Financing recommendations (Draft)

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement N° 101036838. D7.14 – Financing Recommendations (Draft) March 2023 Authors: First draft of the document: Fatih Ege (EURADA) First revised version of the document: Jerome Friedrichs, Ivana Rae Almora, María Midón, Carmella Navarro Medina, Paula Montero (all EURADA); Miguel Ángel Domene (CJM); Rafael Ataz (INFO); Edoardo Croci, Chiara Candalino, Benedetta Lucchitta, Tania Molteni (all UB) Ref. Ares(2023)2353870 - 31/03/2023 A2C – Deliverable D7.14v1.0 Page | 1 Technical References Project Acronym Agro2Circular Project Title TERRITORIAL CIRCULAR SYSTEMIC SOLUTION FOR THE UPCYCLING OF RESIDUES FROM THE AGRIFOOD SECTOR Project Coordinator Fuensanta Monzó CETEC [email protected] Project Duration October 2021 – September 2024 (36 months) Deliverable No. 7.14 Dissemination Level* PU Work Package 7 – A2C systemic solution adoption, replication and scalability Task 7.5 – Multidimensional model for adoption, replicability and scalability of A2C systemic solution at regional and EU level Lead Beneficiary 27 (EURADA) Contributing Beneficiary/ies 23 (CAJAMAR), 24 (CARM), 28 (UB), 32 (INFO) Due Date of Deliverable 31 March 2023 Actual Submission Date 31 March 2023 * PU = Public PP = Restricted to other programme participants (including the Commission Services) RE = Restricted to a group specified by the consortium (including the Commission Services) CO = Confidential, only for members of the consortium (including the Commission Services) Document History Version Date Comments v0.1 06.01.2023 First draft of document v0.2 02.03.2023 First revision of original draft v0.3 30.03.2023 Revised version. Cajamar (Raquel Faraldo, Miguel Angel Domene). CETEC (Federico Mesa, Juan Agüera). v1.0 31.03.2023 First final version, approved by the WP leader and the project coordinator, (will be) submitted to EC. v1.1 First draft based upon first final version v2.0 Second final version, approved by the WP leader and the project coordinator, (will be) submitted to EC. A2C – Deliverable D7.14v1.0 Page | 2 Document Distribution Log Version Date Distributed to v0.1 06.01.2023 Alba Matamoros (KVELOCE), Aran Blanco (KVELOCE), Maite Ferrando (KVELOCE), Maria Cruz Escudero (CJM), Miguel Ángel Domene (CJM), Facundo Pérez Rubio (CARM), Marial Delahera (CARM), Antonio Romero (INFO), Jose M. Ruiz (INFO), Maripaz López (INFO), Rafael Ataz (INFO), Rafael Martinez (INFO), Benedetta Lucchitta (UB), Claudia Piccioni (UB), Edoardo Croci (UB), Federico Cornacchia (UB), Tania Molteni (UB) v0.2 02.03.2023 Alba Matamoros (KVELOCE), Aran Blanco (KVELOCE), Maite Ferrando (KVELOCE), Miguel Ángel Domene (CJM), Facundo Pérez Rubio (CARM), Marial Delahera (CARM), Rafael Ataz (INFO), Benedetta Lucchitta (UB), Claudia Piccioni (UB), Edoardo Croci (UB), Federico Cornacchia (UB), Tania Molteni (UB) Verification and approval Name Date Verification Final Draft by WP leader Approval Final Deliverable by coordinator Disclaimer and Acknowledgement This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 101036838 Disclaimer This document reflects only the views of the author(s) the European Research Executive Agency (REA) is not responsible for any use that may be made of the information it contains. Whilst efforts have been made to ensure the accuracy and completeness of this document, the A2C consortium shall not be liable for any errors or omissions, however caused. A2C – Deliverable D7.14v1.0 Page | 3 Table of Contents 1. List of Abbreviations .................................................................... 6 2. Executive Summary ..................................................................... 8 3. Introduction .................................................................................. 9 4. International Financing Schemes for the Circular Economy ...... 11 4.1 European Union Funds ..................................................................................... 11 4.1.1 Horizon Europe ............................................................................................ 11 4.1.2 Regional Policy Support ............................................................................... 13 4.1.3 LIFE .............................................................................................................. 14 4.1.4 Single Market Programme (SMP) ................................................................. 15 4.1.5 Structural Reform Support Programme (SRSP) ........................................... 15 4.2 Incentives ........................................................................................................... 16 4.3 Financial Institutions and other For-Profit Initiatives ..................................... 17 4.3.1 World Bank Group ........................................................................................ 18 4.3.2 European Investment Bank (EIB) ................................................................. 19 4.3.3 Joint Initiative on Circular Economy (JICE) .................................................. 20 4.3.4 European Bank for Reconstruction and Development (EBRD) .................... 21 4.4 Asset Management Firms ................................................................................. 21 4.5 Crowdfunding .................................................................................................... 22 5. Green Public Procurement ........................................................ 24 5.1 EU GPP Food Catering Services and Vending Machines Criteria ................. 24 6. Public Financing Schemes in the Region of Murcia .................. 27 6.1 INFO .................................................................................................................... 27 6.1.1 Grant programme for energy efficiency actions in SMEs and large companies in the industrial sector ................................................................................................. 27 6.1.2 CHIS grant line for the calculation and certification of carbon footprint in organisation/product and water footprint ..................................................................... 28 6.1.3 Innovation voucher for optimising industrial processes and products ecoinnovation ................................................................................................................... 28 6.1.4 R&D support to regional technological centres for developing sustainable products and processes .............................................................................................. 28 6.1.5 R&D support to enterprises for developing sustainable products and processes ................................................................................................................... 29 6.2 CARM .................................................................................................................. 29 6.2.1 Grants to the operational funds of fruit and vegetable producer organisations (OPFH) 29 6.2.2 Grants for investments in energy efficiency and renewable energies (biogas and agricultural biomass). ........................................................................................... 29 6.2.3 Grants for innovation projects in rural areas ................................................. 30 6.2.4 Grants for investments in farms .................................................................... 30 A2C – Deliverable D7.14v1.0 Page | 4 6.2.5 Grants for investments in farms linked to the creation of agricultural companies 30 6.2.6 Grants for investment in processing, marketing and development of agricultural products ................................................................................................... 30 6.2.7 Grants for the programme for the application of precision agriculture and 4.0 technologies in the agricultural and livestock sector, as part of the Plan to boost the sustainability and competitiveness of agriculture and livestock farming ..................... 31 6.2.8 Grants for the consolidation of irrigation by using reclaimed water from wastewater reservoirs ................................................................................................. 31 6.2.9 Grant for the improvement of energy efficiency and renewable energy generation in irrigation communities. EURI Funds – RDP 2014-2020 ........................ 31 7. Private Financing Schemes in the Region of Murcia ................. 32 7.1 Bank and Financial Cooperatives Schemes.................................................... 32 7.2 Alternative Private Financing Schemes in the Region of Murcia .................. 35 8. Financing Schemes & Agro2Circular Business Models ............ 38 9. Good Practices .......................................................................... 45 9.1 CIRCWASTE (Finland) ....................................................................................... 45 9.2 URBIOFIN (Greece) ............................................................................................ 45 9.3 EIB Financed Projects ....................................................................................... 46 9.3.1 Novamont Renewable Chemistry, Italy ........................................................ 46 9.3.2 ISP Loan for Circular Economy, Italy ............................................................ 46 9.3.3 IREN Climate Action and Circular Economy Loan, Italy ............................... 46 9.3.4 Winnow, Romania ........................................................................................ 47 9.3.5 Tackling Food Waste, France ....................................................................... 47 9.4 De Clique (Netherlands) .................................................................................... 47 9.5 GPP Good Practices .......................................................................................... 48 9.5.1 GPP in Flemish Governments Cooperation Agreement with Municipalities . 48 9.5.2 GPP Regional Plan, Liguria .......................................................................... 48 9.5.3 Promotion of Green Public Procurement by Providing Green Technical Specifications, Lithuania ............................................................................................. 49 9.5.4 Good Practices in Green Public Procurement in Regional Waste Management, Spain 49 10. Recommendations .................................................................... 50 10.1 Green Public Procurement ............................................................................... 51 11. Annex ........................................................................................ 53 11.1 References ......................................................................................................... 53 A2C – Deliverable D7.14v1.0 Page | 5 Table of Figures Figure 1. Financial Incentives and Calibration Approach ................................................... 17 Figure 2. World Bank Group Municipal Solid Waste Management Operations by Country Income Group. ............................................................................................................ 19 Figure 3. EIB Circular Economy Signed Operations, 2015-2019 ....................................... 20 Figure 4. (SWD) EU GPP Criteria for food, catering services and vending machines ....... 26 Figure 5: The Impact of Circular Business Models on a Linear Economy (OECD, 2019) .. 40 A2C – Deliverable D7.14v1.0 Page | 6 1. List of Abbreviations AVALAM Unión de empresarios Murcianos SGR BBI JU Bio Based Industries Joint Undertaking BGK Bank Gospodarstwa Krajowego CAPEX Capital Expenditure CARM Comunidad Autónoma Región de Murcia CDC Caisse des Dépôts Groupe CDP Cassa Depositi e Prestiti CE Circular Economy CERSA Compañía Española de Reafianzamiento CF Cohesion Fund CSR Corporate Social Responsibility EBRD European Bank for Reconstruction and Development EC European Commission ECBF European Circular Bioeconomy Fund EFSI European Fund for Strategic Investments EGFF European Growth Finance Facility EIAH European Investment Advisory Hub EIB European Investment Bank ERDF European Regional Development Fund ESIF European Structural and Investment Funds ETC European Territorial Cooperation EU European Union GEF Global Environment Facility GNI Gross National Income GPP Green Public Procurement IBRD International Bank for Reconstruction and Development ICO Instituto de Crédito Oficial ICREF Instituto de Crédito y Finanzas de la Región de Murcia ICSID International Centre for Settlement of Investment Disputes IDA International Development Association IFC International Finance Corporation INFO Instituto de Fomento de la Región de Murcia JICE Joint Initiative on the Circular Economy JTF Just Transition Fund KfW Kreditanstalt für Wiederaufbau MFF Multiannual Financial Framework MIGA Multilateral Investment Guarantee Agency MSW Municipal Solid Waste MSWM Municipal Solid Waste Management NGO Non-Governmental Organisation NPV Net Present Value R&D Research and Development SDGs Sustainable Development Goals SME Small and Medium-sized Enterprises SMP Single Market Programme SRSP Structural Reform Support Programme A2C – Deliverable D7.14v1.0 Page | 7 UN United Nations WBG World Bank Group A2C – Deliverable D7.14v1.0 Page | 8 2. Executive Summary This document constitutes deliverable 7.14 Financing Recommendations (Draft) of the Agro2Circular project, undertaken within task 7.5 Multidimensional model for adoption, replicability and scalability of A2C systemic solution at regional and EU level, and represents the main outcome of sub-task 7.5.3 Financing schemes linked to the business models generated. This is a first draft version of the financing recommendations developed during the project that was submitted halfway through the project duration, in month 18. As such, this document focusses in its analysis and recommendations primarily on international and regional financial frameworks that enable the circular economy. Deliverable 7.15 Financing Recommendations (due date M35) will then more closely align the analysis and recommendations with the concrete outcomes and results of the project. Nevertheless, dedicated sections present both public and private financing schemes in the region of Murcia, which marks the territorial centre of the Agro2Circular project. Agro2Circular is an EU (H2020) funded project that will implement a territorial, scalable, systemic and digitally powered solution for the upcycling of fruits and vegetables residues and non-renewable, multilayer plastic into high added value products. This deliverable is a synthesis report summarising the main conclusions regarding financing schemes and recommendations for their improvement. The aim of the report is to provide an overview of the driving forces that can be used to partially or fully finance eligible businesses or projects in the circular economy. It analyses different types of financing schemes and best practices, exploring the financing ecosystem that enables the implementation of territorial circular solutions at European and regional level to ensure the territorial implementation of the project’s systemic solutions. Recommendations are furthermore provided to improve the financing schemes analysed, including recommendations to promote public procurement in Agro2Circular related areas. Chapter four explores international financing schemes for the circular economy, with a particular focus on the various funding programmes provided by the European Union. Other points of interest are international financial institutions and other for-profit initiatives, asset management firms and crowdfunding opportunities. Chapter five then focuses on green public procurement as key mechanism in enabling the transition towards the circular economy. Chapters six and seven present the above-mentioned public and private financing schemes in the Spanish region of Murcia. Chapter 9 is a selection of good financing practices, while, lastly, chapter 10 provides the name-giving financing recommendations. A2C – Deliverable D7.14v1.0 Page | 15 “The Circular economy and quality of life sub-programme aims at facilitating the transition toward a sustainable, circular, toxic-free, energy-efficient and climate-resilient economy and at protecting, restoring and improving the quality of the environment, either through direct interventions or by supporting the integration of those objectives in other policies.” 23 The mechanisms of funding are the Standard Action Projects (SAPs) and Strategic Integrated Projects (SIPs). The former targets projects implementing innovation or best practices solutions, while the latter targets policy and legislation actions. 4.1.4 Single Market Programme (SMP) The Single Market is one of the central pillars of the European Union and the largest market in the world that enables people, goods, services and money to move freely between countries. For 2021-2027, the Commission has proposed “a dedicated €4.2 billion programme to empower and protect consumers and enable Europe’s many small and medium-sized enterprises (SMEs) to thrive”. 24 The objectives of the SMP are to: 1. Maintain a high level of food safety; 2. Give even higher protection to consumers; 3. Boost the competitiveness of businesses, in particular SMEs; 4. Improve the governance of the Single Market and compliance with rules; 5. Produce and disseminate high-quality statistics; 6. Develop effective European standards. 25 Of particular relevance for this report is the food safety focus area of the Single Market Programme, which represents 41% of the programme’s budget. Its expected impacts are to: 1. Prevent, control and eradicate animal diseases and plant pests; 2. Support the sustainable food production and consumption; 3. Support the improvement of animal welfare; 4. Improve the effectiveness, efficiency and reliability of official controls. 26 4.1.5 Structural Reform Support Programme (SRSP) The last EU funding programme to name for the purposes of this report is the Structural Reform Support Programme (SRSP). Contrarily to the above-named programmes, the SRSP is mainly concerned with assisting reform processes, either institutional, administrative, or growth-enhancing. To this end, the programme provides technical assistance for the full lifecycle of the reform process (preparation, design, implementation). One of its main advantages is that it does not require co-financing by the EU Member States themselves. “The goal is to support Member States’ efforts to design and implement 23 https://cinea.ec.europa.eu/programmes/life/circular-economy-and-quality-life_en 24 European Commission. 2021. Single Market Programme [Fact sheet]. https://ec.europa.eu/docsroom/documents/45590 25 Ibid. 26 Ibid. A2C – Deliverable D7.14v1.0 Page | 16 resilience-enhancing reforms, thereby contributing to the EU’s recovery from the COVID-19 crisis, improving the quality of public services and getting back on the path of sustainable and inclusive growth.” 27 4.2 Incentives The transition to the circular economy will demand significant financial resources, both from the public and private sectors and “incentives are vital to overcome barriers stemming from linear models” 28 . There are several incentives that policy makers may implement with the goal to stimulate circular economy that can benefit investors in the transition process. Barriers that need to be overcome and that can be targeted by incentives include market failures preventing or delaying circular products, services and solutions, non-pricing of negative externalities, and the steering of markets towards sustainability and promoting behavioural change. “Incentives have the capacity to create value, reduce the risk of investment and improve the competitiveness of value chains that deliver net environmental benefits compared to linear economies.” 29 Not all incentives are financial incentives and not all financial incentives are financial instruments targeted at investors to achieve more investment in desirable economic activities and are therefore relevant to this report. These include incentives delivered through blended financial instruments, e.g., financial guarantees or blended finance where public investors take a higher investment risk. A notable financial incentive instrument are subsidies such as the EU funds discussed above. These incentives aim to encourage private actors, through direct or indirect financial rewards, to gear their behaviour and activities more towards circular economy. Subsidies can transform a circular economy that is not economically viable into a profitable activity. Therefore, subsidies can have a significant and immediate impact, but there is also a risk of market distortion. However, the challenge of scaling needs to be overcome by connecting circular economy projects with commercial financing, given that these projects require cofinancing of about three to four times grant amounts. The correct choice of the right incentive(s) ultimately depends on the addressed market failures. In a report prepared by European Commission on incentives to boost the circular economy, financial instruments are categorised by their market context and calibration: 30 27 https://commission.europa.eu/about-european-commission/departments-and-executiveagencies/structural-reform-support_en 28 European Commission. 2021. Incentives to Boost the Circular Economy. https://op.europa.eu/en/publication-detail/-/publication/51378e0a-d303-11eb-ac72-01aa75ed71a1 29 Ibid. 30 Ibid. A2C – Deliverable D7.14v1.0 Page | 17 Figure 1. Financial Incentives and Calibration Approach 4.3 Financial Institutions and other For-Profit Initiatives The circular economy model offers a variety of financing options that go beyond projectrelated grants. Financial institutions contribute by providing financing and investment for circular economy projects, taking into account the profitability and risks of participation. This economic model helps to protect the environment by avoiding overconsumption, waste and pollution through the reuse of materials, recycling and conversion into raw materials, thus creating a closed production cycle. The implementation of this economic model leads to the emergence of innovative business mechanisms, as well as tools and new ways to assess the risks of the actions undertaken. The financial sector is increasingly demanding these mechanisms, moving away from the old vision of maximising corporate value by increasing share prices and towards a point of view that takes into account social and environmental impacts 31 . Finance has produced various concepts over the decades. In the 80s and 90s, concepts such as portfolio investment, cost economics and corporate governance, reputation, and 31 European Commission. 2019. Accelerating the Transition to the Circular Economy. Improving access to finance for circular economy projects [Report]. https://op.europa.eu/en/publication-detail/-/publication/02590134-4548-11e9-a8ed-01aa75ed71a1 A2C – Deliverable D7.14v1.0 Page | 18 profitability, among others, gained ground. Nowadays, all these terms have evolved, especially in recent years, with concepts such as impact investment, sustainability, social and ethical investment, climate and responsible finance and green bonds. Financial institutions are being pushed to participate and invest in circular economy projects in order to achieve the goals set out in the Paris Agreement on climate change. The circular economy system has been introduced over the last five years through various financial instruments such as green bonds, which have helped to accelerate the transition to the new economic model. The main financial instruments are: ● Green bonds: Aim to support and finance sustainable and environmentally friendly projects and have the World Bank Group as one of the main issuers. One example: TSKB Green Bond Issue 32 . ● Green credits: Instruments used by banks to finance projects dealing with high levels of pollution in order to reduce the carbon emissions generated, and to finance energy efficiency in order to meet the targets set by the EU. An example of this is the World Bank’s US$ 212.5 loan to VPBank in Vietnam 33 . ● Green Exchanges: These are aimed at investors who have an interest in investing in and acquiring shares in environmentally friendly companies. This is the case with the Luxembourg Green Exchange, a platform created to contribute to the goals of the Paris Agreement 34 . ● Social Bonds: Debt instruments that focus on financing social and humanitarian projects by helping the neediest communities. Some of the areas where these bonds are used are employment, utilities such as access to drinking water or education. In 2016, Starbucks issued its first US sustainable bond, which has a major impact on society with programmes throughout the coffee supply chain 35 . 4.3.1 World Bank Group The World Bank Group (WBG) has increased its recognition regarding Municipal Solid Waste Management (MSWM) in a circular economy. Under the Climate Change Action Plan 2021-2025, which presents significant differences concerning the previous action plan, the WBG aims to find the best way to integrate both waste management and circular economy plans in order to contribute to the development of countries and regions, especially those with high poverty rates, through the implementation of climate change mitigation strategies, and to help meet the Sustainable Development Goals set by the United Nations in the 2030 Agenda. The International Finance Corporation (IFC), as a member of the World Bank Group, contributes by helping countries and regions with limited infrastructure or informal economies, such as Uganda, to strengthen their potential for municipal solid waste management while increasing prosperity through recovery solutions and financing. The World Bank Group is considered the main source of lending in the area of municipal solid waste management. The World Bank's internal report on an assessment of the World 32 https://www.tskb.com.tr/uploads/file/tskb-sustainable-finance-framework.pdf 33 https://en.vietnamplus.vn/vpbank-proparco-cooperate-to-promote-green-credit-in-vietnam/185249.vnp 34 https://unfccc.int/climate-action/momentum-for-change/financing-for-climate-friendlyinvestment/luxembourg-green-exchange 35 https://stories.starbucks.com/press/2016/starbucks-issues-the-first-u-s-corporate-sustainability-bond/ A2C – Deliverable D7.14v1.0 Page | 19 Bank Group's support to its client countries indicates a contribution of around $3 billion over the period 2010 to 2020, representing 10% of the total. 36 These figures are higher than those of other multilateral development banks, whose funding for similar activities over the same period ranged from 0.5% to 6.1% of the total. The following table, which is part of the report for the period 2010-2020, shows that lowincome countries receive very little or no share of World Bank loans and investments. Lowermiddle-income countries and upper-middle-income countries on the other hand, receive the largest share. Figure 2. World Bank Group Municipal Solid Waste Management Operations by Country Income Group. The World Bank is the world’s largest international organisation for financing developing countries and has the best triple-A rating. The World Bank not only provides loans, but also offers advice and expertise on a wide range of topics such as climate or human capital. It is integrated into five international organisations, each with a specific purpose. These include the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). 4.3.2 European Investment Bank (EIB) Of all financial institutions, the European Investment Bank (EIB) is the largest multilateral financial institution in the world. It provides financial support and advice to meet the needs of businesses in areas such as climate, cohesion, innovation, SMEs and sustainability in relation to circular economy projects inside and outside the EU that aim to prevent waste through reuse, recycling and regeneration of natural systems 37 . These projects are implemented through the European Fund for Strategic Investments (EFSI) 38 , which aims to increase economic growth in the long term and improve competitiveness within the EU 36 World Bank. 2022. Annual Report 2022. Helping Countries Adapt to a Changing World. https://openknowledge.worldbank.org/bitstream/handle/10986/37972/AR2022EN.pdf 37 https://www.eib.org/en/about/at-a-glance/index.htm 38 https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/economy-works-people/europeanfund-strategic-investments_en A2C – Deliverable D7.14v1.0 Page | 20 through private investment. There is also EU funding for innovators (InnovFin), which aims to help small businesses access finance by supporting projects 39 . As mentioned above, the EIB provides not only financial support but also advisory services to help identify the best way to improve the financial viability of projects related to the circular economy. A large number of projects in many different sectors have benefited from these investments, with a total financing agreement of €65,15 billion in 2022 40 . Broken down by sector, the results for the period 2015-2019 are as follows 41 : Figure 3. EIB Circular Economy Signed Operations, 2015-2019 The EIB Group claims to be constantly adapting to new opportunities and emerging market needs and is working with SMEs to support them to develop new financing projects. InnovFin Advisory coordinated the launch of the European Circular Bioeconomy Fund (ECBF), a venture fund designed to help growth companies with a focus on the circular economy and high innovation potential to contribute to Europe’s environmental goals by 2050. The €300 million fund will invest in companies across a range of sectors, including the blue economy and fisheries, agri-food, industrial biotechnology, biotech chemicals and materials, packaging, and household and personal care products 42 . All EIB financing and advisory services are provided primarily through InnovFin Advisory and the European Investment Advisory Hub (EIAH). 4.3.3 Joint Initiative on Circular Economy (JICE) Given the importance of the circular economy in combating climate change and the various programmes designed to help businesses achieve the agreed targets, the Joint Initiative on the Circular Economy (JICE) brought together the EIB and five European promotional banks: Bank Gospodarstwa Krajowego (BGK – Poland), the Caisse des Dépôts Groupe (CDC – France) including Bpifrance and Banque des Territoires, Cassa Depositi e Prestiti (CDP – Italy), the European Investment Bank (EIB), Instituto de Crédito Oficial (ICO – Spain) and KfW – Kreditanstalt für Wiederaufbau (Germany). This five-year plan (2019-2023) aims to accelerate the transition to a circular economy by providing up to €10 billion in loans, 39 https://www.eib.org/en/products/advisory-services/innovfin-advisory/index.htm 40 https://www.eib.org/en/about/key-figures/index.htm 41 https://www.eib.org/en/publications/the-eib-in-the-circular-economy-guide 42 https://www.ecbf.vc/investment-focus A2C – Deliverable D7.14v1.0 Page | 21 financing, technical assistance and guarantees for appropriate circular economy projects by 2023. 43 The sectors that the JICE supports are diverse and include several companies and projects such as water management (AQUASERVICE – Spain), waste (STARMEAT – Poland), urban development (PALAZZO DELLE FINANZE – Italy), services (VESTIAIRE COLLECTIVE – France) and other sectors such as agriculture, industry and mobility. 4.3.4 European Bank for Reconstruction and Development (EBRD) The last financial institution to be mentioned at European level is the European Bank for Reconstruction and Development (EBRD). This institution was founded to rebuild Central and Eastern Europe after the Cold War. The EBRD is committed to promoting marketoriented economies and developing private and entrepreneurial initiatives. It launched its first circular economy plan, called the Circular Economy Regional Initiative, in Turkey and the Western Balkans in 2021 to address the barriers preventing the transition to a circular economy with a focus on SMEs. Funding is also provided with support from the Global Environment Facility (GEF) and technical cooperation from the Austrian Federal Ministry of Finance, amounting to $13.76 million and $1 million respectively. The global economy has an enormous impact on the environment and this programme aims to change the way raw materials are used, from extraction to disposal. It will be necessary to improve the management of raw materials throughout their life cycle, reduce greenhouse gas emissions, especially CO2 emissions, divert waste from landfills and oceans, and eliminate, avoid or better manage harmful chemicals 44 . 4.4 Asset Management Firms Investments in the circular economy are a matter of interest to all types of companies like large asset management companies, governments, SMEs, and financial institutions. According to a study by the Ellen MacArthur Foundation, during the period comprised between December 2019 and December 2021, the amount of corporate and sovereign bonds that were issued annually experienced an increase of five times to the first period. 45 There are new and better investment opportunities for all sectors when shifting to a circular economy that contributes to the prosperity of the companies besides controlling environmental impact. The private sector is each time more attracted to the new opportunities that this economy model offers, the contribution to the transition into a carbonneutral economy, and the fact of having a healthy portfolio. Among the top three largest asset management firms we stand out BlackRock, Vanguard Group, and Fidelity investments. Focusing on the first one, BlackRock launched a Circular Economy Fund with a number of total assets that amounted to $1.9 trillion. Of those assets, at least 80% were invested in equity securities of companies worldwide, like Adidas, which benefit or contribute towards the transition to a circular economy. Under normal market 43 https://www.eib.org/en/press/all/2019-191-eur-10-billion-to-support-the-circular-economy-in-the-eu 44 https://www.ebrd.com/news/2021/ebrd-launches-first-circulareconomy-programme.html 45 https://ellenmacarthurfoundation.org/topics/finance/overview A2C – Deliverable D7.14v1.0 Page | 22 conditions, the fund will invest in a portfolio of equity securities of companies rated on their ability to manage risks and opportunities associated with circular economy and other key points such as environmental, social, and governance issues (ESG). 46 Another example of circular finance is Intesa Sanpaolo, the leading bank in Italy and one of the top banks in Europe with more than 14 million customers. The transition is seen as a chance to create value and achieve sustainable economic development both with a social and environmental impact. From 2007 to 2014, the contribution to renewable energies and the environment amounted to €11 billion. The business plan of Intesa Sanpaolo for 20182021 includes among its topics the relevance of the circular economy to fight climate change and other issues such as waste, pollution, and biodiversity loss. 47 4.5 Crowdfunding A recently introduced concept, crowdfunding has proven a legitimate way to collect the necessary funds for an initiative, project or product. It consists of 1) the product’s owner, who digitally promotes it in the 2) crowdfunding platform, in order to find 3) people willing to provide the financial resources needed to realise the owner’s product. Due to the fact that it is a relatively new funding strategy, no formal institutions are involved in the process, therefore it is considered an alternative form of financing. Although it is a fairly new concept, the volume of funds raised through crowdfunding platforms is expected to reach $57 billion in 2022 and $90 billion in 2025. 48 The main difference between crowdfunding and other traditional funding strategies is the number of contributors and the scale of their contributions. Where traditional funding comes from a small number of sources in sizeable amounts, crowdfunding engages numerous sources in smaller contributions. Thus, crowdfunding can mostly or entirely fund small initiatives, but will only constitute a part of the capital in case of larger projects. As an advantage, crowdfunding can constitute not only the form of funding, but also a way of promoting and creating awareness for the initiative in question. Since, through the platform, it can reach an extensive audience, their contribution to the project can also be considered its validation and, if the project reaches their amount goal quickly, its market potential. Even if, in this case, financial institutions may be willing to invest in the project, crowdfunding still presents the setback that, due to its lack of regulation, crowdfunding can be seen by non-reliable by institutionalised funders. Crowdfunding can be peer-to-peer tending, where a crowdfunding campaign is posted online, and different contributors provide their donations. But it can also be reward-based, where the owner of the product or service sets up different “rewards” depending on the funder’s contribution (for example, a tier system can be set up and the funders will receive from the most basic to the most elaborate version of the product they funded). Finally, 46 https://ellenmacarthurfoundation.org/circular-examples/the-worlds-largest-investor-embraces-the-circulareconomy-blackrock 47 https://ellenmacarthurfoundation.org/circular-examples/embracing-the-circular-economy-at-italys-largestbank-intesa-sanpaolo 48 https://www.isbank.com.tr/blog/kitlesel-fonlama-nedir A2C – Deliverable D7.14v1.0 Page | 23 crowdfunding may be equity-based, where funders will receive the amount they contributed to company shares. Besides, it is widely accepted that crowdfunding can deliver a business with more than just money to invest. Leone et al. in a study focused on reward-based crowdfunding showed that it can also be a source of some non-monetary benefits such as validation of the business idea, definition of the product/service (through customer feedback), product promotion, innovation or identification of internationalization opportunity among others. Furthermore, this type of crowdfunding shapes circular business models in informational mechanisms, innovation networking and marketing aspects; and it can reduce risks connected to the circular business model. 49 Multiple crowdfunding platforms are readily available and well-known to the public, such as Kickstarter and GoFundMe. In addition to these, the European Crowdfunding Network exists, where professional training and transparent digital financing opportunities are offered. 5051 A success case of circular business model foundation through crowdfunding (Kickstarter platform) is Vesica Piscis. It is a small enterprise created in Elx, Spain, and mainly specialized in footwear. Their business model is based on circular economy and respect to the environment. Their campaign was launched at the beginning of December 2015, using rewards as pairs of shoes, and aiming to obtain 15.000 euros in one year. In June 2016, the project reached 17.589 € allowing them to launch the creation of their business. 52 49 Leone, D., Cristina Pietronudo, M., Gabteni, H., & Rosaria Carli, M. (2023). Reward-based crowdfunding for building a valuable circular business model. Journal of Business Research, 157. https://doi.org/10.1016/j.jbusres.2022.113562 50 https://eurocrowd.org 51 https://eurocrowd.org 52 Leone, D., Cristina Pietronudo, M., Gabteni, H., & Rosaria Carli, M. (2023). Reward-based crowdfunding for building a valuable circular business model. Journal of Business Research, 157. https://doi.org/10.1016/j.jbusres.2022.113562 A2C – Deliverable D7.14v1.0 Page | 24 5. Green Public Procurement Defined as “a process whereby public authorities seek to procure goods, services and works that have a lower environmental impact throughout their life cycle than goods, services and works with the same primary function that would otherwise be procured” 53 , Green Public Procurement (GPP) can also constitute a valuable tool to encourage the circular economy. The public sector’s spending comprises around 14% of the EU’s gross domestic product and, with such a significant purchasing power, their choice of greener products and services could mean an important change towards more sustainable production and consumption 54 . On the one hand, GPP has the potential of modifying the marketing. Through GPP, public authorities can encourage various industries to produce greener products and services. Due to the nature of the services public authorities purchase (transport, construction, health services, education), GPP could have a great infrastructural impact. On the other, GPP remains a voluntary initiative and states can choose to what extent they implement it. Barriers to further introduce it are a lack of political support, perception that green products are more costly, the lack of consistent criteria evaluating which products are more environmentally friendly, the low co-operation between public authorities or the lack of training of staff responsible. Today, 22 European countries (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Malta, the Netherlands, Poland, Portugal, Slovakia, Spain and Sweden) have adopted National Action Plans for GPP and started to build their implementation infrastructures under the EU Public Procurement Directive 2014/24/EU. Five EU countries do not have a National Action Plan in force (anymore): Estonia, Hungary, Luxembourg, Romania and Slovenia. 55 With respect to GPP in Spain and in accordance with the provisions of Article 202 of Law 9/2017, of 8 November on Public Sector Contracts, The Murcia regional development agency INFO states in its specifications and in its contracts, special conditions of execution of an environmental and “green“ nature, whenever its link with the object of the contract is possible. This applies more precisely in some furniture supply contracts for participation in fairs, travel agency service contracts, audit service contracts, consultancy contracts, IT support service contracts, etc. Failure to comply with these conditions may entail for the contractor the penalties established in the specific administrative clauses that govern that range of contracts. 5.1 EU GPP Food Catering Services and Vending Machines Criteria The EC has developed GPP criteria for specific sectors to facilitate the inclusion of environmentally friendly requirements. GPP criteria are to be understood as part of the procurement process and must comply with its standard format and rules as set out in the 53 https://ec.europa.eu/environment/gpp/what_en.htm 54 Ibid. 55 https://ec.europa.eu/environment/gpp/action_plan_en.htm A2C – Deliverable D7.14v1.0 Page | 31 6.2.7 Grants for the programme for the application of precision agriculture and 4.0 technologies in the agricultural and livestock sector, as part of the Plan to boost the sustainability and competitiveness of agriculture and livestock farming Objective: Call for aids for the implementation of equipment or adaptation of existing equipment to precision agriculture in agricultural holdings, aimed at meeting the objectives of the Green Pact in the agricultural sector. Beneficiaries: Citizens and Companies and other Entities. • Natural or legal persons, of a private or public nature, who are owners of livestock farms, provided that they are considered SMEs. • In the case of collective investments, groups of natural or legal persons, of a private or public nature, or without their own personality in accordance with the terms of Article 67.2 of Royal Decree-Law 36/2020, of 30 December, and any organisation or association of producers recognised by the competent authority, comprising a minimum of five owners of farms, provided that they are considered SMEs. 6.2.8 Grants for the consolidation of irrigation by using reclaimed water from wastewater reservoirs Objective: To grant aid for the consolidation of pre-existing irrigation systems in irrigation communities through the execution of new works, installations, devices and equipment that enable the incorporation and use in irrigation areas of reclaimed water from wastewater treatment plants. Beneficiaries: Companies and other entities. Irrigation communities are attached to the basin organisation of the Segura Hydrographic Demarcation whose irrigation area is located mainly (more than 50 %) in the Region of Murcia and on which the financial burden of the investments and expenses considered eligible falls. 6.2.9 Grant for the improvement of energy efficiency and renewable energy generation in irrigation communities. EURI Funds – RDP 2014-2020 Objective: Call 2022 with EURI funds for grants to improve energy efficiency and renewable energy generation in irrigation communities and general irrigation communities in the Region of Murcia. Beneficiaries: Companies and other entities. Irrigation communities and general irrigation communities – user communities regulated in Chapter IV of the Consolidated Text of the Water Law approved by Royal Legislative Decree 1/2001, of 20 July and in Chapter IV of the Public Hydraulic Domain Regulations approved by Royal Decree 849/1986, of 11 April. A2C – Deliverable D7.14v1.0 Page | 32 7. Private Financing Schemes in the Region of Murcia Two different private financial schemes are considered in this section. First, private financial schemes from bank and financial cooperatives are described. Secondly, some alternative non-bank based financial schemes are detailed. 7.1 Bank and Financial Cooperatives Schemes The Bank of Spain has shown its concern regarding sustainable economy by prioritising in its research agenda an analysis of the multiple implications that climate change and the transition towards a more sustainable growth model have for the economy as a whole and for the financial system. This is reflected in the last report of analytical and research priorities for 2020-2024 64 . Among the long-term trends of the Spanish economy, it prioritises the study of the informative content on sustainability and the degree of compliance with the recommendations on climate risk included in corporate reports, as well as the incorporation of sustainability factors in public debt markets, in portfolio management and in the conduct of monetary policy. According to the Regional Statistics Center of Murcia, in 2022, 25 different credit institutions operated in the Region, including credit cooperatives and banks. Together, totalled to 520 branches, from which 187 are based in Murcia city, and 76 in Cartagena, the two most populated cities in the Region. On one hand, the most representative entity among banks is Caixabank, with 167 branches; and on the other hand Cajamar Group, with 113 branches, within credit cooperatives. The Cajamar Cooperative Group has always worked with an eye on local development and, undoubtedly, the agri-food sector is its most intense field of action. Their main commitment has been to give their best to the field, to all the companies in the sector and to its auxiliary industry. In this way, the trajectory has been parallel to that of those areas in which they have had a commercial presence. And thus they have made the agri-food culture their own. Their DNA is an agro-DNA. The agri-food sector represents a high percentage of their total activity, and therefore, they have developed their own structure (internal and external), recognising the role of the economic sector as a pillar of the maintenance and development of the entity. In this sector there are many elements that differentiate them from other entities: ● A wide range of specific products and services; ● Their commitment to research and innovation in production systems; ● And the dissemination of knowledge among farmers and managers in the auxiliary industry. 64 Banco de España. 2021. Prioridades analíticas y de investigación del Banco de España 2020-2024. https://www.bde.es/f/webbde/INF/MenuVertical/AnalisisEconomico/Actualizacion_2021_Prioridades_analitic as_BE.pdf A2C – Deliverable D7.14v1.0 Page | 33 For them, providing support and quality service to farmers is essential, regardless of the volume. And to the companies that bring together cooperation and channel their prosperity as well. This is the case with cooperatives, which for years have made possible that the effort of the farmer has a reflection with a lot of specific weight in all corners of Spain and numerous countries of the European Community. The Ethics and CSR Management Committee of Banco de Crédito Cooperativo, head of Grupo Cooperativo Cajamar, ratifies and promotes its commitment to the social, economic, and sustainable environment in which it interacts. Hence, although the very nature of its activity generates a minimal environmental impact, it has committed to sustainable development within its business model that contemplates not only direct impacts, but also indirect ones generated through the consequences of its financing activities, asset management and the management of its supply chain. Cajamar Cooperative Group’s mission is to contribute with financial solutions to the economic development and social progress of its members, clients, and the environment in which the group operates through a unique strategy based on the principle of cooperation, social economy, and sustainable development. Their vision is being the market leader in cooperative banking and a reference for the agrisector in Spain, recognised for its strength, commitment, and high ethical standards in relation to their customers, members, employees, and the environment in which they operate, based on a sustainable model. Their purpose is to continue ensuring people’s well-being and social progress, by cooperating to generate ideas and innovation that contribute to sustainable connectedness of territories. The cooperative banking model brings diversity to the banking system: It truly contributes to local sustainable development, generates a stable and lasting relationship with the environment, reduces the risks associated with speculation and the generation of bubbles through a countercyclical business model, contributes to reducing the risks associated with the usual baking model: moral hazard, adverse selection, and asymmetric information. Their main objectives: ● To adapt to regulatory expectations, which encompass compliance with the EU action plan for sustainable finance and adaptation to important regulatory changes in disclosure and management of environmental risks; ● To expand the products and services catalogue that include ESG criteria (Environmental, Social and Governance), responding to demand of individuals and companies and taking advantage of financing opportunities that will arise in the transition towards low carbon economy; ● To advance in climate and environmental risk management through the implementation of climate indicators in the risk methodology and manuals, and developments in carbonisation analysis process of the portfolio; ● To develop and implement an internal training plan in sustainable finance to strengthen the presence of values related to sustainability in the group’s culture. A2C – Deliverable D7.14v1.0 Page | 34 ● Continue reinforcing the presence of sustainability and the consolidation of ESG criteria in the group’s strategy and governance. CaixaBank is a highly representative entity in the region. It has an environmental and climate strategy whose objective is to contribute to the transition towards sustainability by financing and investing in sustainable projects, environmental and climate risk management, and the reduction of direct impact of our operations. Within this strategy, CaixaBank includes financial lines like: ● Loans linked to sustainability variables which are loans linked to ESG (Environmental, Social and Corporate Governance) criteria (€10,832 million mobilised through the 92 loans made available in 2021); ● Green loans: These are loans with a positive environmental impact, whose underlying are eligible projects or assets, in areas such as renewable energy, energy efficiency, sustainable transport, emission reduction, waste treatment and sustainable building, which comply with the Green Loan Principles (GLP) issued by the Loan Market Association (€1,625 million mobilised in 36 green loans in 2021). ● Eco-financing: Encouraging sustainable investments that use resources more efficiently and/or reduce environmental impacts. To do this, they offer personal ecoloans and eco-microloans to finance the purchase of efficient vehicles and household appliances and home renovations to improve energy efficiency. And also financing projects related to efficient water use, renewable energies, waste management, energy efficiency, ecological agriculture and rural development, through eco-financing lines for the agricultural sector (€61 million made available through 919 loans linked to eco-financing lines in 2021). Banco Sabadell is also among the most represented entities in the region of Murcia. It has impulse different projects towards circular economy (Givers, W3R, Ding Dong project or B·COME). Banco Sabadell is committed to sustainability, and it has established a commitment to sustainability, a framework for action that ensures the integration into a strategy of a forward-looking vision in relation to environmental, social and governance (ESG) commitments, that aligns its business objectives with the Sustainable Development Goals (SDGs), and that establishes action levers to generate transformation and promotion activities. To do this, it has brought on board all of the institution’s corporate bodies and established four strategic pillars: ● Progress as a sustainable institution; ● Support customers in the transition to a sustainable economy; ● Offer investment opportunities that contribute to sustainability; ● Work together for a sustainable and cohesive society. Banco Santander is another bank entity which has reinforced its commitment to the circular economy by converting its cards into street furniture. It also has implemented subsidies and grants for sustainability such aids for energy efficiency, self-consumption aid or moves plan. 65 65 https://www.bancosantander.es/en/santander-sostenible/ayudas-subvenciones-verdes A2C – Deliverable D7.14v1.0 Page | 35 Withing other entities with presence in Murcia it is worth mentioning BBVA which presents a wide portfolio of funds for investing in sustainable assets. Other programs and sustainable financial lines can be consulted on the following websites. Bancofa r https://www.bancofar.es/documents/sostenibilidad Bankint er https://www.bankinter.com/empresas/financiacion BBVA https://www.bbva.es/general/sostenibilidad/soluciones-paranegocios.html?int=banndesthomep-landcampsoste CaixaBa nk https://www.caixabank.com/es/sostenibilidad/transicion-sostenible/negocio-sostenible.html Caja Rural Central https://www.ruralcentral.es/es/sostenibilidad Caja Rural de Granad a https://www.cajaruralgranada.es/es/autonomos/lineas-inversion Cajamar https://www.bcc.es/es/responsabilidad-corporativa/gestion-ambiental Deutsch e Bank https://country.db.com/spain/sostenibilidad Ibercaja https://www.ibercaja.es/empresas/soluciones/empresas/https://www.ibercaja.com/sostenibi lidad/compromisos-con-el-medio-ambiente/iniciativas-medioambientales ING https://www.ing.es/sobre-ing/banca-responsable/planeta# Kutxaba nk https://www.kutxabank.com/sostenibilidad Renta 4 https://www.r4.com/que-necesitas/compromiso-social/inversion-sostenible Sabadel l https://bancsabadell.com/cs/Satellite/SabAtl/PYMEs/1191332199861/es/ Santand er https://www.bancosantander.es/santander-sostenible/ayudas-subvenciones-verdes 7.2 Alternative Private Financing Schemes in the Region of Murcia In Murcia one can find alternatives to bank-financing schemes. Some of them are described in the table below. Alternative Private Financing Schemes in the Region of Murcia ICREF lines ICREF+AGRO Aim Financing self-employed and companies in the agricultural and agri-food sector to improve the fluidity of credit, thus being able to serve the modernisation and innovation of these sectors, and that can also contribute to the maintenance and creation of employment, also offering the personal guarantee for 100 % of the amount of the loan by AVALAM S.G.R. A2C – Deliverable D7.14v1.0 Page | 36 Target Self-employed and companies in the agricultural sector (agriculture, livestock and fishing) and agri-food (food and beverage companies) Financial magnitude Total financing scheme: €12 million (€6 million Financial Entities + €6 million ICREF) ICREF financia 100 Aim Financing the self-employed, entrepreneurs and micro-enterprises to undertake their business projects, allowing them to consolidate and even increase their market share, also offering a personal guarantee for 100% of the loan amount from AVALAM S.G.R. Target Self-employed and SMEs Financial magnitude €6 million (€3 million Financial Entities + €3 million ICREF) AVALAM lines AVALAM industrial support line Aim Investment and working capital linked to the growth or start-up of the SME. CERSA, through the Ministry of Industry, Commerce and Tourism, subsidises opening, study and guarantee commissions at zero cost and reduces the interest rate to 1.80%. Target SMEs whose activity is carried out in the industrial, manufacturing and services to industry sectors. SMEs with a legal nature that make an industrial investment, even if they are not industries. Financial magnitude Up to €600,000 AQUISGRAN Aim AQUISGRAN is a new line of non-bank business financing that is channelled exclusively in the region of Murcia through AVALAM without the intervention of a financial institution. This is a pioneering formula in Spain to promote access to credit for SMEs and the self-employed in an agile and direct manner. Target SMEs and freelancers with headquarters in the Region of Murcia Financial magnitude Investment: maximum €300,000. Up to 7 years and up to 12 months of optional grace period. Current: maximum €300,000. Up to 5 years and up to 12 months of optional grace period. Entrepreneurs: maximum €50,000. Up to 5 years and up to 12 months of optional grace period. CRECE Aim Investment in fixed assets for the business such as machinery, facilities, means of transportation, reforms of the facilities, acquisition of real estate, etc. Target SMEs and freelancers belonging to sectors not excluded from this aid: Companies operating in the real estate sector, companies without staff, companies in crisis, companies that do not comply with the legislative requirements in social, labour, ethical and environmental matters that are applicable at all times, companies and organizations dependent on or owned by the State, Autonomous and Local Public Administration. A2C – Deliverable D7.14v1.0 Page | 37 Financial magnitude Up to €600,000 INFO Grants INFO grants to create or maintain employment Aim The grant program is aimed at those companies that have the initiative to create employment or maintain employment and that carry out a training workshop that contributes to their transition towards the green economy or their digital transformation, depending on the type of subsidy requested. Target a) Those micro-enterprises and self-employed workers that carry out their activity in the territorial scope of the Region of Murcia, which have at least one work centre open in said territory, which have between one and nine salaried workers and a turnover or balance less than two million euros. b) Cooperatives and labour companies that carry out their business activity in the territorial scope of the Region of Murcia that have at least one open workplace in said territory. In the case of cooperatives, they must have opted for the modality of assimilated to employed persons, for the purposes of Social Security. Financial magnitude • Aid for job creation: €5,000 • Aid to maintain employment: €3000 INFO Call for Energy Efficiency Actions Aim Program aimed at encouraging and promoting actions in SMEs and large companies in the industrial sector that reduce carbon dioxide emissions and final energy consumption, by improving energy efficiency, thereby helping to achieve reduction targets of final energy consumption set by Directive 2012/27/EU, of the European Parliament and of the Council, of October 25, 2012, on energy efficiency Target Companies that are considered SMEs or large companies in the industrial sector, whose CNAE 2009 is between 07 and 33 and 35 to 39 and energy service companies. Financial magnitude The amount of the aid will be the lesser of the following three: 1. 30% of the eligible investment of the project. 2. The maximum amount that, depending on the region where the project is located and type of promoting company: 35% (large company), 45% (medium) and 55% (small) 3. The maximum amount established in the corresponding call. A2C – Deliverable D7.14v1.0 Page | 38 8. Financing Schemes & Agro2Circular Business Models Food production processes are becoming increasingly intensive in energy, land, and water consumption, posing significant pressure on global planetary boundaries. 66 In particular, intensive agricultural practices are responsible for one-third of global terrestrial acidification 67 and 80% of global deforestation. 68 The agri-food sector is also one of the highest contributors to climate change, releasing between 21 and 37% of total GHG emissions. 69 In Europe, food production is responsible for 30% of GHG emissions. 70 Additionally, the environmental costs of food production are furtherly exacerbated by high losses across the supply chain, accounting for about 20% of the food globally produced. 71 Furthermore, a significant amount of multilayer plastic films is used as industrial packaging for the protection of food and agriculture for crops, and only a low share of it is sorted and recycled in Europe. 72 This is due to several reasons, including the lack of sorting and recycling technologies and the unavailability of financially and environmentally sustainable models for the valorisation of this type of waste. Most of this waste is indeed landfilled or incinerated, generating a relevant environmental burden and a loss of economic value. In this context, the application of circular economy principles in the agri-food sector constitutes a great opportunity to reduce its environmental impacts and develop more sustainable food systems, enabling the transition towards resource-efficient production modes. 73 The transition from a linear to a circular economy requires not only the adoption of new products, technologies and processes, but also of innovative business models that find new ways to generate value for companies and society contributing to sustainability, efficiency and productivity. 74 This chapter aims to explore the concept of circular business model in the context of Agro2Circular project and clarify its relation with the financing schemes presented in this deliverable. 66 M. Crippa, E. Solazzo, D. Guizzardi, F. Monforti-Ferrario, F. N. Tubiello & A. Leip. 2021. Food Systems Are Responsible for a Third of Global Anthropogenic GHG Emissions; FAO, a c. di. 2016. Forests and Agriculture. Land-Use Challenges and Opportunities. State of the World’s Forests 2016. 67 J. Poore & T. Nemecek. 2018. Reducing food’s environmental impacts through producers and consumers. 68 FAO, a c. di. 2016. Forests and Agriculture. Land-Use Challenges and Opportunities. State of the World’s Forests 2016. 69 IPCC. 2019. Summary for Policymakers. Special Report on Climate Change and Land. 70 Crippa, E. Solazzo, D. Guizzardi, F. Monforti-Ferrario, F. N. Tubiello & A. Leip. 2021. Food Systems Are Responsible for a Third of Global Anthropogenic GHG Emissions. 71 UNEP. 2021. UNEP Food Waste Index Report 2021; Vasileios Rizos, Julie Bryhn, Monica Alessi, Edoardo Righetti, Noriko Fujiwara & Cristian Stroia. 2021. Barriers and Enablers for Implementing Circular Economy Business Models. Evidence from the Electrical and Electronic Equipment and Agri-Food Value Chains. 72 A.-S. Bauer, M. Tacker, I. Uysal-Unalan, R.M.S. Cruz, T. Varzakas & V. Krauter. 2021. Recyclability and Redesign Challenges in Multilayer Flexible Food Packaging. 73 OECD. 2019. Business Models for the Circular Economy. Opportunities and Challenges for Policy. 74 Augusto Bianchini, Jessica Rossi & Marco Pellegrini. 2019. Overcoming the Main Barriers of Circular Economy Implementation through a New Visualization Tool for Circular Business Models. A2C – Deliverable D7.14v1.0 Page | 39 In general terms, a business model describes how a firm generates, captures, and delivers value. 75 It provides a simplified representation of the elements constituting a complex organisational system, the interactions between them, and how they relate to the organisation’s business logic. 76 In other words, a business model represents a firm’s competitive strategy. 77 Circular business models aim to integrate principles of circular economy (reuse, reduce recycle) into the business model design, to internalise the social and environmental costs of materials and products and optimise resource value. 78 In addition to minimising the use of natural resource inputs, circular business models differentiate from traditional ones also for different approaches across the value chain. 79 For instance, a circular sales strategy tends to focus on providing higher-quality products rather than maximising the sales volume of short-lived ones. Another common circular strategy consists of providing access to shared products, rather than the proper ownership. Furthermore, circular businesses tend to supply customers with additional repair and remanufacturing services, to maximise the value of existing materials and foster customer loyalty. The growing literature on circular business models provides a great variety of approaches and definitions. Among existing taxonomies, we focus on the one adopted by the OECD 80 , which categorized circular activities according to the underlying business proposition. In its report, the OECD identifies five major business models: circular supply models, resource recovery models, product life extension models, sharing models, and product service system models. Figure 5 summarises the key features of the mentioned circular business, while Figure 6 illustrates their impact on the linear economy value chain. 75 Alexander Osterwalder, Yves Pigneur & Christopher L. Tucci. 2005. Clarifying Business Models. Origins, Present, and Future of the Concept. 76 Martin Geissdoerfer, Sandra Naomi Morioka, Marly Monteiro de Carvalho & Steve Evans. 2018. Business Models and Supply Chains for the Circular Economy; Alexander Osterwalder, Yves Pigneur & Christopher L. Tucci. 2005. Clarifying Business Models. Origins, Present, and Future of the Concept. 77 OECD. 2019. Business Models for the Circular Economy. Opportunities and Challenges for Policy. 78 Anne P. M. Velenturf & Phil Purnell. 2021. Principles for a Sustainable Circular Economy. 79 OECD. 2019. Business Models for the Circular Economy. Opportunities and Challenges for Policy. 80 Ibid. A2C – Deliverable D7.14v1.0 Page | 40 Figure 5: The Impact of Circular Business Models on a Linear Economy (OECD, 2019) In the context of Agro2Circular, we recognize the circular supply models and the resource recovery models as the most relevant business modes for our project. Circular supply business models differentiate from linear models by replacing traditional inputs with more sustainable alternatives, such as bio-based, renewable, or recovered materials. In this way, adopting firms can simultaneously reduce the environmental pressures of their supply chains while ensuring that input materials do not eventually become waste. In this sense, this approach also reflects the logic of the resource recovery model where material recovery is considered at an earlier stage. The advantages of adopting such business models include the possibility to reduce risks from the introduction of more stringent environmental regulation or risks from using natural resources which are geographically concentrated in a small number of countries. In addition, by replacing traditional inputs with more sustainable alternatives, firms can label their products as “green” and broaden their market to environmentally conscious consumers. A2C – Deliverable D7.14v1.0 Page | 47 Specifically, investments on projects related to solid waste management will be implemented in the regions of Liguria, Piedmont and Reggio Emilia. Examples of financed actions include, among others, a plant to produce pallets from wood waste and the purchase of new vehicles for waste collection. On the other hand, investments in the hydropower sector were implemented in 16 sites in the Piedmont and Campania regions. 9.3.4 Winnow, Romania The food waste management company, Winnow, will develop and introduce EIB funds worth EUR7.5m for the development of software and hardware solutions to help staff in commercial kitchens to reduce the amount and type of food wasted. The aim is to provide users with data for the management and prevention of food waste. As part of the European Growth Finance Facility (EGFF), the loan scheme is designed to offer SMEs and mid-cap companies' investment in tangible and intangible assets thus achieving a positive crowding-in effect, attracting additional private investors to the companies. 99 9.3.5 Tackling Food Waste, France Straying away from traditional food waste practices of paying other companies to either burn or dispose of unsold products in landfills, the French company, Phenix, has developed an innovative and digital alternative. The service allows companies to sell their food items just before its expiry date as well as help provide food donations to charities. 100 This scheme ensures that no food is wasted while money is saved not only on the food item itself but also with its waste disposal. This idea has also given businesses financial incentives such as tax credits when they donate to charities. Phenix has expanded their services to Portugal and Spain. Their idea has also received investments from Bpifrance in order to internationalize and grow further. 9.4 De Clique (Netherlands) De Clique is a Dutch company that collects food by-products such as coffee grounds and other food waste from companies to resell them to third party suppliers and product manufacturers who transform them into new products such as food ingredients, cosmetics and biomaterials. In order to be more environmentally friendly, the collection process is carried out by bicycle couriers and electric vehicles. On the alternative, inedible food byproducts and other organic waste are often landfilled or incinerated. The company thus guarantees the reuse of materials by collecting and separating waste into high-value products that last in the community economy. 99 https://www.eib.org/en/press/all/2019-251-investment-plan-for-europe-support-to-improve-foodmanagement-in-romania 100 European Investment Bank. 2019. Joint Initiative on Circular Economy [Factsheet]. https://www.eib.org/attachments/joint_initiative_on_circular_economy_en.pdf A2C – Deliverable D7.14v1.0 Page | 48 Currently, it estimates that only 2% of organic waste produced in cities is reused to make valuable products, which is a large untapped potential opportunity. This system helps to increase this figure to 10 tons per month by reducing dependence on finite resources. 9.5 GPP Good Practices 9.5.1 GPP in Flemish Governments Cooperation Agreement with Municipalities During the years 2008-2013, the Flemish Department of Environment, Nature and Energy awarded grants to the municipalities that signed a cooperation agreement. Additional grants could be obtained on a voluntary basis through actions at the award or project level 101 . One of the ten topics covered was optimal ecological use, including the sustainable use of wood, certified waste in tenders and passive awareness. On the procurement level, environmentally friendly products should be used and promoted to the target groups (product groups are as follows: Compost, construction waste, materials from recycled plastics, office supplies, catering, environmentally friendly products, cleaning products, wood preservatives, paints and varnishes, products from recognized recycling points). GPP guidelines have been developed for these product groups. The projects approved were eligible for 50% funding. The evaluation was based on annual reports. For many municipalities, this marked the beginning of green procurement in their organization. €30,000,000 in subsidies were needed. The number of grants depended on the inhabitants and the area of the municipality. The basis was €1.7/hour + €1.4/ha (minimum €20,000). The subsidy was €30,000 x the maximum number of full-time sustainability workers specified in the contract. Projects received €1.7/hour + €1.4/ha x 61.1%. 102 9.5.2 GPP Regional Plan, Liguria The new Green Public Procurement Plan is based on the previous strategy and was developed to raise awareness of the circular economy and its application in the regional market by increasing the participation of SMEs in tenders and improving their knowledge of green certifications. 103 The main objective is to implement green procurement by including CAM (minimum environmental criteria) in public tenders for goods and services. The plan is innovative and includes training for public administration and the private sector. On the public administration side, this project aims to promote capacity building for the preparation and evaluation of green tenders. The private sector, for its part, will promote capacity building in companies for environmental sustainability criteria and certification. Under this framework, SMEs will have to acquire knowledge and adopt European sustainability tools such as EMAS, PEF, EU ECOLABEL and LCA studies. In fact, the existence of these EU instruments, in particular EMAS, is rewarded in the evaluation of tenders. The plan promotes 101 https://www.interregeurope.eu/good-practices/gpp-in-flemish-governments-cooperation-agreement-withmunicipalities 102 https://omgeving.vlaanderen.be/nl 103 https://projects2014-2020.interregeurope.eu/enhance/news/news-article/14499/enhance-and-the-newgpp-plan-of-the-liguria-region/ A2C – Deliverable D7.14v1.0 Page | 49 the use of European sustainability instruments to foster the recovery and increase the resilience of SMEs and the regional and national market after the Covid-19 pandemic. The project and its entire implementation required about 35,000 euros and the participation of 4 members. The rest of the additional activities such as stakeholder meetings, training, etc. required about 15,000 euros and the hiring of 2 staff. 104 9.5.3 Promotion of Green Public Procurement by Providing Green Technical Specifications, Lithuania The Central Procurement Organisation (CPO LT) is the body in charge of procurement, both at the national and local level, on behalf of the contracting authorities. 105 Acquisitions are conducted through the CPO LT electronic catalogue, which minimizes the procurement procedure, optimizes the purchasing cycles, and reduce the costs of the process. This is structured into 49 different groups within the categories of services, goods and works. Through this methodology, it is possible to determine which technical specifications are necessary to qualify for green public procurement. This facilitates the process of green public procurement, as it is not necessary for the contracting organizations to establish the criteria themselves. In addition, these entities have the possibility to use these technical specifications as an example and carry out this process themselves. 99% of procurements are carried out using green specifications. There are 380 ecological specifications for categories such as office supplies, cleaning services, IT and office equipment, cell phones, furniture, and foodstuffs. During the first half of 2020, ecological goods and services acquired through the CPO LT ecatalogue achieved a total value of €18 million. 106 9.5.4 Good Practices in Green Public Procurement in Regional Waste Management, Spain CREA oversees waste management in the districts of Vinalopó, Spain. One of the main environmental problems is the huge amount of waste that is landfilled and cannot be recycled. 107 As a solution, CREA aims to reduce the amount of waste by recycling and classifying the waste generated for subsequent recovery or reintroduction into the value chain. This project is particularly essential in densely populated areas, where there are environmental problems related to poor waste management and uncontrolled landfills. All municipalities are required to have an environmental plan that includes green procurement measures tailored to the needs and reality of the municipality. 104 https://projects2014-2020.interregeurope.eu/fileadmin/user_upload/tx_tevprojects/library/file_ 1655473732.pdf 105 https://www2.cpo.lt/en/eu-support/ 106 https://www.interregeurope.eu/good-practices/promotion-of-green-public-procurement-by-providinggreen-technical-specifications 107 https://elretodelreciclaje.com/crea-consorci-de-residus/ A2C – Deliverable D7.14v1.0 Page | 50 10. Recommendations ● To redirect financial resources from linear to circular solutions, negative externalities need to be systematically priced in as circular businesses would benefit from corresponding price signals. ● The private sector should not be forced to share or promote sustainability, rather reinforcing the idea that it should be based above all on business opportunities rather than just legal obligation or conviction. Not harming the environment or the climate is not just a matter of corporate social responsibility, the circular economy is a business opportunity for the private sector. ● The creation of reporting standards for circular businesses and the adoption of some standardised reporting measures would reduce asymmetric information and distortions that hinder the growth of circular investments. ● The lack of credible commitments from the public sector poses a risk to long-term investment decisions by private sector actors that needs to be addressed. ● The search for financing opportunities for the circular economy should not be limited to government support or incentives, but should also consider different business models, loans, and private sector support. Although public funding is widely available in this area, it is not possible to finance all projects. Business models with a high sustainability contribution can receive funding from the private sector through a winwin relationship. ● It is also possible to find investments in innovative ideas with alternative mechanisms such as crowdfunding. Small investors can use such mechanisms to make all their investments. Moreover, a business idea can be promoted at the same time thanks to the large audience it reaches. ● If there are no grant opportunities for investments in the circular economy or if there is no suitable programme at regular intervals, the loans granted by investment banks or private banks should be considered. Since such loans are supported by certain consortia or the public sector, they offer the chance to find financing that is more suitable than the market conditions. ● When looking for funding for projects, it helps companies to find the right fund if they first define the focus of their activities. This is because each programme has its own priorities and funding mechanisms. For example, if the project idea is more of a research and modelling project or a pilot application, it would make sense to use the tendering opportunities of the Horizon Europe programme. ● The legal status of a project organisation can affect the use of the programmes. Some programmes are only suitable for public institutions or non-governmental organisations, while others are suitable for for-profit organisations. When applying for the programmes, these criteria need to be checked. ● The circular economy concept is inherently a multi-stakeholder approach that involves many processes. Therefore, giving high priority to stakeholder participation and collective collaboration in the formulation of projects will help them gain clout and attract more funding. ● Cooperation between actors in the field of the environment or circular economy is called to be a line of work for the present and for the future. Companies can use the A2C – Deliverable D7.14v1.0 Page | 51 sub-products of other firms, this will enable cooperation between companies that had always presented cultural barriers, at least in Spain (win-win approach). ● When developing business models for the circular economy, the positive and negative effects of incentives in the market and financial analysis need to be considered. This is because the additional support received for transactions during the operational process may shorten the return on investments. On the contrary, business models may become less profitable due to additional obstacles they encounter. ● The recycling and upcycling rate of organic products is still very low, which means that there is still a long way to go in this area, which holds investment potential. If considering the principles of waste prevention, sharing systems and the win-win principle when developing business models, they will have a high chance of success and minimise harm to nature. ● The importance of technological partners (i.e., technological centres and other research and technology organisations) promoting technology and knowledge transfer, and the implementation of new methods, advanced materials, and improved processes in enterprises, in order to accelerate industrial transition towards a green economy. ● Investments should contribute to the extension of product life cycles and the reuse of waste and the valorisation of sub-products in line with EU regulations to support the transition to a circular economy. ● Investments should contribute to reducing and optimising water resources so that adequate ecological levels are maintained in aquifers and basins. ● Investments should contribute to reducing all forms of pollution that negatively impact ecosystems and human health. ● Investments should contribute to protecting or restoring biodiversity and achieving good ecosystem status. 10.1 Green Public Procurement ● GPP is also a kind of incentive and an important tool for actors to achieve a positive external impact on nature. Public institutions can use their purchasing power to put pressure on suppliers to achieve positive environmental impacts through GPP. ● Supplier should comply with GPP criteria as soon as possible to stay ahead of the competition, because the number of institutions requiring these criteria is increasing by the day. Many environmentally friendly applications that are preferred today will be mandatory tomorrow. ● Environmental aspects and opportunities to apply green procurement criteria should be considered in all procurement processes, especially in terms of reducing energy consumption (electricity, heat and water) and emissions (CO2 emissions and particulates), recyclability, life extension, material selection, use of recycled materials and waste prevention. ● Possibilities for buying used products and products made from recycled materials should be considered. A2C – Deliverable D7.14v1.0 Page | 52 ● The products procured should be recyclable and sent for reuse or recycling after use. ● Life-cycle costs should be taken into account in procurement. This allows procurers to choose the most economically advantageous option on a life-cycle basis. ● Resource-efficient procurement options should be considered. These include the procurement of services instead of products, optional forms of ownership and the reuse of products. ● Eco-label criteria can be used when formulating tenders. A2C – Deliverable D7.14v1.0 Page | 53 11. Annex 11.1 References - Alain Daou, Camille Mallat, Ghina Chammas, Nicola Cerantola, Sammy Kayed & Najat Aoun Saliba. 2020. The Ecocanvas as a Business Model Canvas for a Circular Economy. Journal of Cleaner Production 258. 120938. https://doi.org/10.1016/j.jclepro.2020.120938 - Alexander Osterwalder & Yves Pigneur. 2010. Business Model Generation. 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