Circular Economy: A Fintech Driven Solution for Sustainable Practices

All over the globe, we face environmental challenges. As animal extinction accelerates and the weather becomes more volatile with record-breaking heat waves across the United States and Europe, for example, sustainable practices have become central to economic development. With investors moving capital into environmental, social, and governance (ESG) oriented investment funds at a sky-rocketing pace, businesses are adapting to the changing dynamic in many ways, including implementing solutions developed by financial technology (fintech) companies. Among other things, fintech companies play a central role in developing the circular economy. To reduce inputs and improve recyclability, circular business models require greater transparency and traceability throughout the supply chain to ensure efficiency. Platforms based on the digitalization of services or blockchain are examples of solutions for reducing information asymmetry in today’s business environment. In this chapter, we first present the importance of the circular economy in tackling today’s environmental challenges and explore industries in which circular business models are most likely to be successful. Next, we expand on the types of solutions fintech can provide to improve efficiencies in the supply chain of businesses. Finally, we present concrete examples of companies implementing these solutions and their impact on society.