SEE THE SHOW NOTES AND LISTEN AT: Accelerating Circular Economy in the USA with Kate Daly

Katie Whalen [00:00:00] Getting in the Loop. Episode 25 Accelerating Circular Economy in the USA with Kate Daly.

[00:00:11] Hi, I'm Katie Whalen and join me each week as I talk with experts around the globe about Circular Economy. You'll find out what's being done to make it a reality and if it can really solve the problems it promises, it's time for Getting in the Loop.

[00:00:31] Welcome back to the Getting in the Loop Podcast. I'm your host, Katie Whalen. And today, we're welcoming Kate Daly of Close Loop Partners to the podcast. Kate Daly is the executive director of the Center for the Circular Economy at Closed Loop Partners and Impact Investment Firm. The center is a hub for circular business acceleration, investment and research focusing on packaging. Food. The built environment and apparel and textiles. Prior to joining Closed Loop Partners, Kate served as senior vise president at the NYC Economic Development Corporation. While there, she led a team launching innovative business development programs in sectors including fashion, tech, sustainability, media and advanced manufacturing. In this episode, you will learn about how close Loop Partners is working with U.S. based companies to help accelerate the transition to a more circular economy. Kate shares why companies are motivated to work on circularity and gives examples of recent projects, including a challenge to reinvent the paper cup as part of the next gen consortium founded by McDonald's, Starbucks and Close Loop Partners.

[00:01:36] Thank you so much for coming on the podcast, Kate. And I think you're calling from New York City, am I right?

Kate Daly [00:01:42] Yes, Close Loop partners is based in New York and thanks so much for having me.

Katie Whalen [00:01:47] Yeah, well, I'm really excited to dive in to everything we're going to talk about today. And we initially, we met at the World Circular Economy Forum in June where you gave a great presentation introducing Close Loop Partners. And we're going to talk about that in a little bit. But right now, I just wanted to get your thoughts, you know, because it's been a couple of months since the conference. Is there something that you heard or saw that's been kind of mulling in your head? What kind of was your takeaway from from the conference?

Kate Daly [00:02:23] Well, I think that the time that I spent in Helsinki at the conference, both within the context of the conference and inside events, I was definitely struck by the shared sense of urgency. And while I think of Europe as being far ahead of the United States in terms of advancing a circular economy, especially in light of European Commission legislation and really just general knowledge about the concept and of course, higher recycling rates, what I was hearing over and over is that people feel that even that relatively supportive climate efforts are moving faster. And so it really struck me that whereas I've been sort of idealizing the European context is moving quite fast. They themselves really see that there's so much more work to do.

Katie Whalen [00:03:06] So we kind of have like this disconnect between outsiders, you know, an outsiders looking at Europe saying, "Oh, well, you know, you're really advance." And then within Europe we're like, "No, we're not advanced at all.".

Kate Daly [00:03:19] Right. I know. I feel like if they came and visited the US, they might be in for a shock.

Katie Whalen [00:03:23] Yeah. Yeah, well, that was kind of what I was hoping to talk a little bit more with you today because, you know, as an American living in Europe, I feel a little bit out of touch with what'shappening in the U.S. and you're sort of right in the middle of it. So can you tell us a little bit about, you know, what's happening? Is there incentive for advancing circular economy in the US?

Kate Daly [00:03:50] I would say one of the basic challenges here in the Unite States is that landfill tipping fees here are comparatively inexpensive. And so municipalities and companies don't always feel of financial motivation to transition from a linear to a circular economy, because our leaky linear system is is not that expensive to maintain the status quo. So I would say that despite that, we still are seeing some cities starting to institute your way, school and other policies that align with circularity. And that's definitely one important driver in the transition. But overall, it's really the private sector and primarily global corporations who are the leading voices to advance circulating in the US.

Katie Whalen [00:04:37] And so you're saying that the private sector is the one that's sort of that you see a lot of this drive. And why do you why do you think that then they're sort of motivated to do this?

Kate Daly [00:04:53] I think in particular for global brands, they're seeing what's happening not just in Europe but in other parts of the world. We see India banning certain types of plastic. We see China having a circular economy policies that are that are influencing their economy. And so I think that global brands are seeing that they have to bring some of this into their own business policies. And they're really advancing beyond those traditional three hours of reduced reason, recycle and taking a much more complex view. And I look at it is there are these additional three hours of risk mitigation revenue opportunity and regulatory impact. And so risk really relates to the supply chain disruption that we're seeing as a result of climate change, whether that drought impacting cotton or in other sectors. And then also the risk of talent attraction and retention. We're seeing that more and more employees want to be in purpose driven organization. And then, of course, there's the revenue opportunity for alternative business models like leasing rather than owning. And then third, we do see that regulations are increasing in the U.S. slowly. Right now, we're primarily seeing this in the form of bans on plastic straws and bags. In some regions and in general, corporations want to get out ahead of all of these issues. And security is one tool for future.

Katie Whalen [00:06:17] Yeah, that was what I was going to sort of I was going to ask you a question about thinking is is there sort of hope in terms of the regulatory motivation, like we see sort of in Europe with its circular economy being discussed at a, you know, EU commission level? Has there been any discussion like that in the US?

Kate Daly [00:06:44] Not at a national level. We're seeing that there. There's some state level regulation that's coming in. And certainly there's more of an interest in the challenges associated with recycling after National soared, China's ban on importing many different types of material. And so I think there's an awareness that recycling in the United States, the United States is a very important economic driver and that nationally there's some potential for legislation that can help support recycling. But it's really not framed through the lens of advancing a circular economy per say. I think that that language isn't really common here. It's it's something I've only seen. For example, The New York Times use the term circular economy once in a recent article, whereas in the European press, it's something that's much more common. And many people, even if they're not working within this particular sector, are familiar with the concept. That's not really where we are in the US right now.

Katie Whalen [00:07:45] Yeah. I've actually I was on us I've been on a sailing trip this past summer with kind of throughout the west coast of Sweden. And I was talking to like the harbormaster in one of the tiny, tiny little harbor that you can only reach by if you have your own sailboat, basically. And he was like asking you what I do. I was like, oh, I work on Circular economy. And he said, "Oh, okay." And I mean, how does a complete, detailed and in-depth discussion about circular economy? Because, you know, it's so prevalent in newspapers and in the press, as you said, here and here in Europe.

Kate Daly [00:08:20] Yeah. The term it really needs to be socialized more here, and I think that it for me, it's so advantageous when you're looking at these changes through an economic lens to the opportunities for job creation and revenue and not what municipalities and taxpayers and legislators care about. And so there's a huge opportunity here. And it's it's- All of us have to work even harder to make sure that there's more awareness of it.

Katie Whalen [00:08:46] So we're gonna dove into your your into Close Loop Partners and and what you're doing. But I had one question before we move on which was what terms do you see sort of being used in the US that are kind of hinting at Circular Economy, but not really straight out using the term circular economy?

Kate Daly [00:09:07] I think the term zero waste is the more common term we hear and we see that cities have set zero waste goals. People understand what that means. That means fewer materials going into landfills. It means collecting organics and food waste so that they're used in anaerobic digesters or on farms. And so zero waste is the first term that people understand. And then I think that it's your waste has such a focus, though, on consumers behavior like that. We all need to stop sending so many things to landfill and the municipalities need to it's to structures and mechanisms to handle that waste. The circular economy is about really system level change that allows for prosperity and profit without all of the negative externalities that have impacted our environment and our quality of life. And so I'm hopeful that zero waste, in addition to terms like circular circular economy circularity, can start to become more mainstream.

Katie Whalen [00:10:11] Yeah, it's- I think you highlight a really good point in terms of the circular economy is moving away from just what can you do as an individual, but actually the whole systemic change. And and that's where a sort of different than what has been talked about and in terms of like sustainability, for example.

Kate Daly [00:10:30] That's right.

Katie Whalen [00:10:32] Yeah. So, okay, so we talked about Close Loop Partners like we've hinted at closely partners, but we haven't really talked so much about what you're doing and what's going on. So could you tell us a little bit more about how your organization has been working with the private sector to try to advance circularity?

Kate Daly [00:10:52] Absolutely. Look Close Loop Partners is an impact investment firm that focuses on the circular economy, and we manage multiple funds that includes the debt funds that invest in recycling infrastructure and technologies. And the investors in that fund include most of the major consumer packaged goods companies, including Unilever, Amazon, as well as all the major beverage companies, Coca Cola, PepsiCo. And the goal there is to strengthen infrastructure that allows for more material to be collected that can then be put back into the feedstock of recycled content that helps all of these companies meet their very ambitious goals for post consumer recycled content in their products and to another debt fund that partners with municipalities to build infrastructure. And we also have a venture, equity funds that invest in early stage startups with a focus on circular product and business model. So we have multiple funds, but then I manage our center for the Circular economy and that's our innovation hub, a closed loop and we focused on convening stakeholders from across the value chain in pre competitive collaboration to solve for challenges that each actor wouldn't be able to solve on the road. So, for example, global brands say they lose sight of and control over the product. The moment after the point of sale and that's when they enter into this stream that ultimately leads to the waste stream or the recycling stream. And so we work on very holistic solutions that touch upon design, manufacturing and and then after point of sale, looking at what happens within the infrastructure, how do we capture these materials and also how do we ensure that there's valuable market commodity coming out the other side that can then feed back into the value chain and enter the material stream. So one example that I'll share of something that we're working on is we're currently convening stakeholders and building an investment roadmap for emerging technologies relating to chemical recycling. And the reason that we're starting to focus on this is because of what I think we've all seen as really a global plastics waste crisis, which is that almost 90 percent of plastic waste ends up in a landfill incinerator or even worse, in our oceans, rather than being treated as a valuable material that it is that can be harvested and. Back into the loop, and we've seen that global plastics demand is forecasted to triple by 2050. The situation that we're in now is only going to get worse and we need to examine every option on the table to address plastic waste. So there's not one solution or twelve solutions. We have to look at dozens and dozens of ways to address this issue. And we see chemical recycling as an opportunity. These are diverse processes like paralysis and other other types of processes that turn plastic waste into building blocks for new materials. And so we're partnering with global brands and others to research environmental impact, policy barriers and market incentive to see what are the best ways to advance these new technologies in parallel to mechanical recycling and reduction and reuse effort. And so we bring people together pretty competitively to help solve for challenges like the.

Katie Whalen [00:14:18] Wow. Fascinating. Okay, so you're trying to look across the value chain and build these different opportunities. I think that's also it must be quite challenging to try to look at this whole system approach.

[00:14:36] Yeah, I'm trying to think about it in terms of bringing these groups of people together. Maybe one of the examples that you gave in Helsinki that was really interesting I thought kind of illustrates this is this challenge of reinventing the paper cup. I don't know if I'm if I'm calling it correctly if that was where it was. Yeah, maybe it could you could you tell us about that and how you kind of how you actually brought these different groups together and sort of took this systematic approach?

Kate Daly [00:15:11] Yeah. That's, for me, that's a great example where we brought together competitors who have been trying to solve for a shared challenge and really identified that a collaborative approach would allow for the most impact downstream throughout the value chain after point of sale. And so last year we launched the next gen consortium in partnership with Starbucks and McDonald's. And this was an effort to identify and commercialize sustainable food packaging solutions. And our first effort, which was to reinvent the paper cup, was joined by supporting partners, the Coca-Cola Company, Yum! Brands, Nestlé and Wendy's. And together, we launched an innovation challenge to identify new solutions for a 100 percent recyclable and or compostable paper cup. And the current paper cups that we all see in the market is lined in plastic London and P. And right now it's not widely accepted as as recyclable and it is not compostable because of the plastic liner. And so we launched an innovation challenge globally. We received four hundred and eighty responses from around the world and we narrowed that down to 12 winners. And these winners were companies that had alternative solutions to a lined paper cup. But also three of the winners are reusable cup option. And then one of the winners is a sort of more emerging stage plant based cup. And we really wanted to. The reason that we didn't have just one winner is, first of all, there is no silver bullet for this very complex challenge. And also that we wanted to the consortium wanted to bring support to emerging innovators at every stage of production. So it might be that there's one winner that could even be market as early as next year, whereas there are other winners that are developing new technologies that could be useful across sustainable food packaging solutions. And that it's worth investing in that sort of research that they're doing and the advances that they're making. And so six of the twelve winners were put into an accelerator that we launched earlier this year, and that will culminate after six months in a pitch day and demo day to show off all the work they've done and where their products are now and by investors to come and see if this is an interest and in parallel to all of the innovation work. We're also working very closely on infrastructure and identifying what are the challenges at material recovery facility who are or are not accepting paper cups. What are the challenges in composting facilities to accept this type of material? What impact did that have? And also what's driving the paper mills in terms of the commodity value of something like this? A paper cup has a very high quality fiber that could be desirable. So how do we make sure that all of the different players throughout the value chain are able to access the benefit of what a reinvented cup could give them? And so we convene stakeholders, have those conversations and see what are the obstacles? What are the opportunities and how do we advance the solution?

Katie Whalen [00:18:29] Fascinating. That's- well, you will you have the result. Will you be sharing the results sort of publicly after the accele- like after the acceleration program finishes?

Kate Daly [00:18:41] Absolutely. We're really excited with how far the companies and the accelerator come. And also, we're looking ahead to piloting some of these solutions in store and have already started some prototyping efforts within. For example, corporate headquarters and cafeterias to see how do the cups and reusable cups perform. And then the next step is to bring that to more public facing pilot.

Katie Whalen [00:19:08] So a little bit circle circling back a little bit. And it's also kind of related to this reinventing the paper cup challenge. You know, you talked about bringing these different actors together and and collaboration.

[00:19:19] And I'm just curious, have you encountered, you know, challenges with bringing potentially these competitors together under the same roof to to solve challenges and problems together, like you'd mentioned, you know, these different fast food chains and things? Has there been have there been issues or tensions there? How do you go about doing that and actually bringing them in in the same room under one roof?

Kate Daly [00:19:47] I've been so pleasantly surprised by how conflict free these efforts are. And it's because everyone's in the room for the right reason. And also everyone has a lot to contribute to that room. And so we're not seeing those types of tensions simply because all of these brands need to have this collective effort in order to figure out the infrastructure issues. And so this is this is all something that's really beyond the control. And so this collective effort that allows them to advance their own goal is so beneficial that it's okay that it helps advance their competitors goal, because there's no way if one brand comes up with an entirely new approach to coffee cups that the system and infrastructure is going to accommodate that one change. Whereas when you have a collective effort, that's where the larger system is incentivized to acknowledge, accept and address a new type of material or a new business model. And so you need that sort of collective effort to advance individual efforts. And I think all of the brand partners are very aware of that and really want to move full speed ahead. And we've we've seen a tremendous interest in other brands joining the effort and we're still bringing on additional supporting partners to it to join the next gen consortium. And so we see this as is a really successful model. And in the U.S., context really is the most successful model in the absence of regulations or other sorts of carrots and sticks. It's really the private sector mobilizing in this way that's going to move the needle.

Katie Whalen [00:21:27] Yeah. Wow. While fascinating, I think, you know, I am sure that like the listeners are taking notes and I think that a lot of them are probably really inspired by this next gen. Is it? Can I call it a consortium?

Kate Daly [00:21:40] Yes, absolutely.

Katie Whalen [00:21:41] Okay. And so I'm just thinking maybe you can enlighten me a little. How is this sort of being funded? May I ask that question? Like, is it the partners paying into to this challenge or is it receiving other support?

Kate Daly [00:22:00] Absolutely. So Starbucks and McDonald's are the founding partners of the consortium, and they each are investing five million dollars in the consortium in order to fund all of these efforts, including the innovation challenge, the accelerator, the research on infrastructure and potential future investments in infrastructure to ensure that these materials get through the system and then come out the other end as valuable feedstock for a continuation of the life cycle.

Katie Whalen [00:22:29] Wow. Okay, very cool. So that was a little bit about packaging. And then I know in Helsinki you gave some examples about apparel and you've touched a little bit on, you know, in this in this call, you we've talked a little bit about chemical recycling, very briefly. But do you have any really things that you've been working on that you would love to share in terms of apparel or things in terms of like an example that you think is really a promising way to go about in apparel and when framing it in terms of a circular economy?

Kate Daly [00:23:03] Well, I would just touch upon one project that we're partnering on, which is called Connect Fashion. We're partnering with with E Group on that. And it's about formulating a digital identity for apparel. And so really thinking of it as a material passport for each article of clothing so that at every stage of the value chain you can identify. What is this made of? Where did it come from? And that helps you understand where can it go? And so if you can imagine a future where at a recycling center or a sorting facility or a reuse company, that you can do something like take your iPhone and scan a tag within clothing and then understand, is it 100 percent cotton? Is it a cotton poly blend? Is it a half percent nylon? That sort of information is critical to understand what can the next life be for this material? And we don't have that in place yet. And I think material passports. We're seeing them in Europe being used in architecture and the environment. You know, this idea that if you're designing buildings for disassembly, you can harvest those valuable materials if you know what they are. We could see a real opportunity for that to be applied in apparel so that materials can retain their value. And you can understand through this digital identity where they can go next. And so that's one thing that I'm very excited about. And of course, within apparently fashion, there's so many different innovations that are emerging to address what is such a daunting challenge, which is that right now on our planet of seven point five billion people each year, 100 billion articles of clothing are produced. And so what are we going to do to bring that back into balance? And circular economy in the toolkit of circular business products and models are one way to approach that huge challenge.

Katie Whalen [00:24:59] Yeah, I think it's really a fascinating project because as you mentioned, there's this discussion, especially in terms of the construction and the built environment in Europe where like buildings as material banks.

[00:25:14] And the one of the challenges that you build a building and then usually at last for five, 50 to 100 years. And then you're thinking what what was this actually made out of? And I think we have the same kind of challenges with apparel, because a lot of it is different kinds of blends. And no one you know, it's it's lots of different types of fibers together in one. And I also see application for this type of technology in the use phase as well, you know, in terms of educating consumers on how to take care of their clothes.

Kate Daly [00:25:46] That's right. I think that one thing that's interesting about this idea of digital identity is that it can be used to help expand security efforts, but it's also advantageous to the brand and the customers in terms of the storytelling as you describe it. And also counterfeit detection. There are other fiscal bottom line opportunities that it brings. And I think that circularity will be most successful when it achieves certain environmental sustainability goals in parallel to advancing revenue and the business bottom line. And so it needs to have that versatility, agility in order to be to have widespread uptake. And so this is one example where you're taking a lot of different boxes. There's a lot of incentive for companies to start to look at things in this way and then everybody benefits. And in particular, when we're looking at the end of life, which is what we care about in this instance, then we have the information that we need to get creating different types of value.

Katie Whalen [00:26:50] Not always directly, you know, maybe, you know, a lot of ties back to financial value at the end, but maybe it's not always immediately a financial value in terms of like, you know, kind of reducing counterfeit, as you mentioned, things like that. So, yeah, very, very brilliant. And there's lots of different ways to look at how you can how you can capture value by having these different circular business models.

Kate Daly [00:27:13] That's right. Exactly.

Katie Whalen [00:27:15] So I'm thinking about, you know, the future and next steps. What what what do you think based on your expertise, what do we need to do in order to work towards scaling circular economy? Well, you can say in general, but also I was thinking, you know, in the in the US.

Kate Daly [00:27:34] Well, in the US, going back to what we were talking about earlier, I do think that wider socialization of the concept is critical. And I think we have to make a decision. Is the phrase the circular economy too wonky for widespread acceptance? Do do we need to revisit that? But I think that it's a very important term because it goes to the heart of the system's change in our economic approaches that don't sacrifice prosperity and that our linear system is so leaky that we are losing out in the long term and in some cases in the short term. And so I think having that term be more widespread and the principles behind it becoming more linked to every day is really important. And I think that ocean plastics and crisis have put a spotlight on the need to change the way that we're doing things. I think people in the US are growing more frustrated at these consequences of a linear system. And so in general, we need to collectively identify better ways to tell the story of the circular economy. That sort of innovation is key. And this circular economy is a tool in the fight against climate change. It's an opportunity for jobs, for revenue. Those are the stories that we need to tell more.

Katie Whalen [00:28:53] I was just recently talking to Walter Stylin and this is also kind of what he was saying to me as well. Is that you? He has a new book out called The Circular economy A User's Guide. And he was in the book. He has a quote where he talks about like, if you want people to, you know, go exploring and build ships and things and you don't you don't teach them how to just like build the ship and show them how to use the word. You don't really focus on the details, but you really motivate them intrinsically to you have a longing for the sea. And then by default, then they'll start to build ships and and do all these things. And so he draws parallels to that kind of like we need to motivate people to really have this desire to achieve something greater and and achieve circular economy.

Kate Daly [00:29:46] Yeah. That's funny, that's one of my favorite quotes. And it's that you teach them to yearn for the vast and endless sea. And I love that because I think it's not. It's not a coincidence that it's a metaphor about our oceans and the sea. And this idea that we've compromised the things that we all value the most. And this is not intentional. We're now seeing the consequences of our everyday behavior. And yet we as consumers are downstream of forces. It's very hard for us to have control over. And so how do we rethink our own consumption, but also hold accountable the systems that are in place but that are not working? And how do we invest capital into innovative alternatives to linear systems? And at the same time, always be mindful of the unintended consequences of even these new innovative approaches. And so I totally agree that vision of a future that that is much more promising and inspirational is if it is a key part of telling that story in the US and getting people excited, and especially within the education system, kids of all ages really thinking about not just accepting the status quo, but but understanding that there are different ways of doing things and even seeing that that the global brands are starting to be more experimental and trying to figure out how do we still provide what our customers want from us, but do it in a way that doesn't have these intended consequences and ultimately is even better for business. And I think that both top down corporate approach with some regulation and the bottom up approach of education and shareholder activism and people starting to connect the dots of these invisible systems that we don't see every day don't always know the consequences. I think both approaches are going to be critical in the US.

Katie Whalen [00:31:51] While this is kind of a perfect segue, I guess it's an unintended Segway in terms of the question that I ask all of the interview guests that come on the Getting in the Loop Podcast at the very end in terms of the in the loop game, which I created to actually kind of, you know, help motivate people to think about, you know, the way that we kind of are currently using our materials in a linear system as well as it is a bit flawed.

[00:32:18] And so in the game, you are a company and you're trying to produce products. But then you have to get access to different resources. And over time, you realize that maybe there's actually a better way than just taking materials, making products and wasting them, but actually, you know, reusing them and recycling different materials and resources. So it kind of gets people to start thinking about, you know, making different strategic investments that move more towards a circular economy. And in the game, they're the most sort of memorable parts are these there are these events and they're you know, they change the market conditions. So they're often inspired by real world happenings, whether positive or negative. So, for example, you know, it could be inspired by the fact that, you know, China has now this this band and you have to rethink what you're going to do with with with your with your waste. So my question for you, Kate, is what kind of event would you create for the game? You know, what kind of topic would it address?

Kate Daly [00:33:21] Well, I think one event that would have a huge impact on the game would be what if oil prices actually reflected the actual cost of our dependance on fuel and the commodities it creates. Like plastic right now. Virgin commodities are artificially priced in the sense that their cost doesn't reflect the actual cost of a loss of their carbon footprint or health and environmental impact and the cost of their disposal. And so if there starts to be more parity between the cost of materials that are recycled content versus virgin commodities, then the industry can be incentivized to start to close the loop on these materials. And so I think that type of the sort of incentivization of recycled content, because virgin materials are priced at the actual cost would be a huge event that would affect a lot of businesses, certainly.

Katie Whalen [00:34:21] Yeah, I think it would definitely be a game changer. Yeah, I guess. Yeah. Not to be. Yeah. I wasn't trying to make that as a joke, but I guess it was definitely be a game changer in terms of the real world and also in terms of in the game. Yeah. Yeah. Right.

[00:34:40] So it's been such a pleasure to talk with you and to hear a little bit more about Close Loop Partners. Maybe we can have you on and again sometime after, you know, the next gen ray announces the results or at least the first sort of results of the accelerator. But before before you go, where can listeners go to learn more about you and the topics that we discussed?

Kate Daly [00:35:07] Well, we have information on all of our investments and our projects on the web at closelooppartners.com. So I encourage everyone to go there and learn more about us and to go to our Twitter account, which is @LoopFund. And we do have a few more projects that we're launching this fall and early next year. So I would love to come back and talk about next gen and some of the new projects as well. Thanks so much for having me. Kate, it's been a real pleasure.

Katie Whalen [00:35:37] Thank you for listening. I hope you enjoyed this episode for show notes and links, go to our website at gettinginthelooppodcast.com. And while you're there, subscribe to our mailing list to have new episodes delivered to your inbox every Monday. See you next week.