February 7, 2023
Sustainability Requires Investing in Circular Economy, Deep Technology
In an episode of Supply Chain Next, Humberto Olivo, Managing Partner at Volpi Ventures LLC, discusses investing in new technologies for a sustainable world.
When asked how he found his way to sustainable investment, he stated, “My background is in the financial sector as a trader, investment banker, and venture-capital investor. But more importantly, I followed my passion for technology and focused on sustainability solutions.”
Getting started
His sustainability journey began with renewable energy. In the 1990s, he and his partners started a venture capital fund focused on clean energy, especially solar and wind projects, and startup groups. They went this route because investment is critical to launching new ideas into viable solutions. “Clean and deep technologies will be indispensable in creating a sustainable and circular economy,” said Olivo.
Proof of sustainability
According to Olivo, his definition of a sustainable company and metrics prove that performance levels are based on standards that must quantify and clarify environmental and sustainability performance and are part of project financing. For example, beginning in the 2000s, investors wanted metrics to quantify emission reductions and operational efficiency in the renewable energy markets.
Third-party audits developed environmental performance reports and became the basis for green bonds and certificates. More importantly, these financial instruments were used in decision-making and securing lower capital costs. By 2015, green bonds became part of a company’s ESG performance.
Deep tech: The solution to sustainability
As a venture capital investor, deep technologies, including blockchain, AI, and ML, are essential to achieve sustainability, says Olivo. Solving sustainability problems requires fresh ideas and new thinking. Consequently, these solutions should be trial-focused, not technology driven. Deep tech is instrumental in discovering innovative ways to measure and quantify ESG performance.
“A hybrid approach that combines digital components with physical advancements is essential to solving sustainability issues and other problems,” says Olivo.
Circularity and carbon math: What is the best way to sustainability?
“We pull gigatons of raw materials from the earth to produce products and repurpose only 8% of that circularly,” stated the Supply Chain Podcast Host, Richard Donaldson. Yet, the ESG focus remains on carbon reductions.
Olivo believes circularity is the subsequent development to accelerate sustainability progress. For example, transparency of supply chains enables tracking resources across their entire lifecycle. Furthermore, through deep technology, newly discovered innovations will increase the transparency and visibility of supply chains. As a result, companies can effectively integrate supply-chain management as part of circularity efforts.
Wrap up
Sustainability is about improving the environment, according to Olivo. Over 30 years ago, renewable energy projects kick-started the sustainability journey. As a result, much progress has been achieved on environmental issues and social responsibilities. Viewing sustainability as a profit center is a colossal mindset change. Circularity will significantly impact sustainability by improving the transparency of supply chains and their sustainability goals. But it truly embrace a circular economy, companies need to invest in clean and deep technologies.
“The improvement of supply chains is all about transparency…we have the technology to accomplish this now,” said Humberto Olivo.
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The entire podcast discussion is available here.