Positive Outcomes summary
Positive Outcome companies are those where benefits for people and the planet make up the majority of their business, and which are held in NZ retail funds. Mindful Money has a rigorous process to select candidates and regularly reviews their ongoing eligibility.
Circular economy theme
A circular economy is a system where materials and products stay in reuse for as long as possible. Products and materials are designed with an aspiration of zero waste and far less need for new raw materials. However, the transition to a circular economy requires new models to encourage sharing and reuse of products, and the design of products for repeated repair or reconfiguration.
In contrast, businesses in our dominant ‘linear economy’ take raw materials and create high volumes of new products which end their lives as waste. This model creates negative ‘externalities’ for society. Disposing of waste has negative effects for local communities. It creates toxic pollution, is wasteful of land resources, and communities have to pay for handling the waste. The linear model is unsustainable as the earth’s resources are finite, and extracting raw materials is often linked to conflicts, and other harms to human rights.
We identified circular economy innovators with models for sharing and re-use. We also selected companies specialising in recycling of materials for use in manufacturing, or who use biodegradable or recycled materials. This builds some ‘circularity’ into the dominant model.
Sub-categories and criteria
- Share & Re-use Systems: products are designed and made in ways that support repeated re-use and repair, or designed for rental rather than purchase.
- Innovative Products/Design: rethinking how existing products can be manufactured using biodegradable materials. Or making alternative recyclable packaging for transit.
- Waste Product Reuse: using waste as a resource to be turned into raw materials that can be used (instead of needing to dispose of the waste in landfills or incinerators). Note, we do not include companies using a portion of recycled materials (e.g. 30% recycled plastic in bottles), or making products ‘designed for recycling’.
Why is each sub-category important?
Share & Reuse Systems
Share and reuse systems are able to achieve benefits for the user and reduce resources by designing systems which keep products in usage for a longer time. They reduce the need to extract new raw materials or use fuel for manufacture and transport. These systems have a much longer product life cycle which reduces waste. Consumers can avoid the high upfront costs of purchasing.
Company example: Brambles
A producer of wooden pallets, crates, containers and unit-load equipment for multiple industries which is listed on the Australian share market (ASX). Customers share and re-use pallets in a circular economy model called ‘pooling’, renting the units they need and then returning them to Brambles for use by others.
Innovative Products/Design
Many nations are struggling to cope with huge volumes of waste. During the early 21st century, waste from single-use plastic and plastic packaging grew exponentially due to e-commerce and more convenience food. The EU has rules requiring minimum recycled content for new products and for packaging to be designed for recycling. As more nations get tough about waste, demand will grow for alternatives.
Company example: Woolchemy
A NZ company that has innovated in hygiene and period products by using natural, renewable wool fibres. This gives consumers an eco-conscious choice as the fibres are biodegradable.
Waste Product Reuse
The economic, environmental and social cost of repeatedly extracting raw materials is high. Regulation and cost are driving more manufacturers to use recycled materials from products that previously went to landfill. They also save shipping costs by sourcing materials locally.
Company Example: Mint Innovation
A NZ company that recycles critical metals from electronic waste such as old laptops and cellphones. They use biological processes to extract high value metals such as gold and copper which are essential to a range of electronic equipment.
Investment considerations relating to Circular Economy
Circular economy models are likely to attract more demand in the next decade. Buyers are concerned about resource scarcity (and related cost inflation) for raw materials, and the environmental, community and economic cost of managing waste. There are some exciting innovations, as highlighted above, in new ways of creating and using products. Attracting new capital investment means these innovators can grow their scale.
Companies that innovate to supply recycled or biodegradable materials or products should benefit from rising demand. This will come from global manufacturers seeking cost savings, or needing to comply with rising regulation, or needing to save on energy and shipping costs. Consumers concerned about the environment also seek goods made with sustainable materials.
The theme has potential for long-term capital growth. However, many economic factors influence the strength of demand, so revenue growth by companies in a short-term period is not certain.