Funding for Projects in the Circular Economy

The circular economy (CE) refers to a transformation of the linear model of “extraction, production, consumption, disposal,” which is applied on a large scale but is being called into question due to the finite nature of natural resources. The CE is currently viewed as a satisfactory response to planned obsolescence, which encourages the waste of resources and the purchase of new products.

In France alone, ADEME, the Ministry of Ecological Transition, and the National Institute for the Circular Economy (INEC) provide different definitions on their websites. The two most authoritative definitions in the French context appear to us to be those of ADEME and the ISO 59000 standards.

According to ADEME, the circular economy is an economic system of exchange and production that, at all stages of the life cycle of products (goods and services), aims to increase the efficiency of resource use and reduce environmental impact while enhancing individual well-being. ADEME has also established the seven pillars of the circular economy: sustainable procurement, eco-design, industrial and territorial ecology, the functional economy, responsible consumption, extending the useful life of products, and waste recycling.

Recently, the ISO 59000 standards developed a definition of the CE which, with the help of the European taxonomy—whose objective is to direct investments toward activities deemed “green” that have a positive impact on the environment—will contribute to the standardization of this field by harmonizing its understanding and implementation. According to these standards, the circular economy is an economic system that uses a systemic approach to maintain a circular flow of resources, recovering, preserving, or increasing their value, while contributing to sustainable development. Resources can be considered from the perspectives of both stocks and flows. The inflow of virgin resources is kept as low as possible, and the circular flow of resources remains as closed as possible in order to minimize waste, losses, and discharges produced by the economic system.

The field of the circular economy therefore spans many sectors of activity, ranging from rental services—which require little technical knowledge of the circular economy—to recycling, which relies on advanced knowledge of process engineering. Financing circular economy projects poses a high risk for a financier due to the lack of historical data, which would allow for the establishment of predefined evaluation criteria for this emerging field. That is why we focus in this article on the issue of CE financing in order to provide some answers and direct the reader to useful bibliographic sources on this topic. We will first present several sources of funding designed to help entrepreneurs enter the market (section