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"In the Context of Circular Business Models, Collaboration is Key" - Interview with the Founding Team of CIRCULAR REPUBLIC

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16 March 2023

In January, UnternehmerTUM launched the new initiative CIRCULAR REPUBLIC, which supports companies in developing circular economy innovations into the core of their business model. Business, the start-up scene, and academia are coming together at Europe's largest innovation center to advance the circular economy jointly. The ambitious initiative is not only acting to secure a future in Germany but can already be described as a lighthouse project with European and even international appeal.

We spoke with the three founding members, Dr. Matthias Ballweg, Dr. Susanne Kadner, and Niclas-Alexander Mauss, about their vision of a circular economy and concrete measures.

According to the Circularity Gap Report 2023, the global economy is only 7.2% circular. What does this number say from your perspective?

Susanne: The number expresses that we have been discussing circular economy for several years but have yet to understand how to do it. A circular economy means decoupling wealth and value creation from resource consumption. Even though a circular economy strategy is to be developed as part of the coalition agreement, it has yet to reach the breadth of society that the climate and resource issues need to be considered together. That's precisely where we need to go.

Matthias: The Circularity Gap Report sheds light on our absolute resource consumption. It doesn't get us anywhere that a drill is produced from 30, 50, or 80 percent recycled material if too many exercises are sold at the same time. So we should be taking more primary resources out of the earth even as we increase our efforts toward sustainability. This illustrates that we have only ever thought about recycling. Recycling products that could be better used and of which we have a lot is a drop in the bucket.

What does that mean for our consumer behavior?

Susanne: The circular economy is an evident and catchy vision. Nevertheless, there are physical and thermodynamic limits; things cannot be 100% circulated, and we need a certain amount of primary material to develop new products. This means that even further growth means further resource extraction.

For me, an honest debate also includes what prosperity means. This honesty also includes not fomenting exaggerated expectations that we can become 100% circular and consume unthinkingly with a simultaneously growing population. That won't work. Nevertheless, it is possible as an individual to regulate one's footprint. There still needs to be more framework conditions, so the personal responsibility for consumers is currently disproportionate. This needs to be talked about.

Niclas: Right! You're not going to win the issue by just making consumers responsible. We need the companies to do this: If companies think about the added value their products can create without using primary resources, they can make a big difference by aligning their business model. Three strategies are needed to achieve this: "Narrowing the Loop," which means using fewer resources, "Extending the Loop," which means extending product life cycles; and "Closing the Loop," which means closing material loops. In this way, we can get to the point of preserving and using materials that we have extracted without consuming more.

The Circularity Gap Report also gives me hope: Conversely, it shows that around 93% of our economic output harbors the opportunity to become circular and to help shape this entrepreneurially. This shaping power is also exhilarating for the start-up scene.

Those who start now have a strategic advantage because the constant availability of resources will decline.

Matthias Ballweg, Director Circular Economy

How can companies benefit from circular business models?

Niclas: While someone else will always win the "Race to the Bottom," the Circular Economy offers manufacturing companies the opportunity to return to what they typically stand for, especially in Germany and Europe: the production of high-quality, durable products, trusting partnerships, long-term thinking and action in corporate planning, and excellent service orientation. Circular business models ensure that, ideally, precisely, this no longer represents a conflict of objectives with profitability but that all the players involved benefit from it together.

I am firmly convinced by my previous experience at Lorenz, a medium-sized measurement technology manufacturer from the Swabian Alb, where the orientation towards the circular economy became a decisive factor for securing the location and competitiveness. The price of brass had multiplied in the early 2000s - something we will also experience with many other raw materials soon - but instead of following the trend toward low-cost materials and low-wage production, Lorenz made a virtue out of necessity and focused even more on the quality and durability of its products: With the advantage of being able to remanufacture them after their life cycle. Initially focused on dismantling and remanufacturing, today, the entire business model is geared toward recycling, and the products are rented instead of sold, among other things. In this way, all parties involved ultimately benefit from a high-quality, durable, high-performance product while at the same time minimizing resource consumption.

Susanne: This also makes the circular economy exciting for companies: minimizing supply chain risks, reducing import dependencies on resources, and working against species extinction and greenhouse emissions. In this way, the circular economy can contribute to decoupling prosperity and value creation from resource consumption.

Matthias: Every company has the opportunity to measure its raw material footprint, to ask itself which resources are consumed in its products and where they come from. The next step will be to ask what opportunities can arise if the same customer need is met with less raw material. Those who start now will have a strategic advantage because the constant availability of resources will decrease. At the beginning of the Ukraine war, the raw material neon was almost unavailable because the most significant global market factories are in Odesa. As we are in a decade of international conflicts, problems of this kind will increase.

What is your contribution to CIRCULAR REPUBLIC?

Matthias: For us, it's essentially about enabling companies - whether startups or established - to build business models now that are sustainable in a world in which, as described, supply chains are breaking down and in which we have a responsibility to no longer scoop new primary material out of the ground. This is the only way to create business models that are also economically successful in the future.

Niclas: On this path, we want to leverage and use the UnternehmerTUM ecosystem in a targeted way to contribute to this overall industrial transformation, which can be broken down into many individual entrepreneurial tasks, both for established companies and startups.

Susanne: In the context of circular business models, collaboration is key. This is precisely what UnternehmerTUM stands for. At CIRCULAR REPUBLIC, we see ourselves as a catalyst for these collaborations across the entire value network to specifically build trust between the individual players.

Matthias: To do this, we work with all the seed funding programs and the start-ups, integrating circular economy through tools and capabilities to meet customer needs with a low raw material footprint so that young companies can start directly with circular business models.

We also drive projects with different, relevant partners for circular value chains, e.g., in the battery sector. They all contribute their expertise: the start-up tozero in recycling, STABL Energy in the area of Second Life, Twaice in the digital twin, and LiBCycle implements logistics. In close cooperation with our corporate partners, such as BMW, pilots and platforms are being built to ensure such solutions are sustainable.

We are also doing a lot of public relations work, hosting the CIRCULAR REPUBLIC Festival in November and organizing events to harness this momentum for the circular economy so that it is on everyone's lips.

Can you share more information about the planned CIRCULAR REPUBLIC Festival?

Niclas: The festival is aimed at all circular economy visionaries and those who want to become one. We want to present ideas and examples and thus inspire imitation. We are planning a multi-day event at Munich Urban Colab, other nationwide locations, and online formats. We hope many partners will join us with their events to push the circular economy. In many cases, we already have long-standing collaborations, such as with Circular Munich and Circular Futures. With the planned festival, we want to take our partnerships to the next level.

Matthias: For me, the great thing about it is the dynamic that we are igniting externally. It's supposed to be more than just an event for us; various Munich initiatives and organizations will be involved. We're also planning a TEDx event involving the city of Munich, and there will be excellent audience formats. It should feel like a firework of inspiration, a common happening.

What would you like to see from policymakers about the circular economy?

Susanne: There are, of course, many levels. On a local level, we are working with the city of Munich - and indirectly with various regions in Europe - for a Circularity Gap Report, and it's great to see that they want to use it to derive concrete measures from it. But I would also like to clarify this point: politics should create the framework conditions that reward circular business and not punish it.

Niclas: Two concrete wishes on my part would be an accurate CO2 price that is substantially reflected in the business models and thus makes a circular economy even more profitable. Secondly, public procurement is geared towards the circular economy, e.g., building construction and equipment. This would be a quick win without the need for complex regulatory measures.

Thank you very much for the interview!

About the persons:

Dr. Matthias Ballweg

Co-Founder and Director at CIRCULAR REPUBLIC

Matthias previously co-led the global circular economy platform at SYSTEMIQ for several years. Meanwhile, he's built coalitions such as the „Circular Cars Initiative“ and co-authored influential studies on implementing a European Green Deal. Before, Matthias was Vice President of Strategy at MAN Truck & Bus for several years. He was responsible for all issues related to the future of mobility in passenger and freight transport.

He holds a doctorate in behavioral psychology, is a start-up founder, father of four children, and a board member of the "Oberland" section of the German Alpine Club — the second largest sports club in Germany.

Dr. Susanne Kadner

Co-Founder and Head of Ecosystems at CIRCULAR REPUBLIC

Previously, Susanne headed the thematic focus "Energy, Resources and Sustainability" at acatech, the German Academy of Science and Engineering. She initiated the Circular Economy Initiative Germany, which defined the transition to a resource-efficient and digitalized circular economy with stakeholders from politics, science, business, and civil society. Before, Susanne worked at the Potsdam Institute for Climate Impact Research, including as scientific director of the UN Climate Council office. Susanne serves as a mentor for the start-up accelerator program of the BMW Foundation Herbert Quandt.

Niclas-Alexander Mauss

Co-Founder and Head of Operations at CIRCULAR REPUBLIC

In his more than ten years in the manufacturing industry, Niclas was closely involved in shaping the transformation of the medium-sized measurement technology manufacturer Lorenz into a multi-award-winning pioneer of the circular economy. Since 2020, the mechanical engineer has been leading an incubation program at UnternehmerTUM and, in parallel, founded the CirculaTUM research network in the course of his doctorate at the Technical University of Munich: today, with around 100 people and over 30 member institutes, it is the largest of its kind in Germany and the scientific counterpart to CIRCULAR REPUBLIC.

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