By Dr. Maja Berden Zrimec, researcher and content writer
Many companies are working hard to change their business in the hope of getting additional value streams and becoming less vulnerable to the changes we are facing. Various studies imply that reorganising value chains is imperative to make them more resilient (1). And while the world is turning to the circular economy, and bioeconomy to become more sustainable, companies are having trouble making the necessary changes. So-called circular business models enable a step towards these objectives (2). Nevertheless, it is a challenge for companies to find compatible actors in the newly created value chains. Many companies have abundant bioresources that could be further utilised for new products or services, but have trouble finding and connecting with a business that could take advantage of their resources. On the other hand, a company might be searching for bioresources and wouldn’t know where to turn.
The value chains needed to create business between companies are in many cases completely missing. Companies are still trapped in the linear way of thinking, where the value creation is straight forward and end-of-life for the product is waste disposal or, at best, recycling of its parts. Circular business models support the prolonged lifetime of a product by following the 4R principle of repairing, reusing, remanufacturing, and recycling (3). Consequently, waste is reduced or used as a secondary raw material, which in turn reduces the need for mining of primary new materials. You can read more about barriers companies face in their transition to a circular economy and value creation in circular business models in our recent blogs (2,4).
Harsh reality of companies’ transition to circular bioeconomy
Although the principle of a circular approach looks very promising in theory, in reality, the producers of biomass waste, that has now become a bioresource, don’t know who could be their buyer. So they are stuck with high waste management costs. They don’t have the knowledge, time, or human resources to find the valuable cross-sector feedstock and market opportunities for their waste. In truth, the circular bioeconomy (CBE) is still a relatively new economic field, and the connections of biolinks have not yet been established. In addition, it is difficult to find upstream and downstream partners and develop new business models when the technology is still lacking or policy is not supporting the value streams. Nevertheless, circular bioeconomy offers a high potential for overcoming these challenges, especially with the support of key players like regions.
Role of regions and regional development
Most sustainable exchange of bioresources takes place inside the regions or between the neighbouring regions. Regions and regional development should thus play an essential role in the transition to a circular (bio)economy because they can strongly support the creation of new local, regional and cross-regional circular value chains with critical mass (5). The insight into regional cluster circumstances reveals diversity among regions that must be taken into account when designing specific regional CBE-strategies, taking the local strengths and weaknesses into account while avoiding “one fits all” solutions (6).
Unfortunately, despite the high interest and demand, proper infrastructure for value chain development and optimisation is missing as discovered by Anteja’s study: Impacts and Potentials of the Ukraine Crisis on Supply Chains Development for the Danube Region (7). Cluster initiatives are mainly focussing on innovation, skills development, export promotion, networking and experience exchange, but not much on business generation or value chain development. Regional developers or chambers neither have the skills nor the capacity to act accordingly. Furthermore, it is not in their scope of work. Research entities or technology transfer centres cover only small areas of the supply chain. Additionally, there is a lack of understanding of natural resources as alternative, unexploited bio-based inputs (8). In a globalised economy, interregional opportunities and solutions based on locally available resources often remain untapped (8). Due to a missing holistic cross-regional approach, many actors in bio-based industries operate in a disconnected mode (8).
The shift towards a bio-based economy represents a particular opportunity for the regions of the Alpine space and Danube region which are important reservoir of biomass resources (9,10). Knowledge and technology of sustainable solutions is being developed especially in the sectors of green chemicals, biopolymers or bio-based materials (8). This is why Value Chain Generator tool was developed to help companies match with compatible partners (8,9).
Matching compatible companies with Value Chain Generator (VCG.ai)
The Value Chain Generator (VCG) is a digital solution for matching companies in the scope of circular bioeconomy. VCG finds unexploited business opportunities for bio-based value chains based on available data to overcome the existing information gaps. It matches companies based on their resources, including waste, and on established good practices in value chain design.
VCG empowers clusters and business support organisations to explore and develop new value chain designs by matching production inputs and outputs across industrial sectors. It also provides a knowledge transfer network by facilitating the sharing of good (bio)links with other clusters and organisations to increase the overall knowledge. The good practices shared within the system can be applied to individual companies, enabling clusters to find the right partners to implement selected circular value chain models. To provide solutions for companies, VCG uses smart technologies, including artificial intelligence, machine learning and natural language processing to process big data sets of companies and find the right solutions and partners.
Digital solutions play a very important role in the development of circular bioeconomy. VCG comes at the right time as Europe is lagging behind with digital technology, especially ICT, which is already seen in the slower GDP growth (11). ICT has grown from being a separate sector into an important tool in industrial sectors. Europe still lacks horizontal links that would enable ICT support in technology development (11). The new digital environment supports a broad range of platforms that can connect suppliers of goods and services to potential customers, making the value chain and individual businesses viable.
- Arh M., Manus M., Meier zu Koecker G., Dermastia M., Novak M. (2021): Value Chain Resilience during the COVID-19 Pandemic: Lessons Learned in the Food and Natural Cosmetics Sectors. In: Values Chains Transparency and Sustainability, M. Berden Zrimec (Ed.). Publishers: Anteja ECG, Ljubljana, Slovenia, and VDI/VDE Innovation + Technik GmbH, Stuttgart, Germany; DOI: 10.13140/RG.2.2.27618.45760
- Berden Zrimec M. (2022): Value creation in circular business models. VCG.ai blogs.
- Hansen EG, Revellio F (2020): Circular value creation architectures. Make, ally, buy, or laissez-faire. Journal of Industrial Ecology 24:1250–1273; DOI: 10.1111/jiec.13016
- Berden Zrimec M. (2022): Barriers and drivers of companies’ transition to circular economy. VCG.ai blogs.
- Metabolic (2019): Guidelines for achieving circularity in regional value chains. Project STEER.
- Stegman P., Londo M., Junginger M. (2020): The circular bioeconomy: Its elements and role in European bioeconomy clusters. Resources, Conservation & Recycling 6: 100029; https://doi.org/10.1016/j.rcrx.2019.100029
- Cigüt T., McManus M., Dermastia M. (2022): Impacts and Potentials of the Ukraine Crisis on Supply Chains Development for the Danube Region, Working paper. Publishers: Anteja ECG, Ljubljana, Slovenia, and VDI/VDE Innovation + Technik GmbH, Stuttgart, Germany; DOI: 10.13140/RG.2.2.17378.20161
- Keller M., Fischer A., Wessely D., Mudaffer A. (2021): Bio-based Business Opportunities Unearthed – The VCG Software Tool, Working Paper. AlpLinkBioEco; DOI: 10.13140/RG.2.2.25278.20802
- AlpLinkBioEco – Linking BioBased Industry Value Chains Across the Alpine Region. Interreg Alpine Space, 2014-2020.
- GoDanubio – Participative Ecosystems for fostering the revitalization of rural-urban cooperation through governing Danube Circular Bioeconomy. Interreg Danube Transnational Programme, 2020-2022.
- Smit S., Tyreman M., Mischke J., Ernst P. Hazan E., Novak J., Hieronimus S., Dagorret G. (2022): Securing Europe’s competitiveness: Addressing its technology gap. McKinsey Global Institute.