Driving circularity in the global carpet supply chain
In this article, Andrew Shannon, partner at Circularity Capital, discusses how carpet manufacturing is changing to meet changing customer perceptions and stringent new environmental legislation. He also explains the pivotal role of finance of accelerating the sector’s progress towards a more circular economy.
According to recent market insight, the global carpet industry is worth more than $17 billion and is expected to grow at a CAGR of 4.1% between now and 2030.[1] This acceleration reflects rising demand for finished goods, coming as a direct result of rapid urbanisation and the post-pandemic commercial boom.
While the sector has always enjoyed stability, in recent years supply chain disruptions and raw material price hikes have seen production costs creep up. This, alongside energy price volatility, has hit manufacturers hard. Profits are down, demand is up, and businesses are starting to feel the pressure.
For some, the scenario is being seen as a major blow to growth, profitability and long-term success. However, others are seeing it as an opportunity to innovate and differentiate. Long gone are the days of stagnant supply chains and dated, linear, take-make-dispose models of production and consumption. The market leaders of tomorrow are turning towards new ways of working to maximise efficiencies and build a far more resilient future.
Harnessing the opportunity
While economic pressures are prompting the supply chain to embrace new ways of working, environmental legislation is also bringing about notable change. For example, the EU recently published its Circular Economy Action Plan (CEAP). Positioned as a cornerstone of the European Green Deal, the document provides a roadmap towards a circular industrial economy that prioritises the environment and works to eliminate waste.
CEAP focusses on four key objectives: making sustainable products the norm in the EU; empowering consumers to embrace circularity; focussing on the lifetime of products through a sectoral lens; and reducing waste. In simple terms, it aims to ensure that companies accelerate their transition towards circular business models.
The action plan aims to drive widespread business change. The EU is not simply looking for incremental improvements in technology, but instead is committed to driving a paradigm shift. Brands therefore need to think about a supply chain that makes the most of resources and reduces waste significantly.
Industry experts predict that the action plan will drive widespread change across multiple sectors, including carpet manufacturing, with businesses forced to amend their operations in order to remain compliant. Indeed, the EU is not simply looking for incremental improvements in technology, but instead is committed to driving a paradigm shift.
Brands therefore need to think about a supply chain that makes the most of resources and reduces waste significantly.
Change in practice
Circularity Capital is a major investor in Shark Solutions, the global leader in advanced recycled PVB (PolyVinyl Butyral) products. With manufacturing operations in both Europe and the United States, the innovative business has perfected the ability to separate the interlaminate PVB layer from broken windshields and architectural glass. Recognised by Bloomberg in its list of ’50 Global Leaders’, the company transforms reclaimed materials into highly valuable, non-toxic, sustainable, recyclable and price-competitive binders for use in paints, coatings, adhesives and flooring products – including carpets.
With a lower carbon footprint than more traditional binders, Shark Solutions provides a truly circular solution to help both customers and end users reduce their greenhouse gas emissions. With technical properties exceeding stringent customer requirements, and coming at a cost-comparable price point, the company is seeing strong interest from paint companies worldwide.
Indeed, Shark Solutions now manufactures tens of thousands of tonnes of material per year for leading industrial companies worldwide. This includes for use in a number of Cradle-to-Cradle Certified products – exactly the type of goods that CEAP is mandating in Europe.
As part of a continued commitment to driving circularity across the global carpet supply chain, the team have recently launched an innovative new binder, specifically designed for applications that require enhanced foaming, including carpet precoat, carpet backing and a diverse range of wider textile applications.
This is the latest announcement in a long line of successes for the circular brand. Earlier this year, for example, Shark Solutions partnered with Belgian manufacturer Tapibel to launch a sustainable range of commercial carpets. The agreement will see post-consumer rPVB used in precoat and secondary backing applications for Tapibel’s ‘Ecofuse’ range. Replacing more traditional oil-based latex binders, the products offer outstanding performance and durability, while simultaneously helping end users to reduce their greenhouse gas emissions.
By embracing the circular economy, Shark Solutions’ utilisation of materials that would otherwise be wasted keeps valuable resources within the value chain for far longer. In addition, its unique approach plays a key role in minimising the sector’s carbon footprint by offsetting the need for emissions-intensive virgin binders.
Embracing the circular economy
But why are businesses like Shark Solutions so pertinent? Well, they demonstrate how circular firms can outperform. Indeed, circular models that are restorative and regenerative by design can achieve both profit and purpose, while alleviating many of the challenges experienced by some of the sector’s more traditional approaches.
When it comes to carpet manufacturing, circular thinking can dramatically reduce waste, while tackling the wider issues of material use and environmental impact. What’s more, it can help to create a more resilient industry and drive widespread economic benefit.
When we founded Circularity Capital in 2015, we did so with the firm conviction that the entrepreneurs of businesses like Shark Solutions, who are developing the circular innovations to make this transition a reality, deserve a specialist investor with the right knowledge and network to unlock their full potential.
We have worked hard to develop a firm with the right capabilities to make this a reality and are currently deploying our second dedicated circular economy private growth-equity fund – at €215m, it is the largest of its kind globally.
Our current portfolio includes a number of leading circular businesses across Europe, but our ambition is to further grow this investment base by supporting leading, innovative, circular businesses where we can add value as a domain expert investor.
It’s clear to see that the circular economy provides a strong framework for decoupling business growth from resource constraints, enhancing resource productivity and driving competitive advantage. It also highlights a subset of business models which are enabling this transition and can generate premium returns for investors. Indeed, circular economy thinking will drive industry for years to come.
ENDS
[1] https://www.grandviewresearch.com/industry-analysis/carpet-market-report#:~:text=The%20global%20carpet%20market%20size,4.1%25%20over%20the%20forecast%20period.