Business models drive circular economies for food systems

Business models are not usually applied to agricultural and food waste recovery and reuse, but with the right combination of policies and incentives promising models could underpin more robust circular economies and transform rural-urban food and waste systems.

Background

As cities become hungrier and thirstier, farmers are struggling with depleted soils, water shortages and climate uncertainty. At the same time, urban areas are becoming vast sinks for organic waste – and the disposal of this waste in environmentally and socially acceptable ways is inefficient and unsustainable. The way forward is to mimic natural cycles by adopting the model of a circular economy – processing organic food waste, wastewater and human excreta to extract energy, nutrients, organic matter and water for agricultural use.

Innovation

WLE has identified opportunities for resource recovery and reuse (RRR) across the food, waste and sanitation sectors. Numerous technical and institutional solutions for recovering water, nutrients and energy from domestic waste streams have been compiled in the RRR report series. Recognizing that many of these solutions remain inaccessible to small-scale entrepreneurs and other stakeholders, WLE innovated a business model approach tailored to these groups. This is comprehensively covered in a catalog of over 45 case studies from around the world, each explaining the value proposition and value chain of the business in question and illustrating multiple pathways to partial or full cost recovery.

Building a circular economy to improve waste management (IWMI)

Impact

The business model approach championed by WLE targets entrepreneurs and has been translated into curricula to appeal to a wider spectrum of stakeholders. Twenty-two universities, mostly civil engineering departments, have expressed interest in adopting the RRR curriculum and its business modules, and over 10,000 students have participated in online courses so far. A course on RRR entrepreneurship for fecal sludge management is currently being used in India to train thousands of officials in the business model approach. Public-private partnerships, which can help surmount financing challenges and encourage innovation, have been facilitated in Ghana with impressive results. A wastewater aquaculture project implemented by the TriMark Aquaculture Centre and the Kumasi Metropolitan Assembly won awards at the Sanitation Challenge for Ghana in 2019, while the JVL-YKMA Recycling Plant, which processes organic waste and fecal sludge into compost and briquettes, was selected as a 2021 SEED Low Carbon Award Winner. New innovative models, such as swaps for farmers in Iran willing to trade their freshwater in exchange for larger volumes of wastewater for irrigation from cities, are also being explored.

Challenges

An enabling environment is critical to successfully apply business models to RRR innovations, particularly in low- to middle-income countries. The business model catalog and RRR series address:

Financial incentives and instruments for economic agents to internalize social/environmental costs, for example in the form of loans for infrastructure investment, and green taxation.
Policies, regulations and guidelines like the Netherlands’ overarching Circular Economy 2050 strategy, and streamlining of registration processes across institutions to encourage investment.
Technologies that match resource constraints, particularly in low- and middle-income countries.
Local capacities to implement RRR initiatives, since small-scale enterprises dominate the bio-energy and waste-to-compost sectors and training guidelines are needed.
Gender perspectives and stakeholder acceptance, as public awareness on the gender roles underpinning recycling and waste-to-compost schemes is low and poorly documented.

Next steps

Challenges remain – while the waste and sanitation sectors will probably always require subsidies, RRR can provide different degrees of cost recovery which can attract private sector participation and increase the service level of public waste management. These returns on investment would come in the form of socioeconomic benefits from improved sanitation and health and recovered resources for agricultural food production. These returns are fully internalized by governments and citizens, but difficult for a private company to monetize. Innovative finance and regulatory mechanisms are therefore needed, as well as stronger outreach efforts to business schools to explore institutional innovations for closing rural-urban resource loops.