Circular Economy Series

What is the Circular Economy

A circular economy business model moves away from traditional linear business models, where raw materials are used to produce products that have a finite lifetime, before being disposed of without consideration for environmental impacts. In a circular economy, materials, products and energy are reused, repaired, recycled, shared and composted to return natural resources to the earth, and prolong the lifetimes of technological resources.

'A circular economy decouples economic activity from the consumption of finite resources. It is a resilient system that is good for business, people and the environment. The circular economy is a systems solution framework that tackles global challenges like climate change, biodiversity loss, waste, and pollution.'


When thinking about the Circular Economy, the first consideration for most people, quite rightly, is the environment. It’s about a new way of thinking, transitioning away from traditional linear models that use finite resources to produce goods and services, towards regeneration and reuse. In recent years this has been accompanied by a growing acknowledgement that these Circular Economy principles also encourage economic innovation and growth. According to the World Economic Forum, the Circular Economy could yield up to $4.5 trillion in economic benefits globally by 2030.

What are the benefits of a circular economy?

A move to a circular economy would hold many benefits for the environment, and the climate crisis. It aims to eliminate waste, with biological materials being reused until they can be composted or used as fuel, and prolonging the lifecycle of finite materials like metals by focusing on reusing, refurbishing and replacing parts. In turn, by aiming to return natural resources to the earth, it aims to regenerate nature, with the economy operating on a principle of reusing resources many times over. This reduces the reliance on finite resources and allows the economy to actively regenerate the natural environment.

How is the Circular Economy creating value?

2022 picked up from where 2021 left off when it comes to investment in the UK Circular Economy. Our annual report shows 2022 was the most active year yet with the number of Circular Economy related investments increasing by 16%, outperforming the UK M&A market, where the total volume of investments fell by 12%.

In 2022, private investors deployed in excess of £850m of capital across 142 Circular Economy led businesses. Our report takes a look at:

  • Who is investing in the UK Circular Economy?
  • Why private investment in UK Circular economy businesses is outpacing investment in the overall UK market?
  • How investor’s attitudes towards the Circular Economy are evolving?
  • Which sectors are most influenced by circular economy trends?

Get the report now


The transition to a circular economy is creating a unique opportunity for entrepreneurs and investors to collaborate. For entrepreneurs, it provides the opportunity to completely re-think practices and processes in the design of new products, services and business models.

For private equity investors, ESG and Sustainability considerations are moving with ever increasing pace towards the top of investment agendas. 88% of limited partners now consider ESG impact when making investment decisions.

Historically, an investor’s ESG agenda was centred around managing risk and compliance, but over the past five years things have changed with a clear shift in investor attitudes towards proactive ESG and the Circular Economy. There is now industry wide recognition of the long-term value creation opportunities that circular business models and positive sustainability characteristics provide.

At the very heart of its ethos, the Circular Economy is about reducing waste and driving resource efficiencies. Using and re-using naturally sustainable raw materials is inevitably cheaper than having to source new raw materials for every product, but efficiencies aren’t just limited to the supply side. One of the major economic benefits of the Circular Economy is that it promotes business models that extend the value generating potential of a product. How can items be maintained or refurbished to ensure they last longer? Can products traditionally owned by a single consumer be rented or sold multiple times for a combined value that exceeds a one-off sale? The Circular Economy is about using less to deliver more; a simple concept, but one that is an obvious attraction for investors.

In the UK in 2022 there were 142 investments totalling over £1bn made into circular businesses. Whilst it is pleasing to see increasing momentum behind the Circular Economy, the investment landscape is not without challenges. For every successful deal there are multiple other early-stage Circular Economy businesses that have been unable to raise the investment they require. But why is this?

There is no doubt that investors are more knowledgeable about both the Circular Economy and the economic rewards on offer for backing the right company. Analysis by Bocconi University of 200+ listed European companies across 14 industries has shown that the more circular a company is, the lower its risk of defaulting on debt, and the higher the risk–adjusted returns of its stock.

However by its very nature, the Circular Economy is disruptive, meaning more often than not the companies operating within the space are presenting entirely different business models or processes to private equity investors.

Circular Economy entrepreneurs are much sought after, but they must be able to demonstrate and articulate two things:

  • A clear commercial growth plan including identifying and quantifying the addressable target market
  • Why consumers or businesses will transition to their product, service or solution over either legacy linear or new competing circular alternatives

This can be challenging when they are often, and commendably so, purpose driven, with economic reward sitting either behind or alongside environmental impact in terms of personal priorities. It can also be extremely difficult for an entrepreneur to have the discipline to leave behind an outstanding idea that simply doesn’t have the addressable market to excite investors.

At the same time, investors must recognise that Circular Economy entrepreneurs are often focused on profit and sustainability in equal measure, and that to motivate these business owners they must both be recognised as priorities. To stand out from the crowd, investors need to demonstrate they understand the how and the why.


Case studies


BDO M&A advised the shareholders of Green Home Group on the sale of a 50% stake in the business to Circularity Capital LLP

Green Home Group is an award winning energy efficiency company, installing insulation, boilers and other energy efficiency measures into homes across the UK.

Measures are delivered under the UK Government’s Energy Company Obligation scheme (“ECO”) on behalf of obligated energy providers, with ECO a key component of the UK Government’s strategy to tackle fuel poverty and reduce carbon emissions.

BDO Growth Advisory advised the shareholders of DAME in Seed Extension investment from a Family Office

DAME is a developer of organic, reusable period products. The business is on a mission to reduce single use products and plastics in the market, with additional environmental benefit achieved from use of organic cotton in supply chain.

BDO Transaction Services provided financial due diligence to Circularity Capital in relation to its investment in Bike Club.

It is estimated that 12.5m unused kids bikes go to waste across the UK. Bike Club’s subscription model allows bikes to be leased, refurbished and reused by new families.

BDO provided Vendor commercial due diligence on the carve out of Ross Care from Millbrook healthcare (Cairngorm Capital).

Ross Care’s carbon reduction plan includes the use of advanced route-planning software, and a first-time fix KPI for its wheelchair service engineers. This drives a significant reduction in fuel usage and emissions, by reducing repeat callouts to repair jobs.


Smart cities: Tech investors and the circular economy

What role will circular technologies play in the future? In this publication, we look at circular economy investment activity in the Technology sector, and how it is spurring the development of smart cities.

The components that make up smart cities, whether mobile apps or the harnessing of big data, have seen a significant uplift in investment in recent years as consumer trends evolve. Between 2018-2021, disclosed capital deployed on TMT circular economy investments in the UK increased from £14m to £102m, and 52% of these investments related to smart cities.

In this report we look at the growing trends, some specific investments, and explore what it means for the future of UK investments.




Find out:

  • How acquisitions involving target businesses that help to digitise cities have been growing
  • What investment trends show about the role the UK can play in the future of smart cities
  • A detailed comparison of sub sectors within the TMT circular economy, including deal volume, deal value, and investor type.


How can we help?

As Circular Economy M&A advisors, it is our job to continue bridging the gap between investors and entrepreneurs by ensuring that business owners can turn Circular ideas or concepts into an investment ready opportunity.

If you’d like to discuss the Circular Economy with us or gain more of an understanding as to how we can help your business, please get in touch with one of our Circular Economy experts, Rory McPherson or Todd Mills.


Get in touch with our team