, and accelerating recovery & reuse to reduce a reliance on volatile commodity prices tied to limited virgin resources. Building on its robust thought leadership, the venture capital team at Closed Loop Partners continues to develop its theses on where they want to see additional investment activity and other smart investors participating in the space, including around markets that are misunderstood in traditional venture capital investing––such as biopolymers as plastic alternatives and evolving molecular recycling technologies.

About the Closed Loop Ventures Group at Closed Loop Partners
Closed Loop Partners’ venture capital arm launched in 2017 with one of the first venture funds dedicated solely to investing in early-stage companies developing breakthrough solutions for the circular economy. The Closed Loop Ventures Group targets leading innovations in material science, robotics, agritech, sustainable consumer products and advanced technologies that further the circular economy.

The Closed Loop Venture Fund II builds on the venture capital group’s first fund’s strategy, supported by an existing portfolio with strong financial performance, coupled with robust environmental and social impact. HomeBiogas, one of the early investments of the Closed Loop Venture Fund I is a leader in developing biogas systems that transform organic waste into clean energy and bio-fertilizer. They announced their $94 million initial public offering (IPO) in Israel in 2021, accelerating the company’s growth into additional markets, including North America. To date, the company has sold over 10,000 systems in more than 100 countries. Algramo, another investment of Fund I, developed a reuse system powered by vending machines that dispense household products into smart reusable packaging. With the investment and support of Closed Loop Partners, the Chile-based company expanded into North America, now piloting their reuse systems in New York City, while also having piloted with leading brands such as Walmart and Unilever in other geographies. Learn more about the Closed Loop Ventures Group here.

About Closed Loop Partners
Closed Loop Partners is a New York-based investment firm comprised of venture capital, growth equity, private equity, project-based finance, and an innovation center focused on building the circular economy. Investors include many of the world’s largest consumer goods companies and family offices interested in investments that provide strong financial returns and tangible impact. Learn more at www.closedlooppartners.com.

Autodesk, the Autodesk logo, and Autodesk Foundation are registered trademarks or trademarks of Autodesk, Inc., and/or its subsidiaries and/or affiliates in the USA and/or other countries. Autodesk reserves the right to alter product and services offerings, and specifications and pricing at any time without notice, and is not responsible for typographical or graphical errors that may appear in this document.

Circular Supply Chains Need Intelligent and Distributed Manufacturer Networks

By Danielle Joseph

November 22, 2021

Gone are the fleeting days of component parts showing up just in time for production from an unknown combination of suppliers. After pioneering the just-in-time supply chain, Toyota responded to the Fukushima disaster by stockpiling critical components — such as semiconductor chips — with enough supply for months at a time. That was a decade ago.

Now, Toyota may be doing better than its competitors while a global chip shortage costs the automotive industry upwards of $110 billion in car sales. However, more industries are recognizing the limitations of a just-in-time strategy applied broadly to every component part and raw material across globalized supply chains.

As unforeseen disruptions increase — whether the COVID-19 pandemic or climate-related natural disasters — and as more products demand critical, limited resources, intense fluctuations in demand, labor shortages, inadequate equipment and physically damaged facilities contribute to an instability of manufacturing capacity. Underdeveloped manufacturing capacity leaves industries exposed to risk, price volatility, market dislocations and lost value.

Unfortunately, first-mile stakeholders in the supply chain are often most at risk of losing value in the face of disruptions. For example, demand for lumber sharply increased when homeowners sought to remodel and build new houses during the COVID-19 pandemic. Meanwhile, U.S. sawmills (largely Canadian-owned) had to shut down over 40 percent of their capacity during this same time period. Yet forestry growers — producing timber that becomes lumber — suffered in a buyer’s market and saw prices for timber remain low: When adjusted for inflation, timber prices are at their lowest over the past 50 years.

While the market has since recalibrated and the lumber bubble may be just one instance in which supply was ill-prepared to manage demand, the whole of today’s U.S. manufacturing is just 11 percent of GDP — near its lowest in over 70 years. Underdeveloped manufacturing capabilities from generations of regional specialization pose significant risk to meeting demand and climate goals. U.S. Secretary of Energy, Jennifer Granholm recently wrote: “We have weak domestic supply chains for technologies critical to our economic and national security… China is the only country with control over every tier of the supply chain for critical materials like the lithium we need for vehicle batteries, including 80 percent of raw material refining capacity… Other countries, especially China, produced 85 percent of transformers for our electric grid — while America still produces almost none.”

The automotive, energy and tech industries must contend with critical rare earth metal supply chains needed for everything from batteries to solar panels. These products are reliant on limited resources, often harmfully extracted from biodiverse regions fraught with social inequities. The ability to (re)manufacture and recycle these raw materials efficiently and locally is critical to business continuity in an increasingly resource-constrained world.

The time is now: Advances in automation and machine learning, rising pay globally and increasing risk from supply chain disruptions suggest that onshoring manufacturing is increasingly attractive to many product producers. Against this backdrop, what do resilient and circular supply chains look like? Supply chain managers are finding the right instances to:

  1. Create visibility into manufacturing supply chains to better prepare for and manage risk
  2. Produce with distributed, more regionally resilient supply networks
  3. Source feedstocks locally and from more available recycled content

Smart entrepreneurs are seizing the moment to build more resilient, circular supply chains. Partsimony, a company dedicated to building cognitive supply chains and increasing efficiencies, closed a $2 million seed round led by Closed Loop Partners’ Ventures Group with participation from Contour Ventures, Urban Us and other top institutional and angel investors. Partsimony applies machine learning to build a predictive and dynamic manufacturing market network, helping solve for the manufacturer discovery and price quoting process for complex hardware companies — which can be an opaque, manual and excel-based process today for both the hardware company and the manufacturer. Partsimony provides hardware companies with a better, real-time understanding of their manufacturers’ capabilities and pricing, helping them iterate and commercialize products faster and with increasingly distributed supply chains. Partsimony also supports the manufacturer by serving as a qualified lead generation platform to acquire customers whose products match technical capacity (production methods and volumes) and help manufacturers maximize margin.

Partsimony’s platform demonstrates how increased transparency and intelligence across supply chains can ultimately benefit business, people and the planet through three core activities:

Digitizing supplier relationships creates transparency

When supply chain disruptions happen, hardware companies need better control over their production and transparency into their suppliers to adapt quickly. Case in point: Toyota knew to safeguard its chip supply because of the company’s “no black box” approach, only adopting technologies it truly understands, down to the gases and the metals of each component. This supply chain visibility — down to the material level — is a critical driver of resiliency, and we invested in Partsimony because its platform helps enable this kind of visibility.

Distributed manufacturing supply chains shorten lead times

Adopting a distributed manufacturer network of on-shore manufacturing within existing off-shore manufacturing supply chain networks is increasingly becoming a competitive advantage. This is not about an America-first dogma; on-shoring of manufacturing helps regionalize the production for any supply chain. Doing so shortens lead times and helps diversify the supplier base. Distributed manufacturer networks are primarily about developing resilient and sustainable business practices, with the added benefit of reducing emissions associated with the international transportation of raw materials and finished component parts. Working with customers such as Stanley Black & Decker, Partsimony has demonstrated 96 percent cost reductions and 83 percent lead time reductions.

Data-driven recommendations can leverage engineering insights and incentivize use of recycled content

Design and material selection have an outsized impact on the circular impact of products. A poorly designed product may choose hard-to-recycle and fossil fuel-based materials in formats where the materials are intermingled and difficult to separate for recovery — a product William McDonough would call a “monstrous hybrid.” Now, Partsimony’s AI supports hardware companies in testing novel, more sustainable materials and alternative manufacturing methods in products from the very first point of design. Engineers upload their digital designs or CAD files to the platform, and Partsimony is building its AI to read the structural requirements of the component part and potentially recommend materials from recycled content, as well as alternative manufacturing solutions.

Digital visibility, distributed manufacturer networks and data-driven infrastructures are the circular antidotes to today’s analog and fragile supply chains. The COVID-19 pandemic is not the first black-swan event within this century, and it most certainly will not be the last. Climate-related disasters will continue to upset business-as-usual, just-in-time production and manufacturing. If we want to design more circular products with more socially equitable access, we must also capitalize on the supply chain disruptions in front of us to redesign our supply chain to be more resilient and more circular.

 

Originally published in GreenBiz