A Startup Pairing Off The Right Waste With The Right Consumers
In a climate where sustainability reporting is climbing the corporate agenda, businesses are increasingly willing to buy up excess or waste materials to use in their manufacturing processes.
The reason is simple: manufacturing with second-hand or waste materials tends to engage fewer carbon emissions compared to virgin resources. Valorising materials that would otherwise have been landfilled offers a way to reduce overall company emissions. It can also be a much easier one than adopting costly renewable materials or switching to entirely new ways of manufacturing.
Construction is one sector where a more fluid marketplace in waste materials could have significant environmental pay-offs. Today, massive volumes of carbon-intensive materials like steel and cement are landfilled before their value has been finally exhausted. This is despite the fact that someone somewhere may be willing to pay for them.
As with any second-hand market, however, in-demand products will tend to appear only sporadically. Hunting down the correct volume and specification of materials will remain a costly enterprise as long as the circular marketplace remains fragmented or non-existent.
Potential suppliers face similar difficulties in marketing any unwanted goods. Without a go-to marketplace, it is impossible to reckon up-to-the-minute demand for odds and ends that may find uses elsewhere. In this situation, companies with surpluses simply contract for disposal, a more established sector than the one for upcycling.
A Match Made In The Cloud: Agave Networks
Although the problem of matching buyers and sellers of surplus is one of the biggest barriers to scaling the circular economy, it’s also one of the few that are amenable to technical hacks.
Startup Agave Networks is a UK start-up that’s applying computational tools to the problem of building markets in surplus industrial material, offering something like a Tinder for construction and manufacturing inputs. Founded by Daniel Byrd and Emmanuel Byrd in London in 2021, it connects companies with unwanted excess with others that are willing to pay for them.
The company defines surplus as “the amount of an asset or resource that exceeds the portion that’s actively utilized”. This means they don’t just deal with unused products sitting in company stockrooms, but also excess raw materials, as well as by-products churned out in the process of making things.
Serving customers in construction and manufacturing means delivering on precise material specifications. This requires efficient processes for collecting and recording detailed information on the materials that are available at any given time. Agave Network tackles this by placing image recognition AI software at the centre of its business model.
Using machine learning algorithms, Agave Network’s software identifies and classifies surplus materials lying in company inventories. The automated sorting capability offered by machine learning software is a neat solution to what would otherwise be a laborious administrative task.
The efficiency gains offered by AI lie at the heart of Agave Network’s profit-making strategy: saving the time and cost of manually finding and sorting company surplus enables them to build up a large database of available materials viewable to potential buyers on a digital platform. In theory, this quickly enables supply and demand aggregation, potentially unifying the fragmented second-hand market in circular materials.
Blockchain is also integral to Agave Network’s business model, underpinning the environmental integrity of their enterprise by giving each waste product a unique digital passport.
The digital passport time-stamps surplus materials up for sale with their provenance, giving buyers and sellers full traceability on the goods they deal in as well as a more precise idea on how much their circular purchasing is denting corporate scope 3 emissions. Subscribers to Agave Network’s platform can view graphs that keep quantified track of their progress in waste reduction.
The digital passport reveals more than just where the associated materials came from. It also keeps track of what becomes of the material over its subsequent life. Users can view what has happened to their sold material long after it has left their warehouses.
The digital passport aims at incentivizing SMEs to adopt circular practices in other ways. Once a company has sold their surplus, it can sell copies of its passports on Agave Networks’ platform. This unlocks additional revenue, with the passports functioning as tradeable environmental impact certificates available to other companies wanting to offset waste.
The monetary incentives that Agave Networks are attempting to build into their circular service chimes with findings that the biggest driver of corporate responsibility activities for construction companies are the potential economic benefits that might flow from them.
A Company On The Rise
Agave Networks has three sources of business revenue: it earns a percent of commission on all materials transacted on its platform, a monthly subscription fee from buyers and sellers who pay to gain access to the marketplace, and a percent of commission for external developers in the platform.
By August 2022, the company had generated more than $500, 000 in excess materials sold from manufacturers and had built its first Agave Networks platform prototype.
In the green startup sector, scaling is not just key to increasing profits but also to enlarge the environmental impacts of a business proposition. When it comes to evaluating whether startups like Agave Networks are truly making a dent, there is no substitute for hard numbers on the carbon emissions avoided from the products they sell.
As an early-stage company, assessing how effectively its business model can undercut waste in manufacturing and construction will require time. However, Agave Networks is already proving its worth on the material inputs market.
One month ago, Agave Networks announced that they had matched 500 metric tonnes of scrap metal. The sellers were in the UK while the end buyer was an Indian steel mill.
In a sector where material performance is non-negotiable, an in-depth understanding of customer needs is essential. Although Agave Networks faces its consumers as a digital platform, the startup also acts as an essential go-between for potential clients to scope the perfect match.
In the case of the India-UK scrap deal, the company spent months looking for supply that met the needs of the steel mill. Given the nature of the waste market, supplying one end-consumer requires scouting several suppliers across different companies or industries. The 500 metric tonnes of scrap metal was made up of obsolete machinery, old cars, and home appliances that had out-lived the potential for repair.
Agave Networks’ next aim is to localise their supply chains to reduce the mileage on their transfers. This would bring down clients, as well its own, scope 3 emissions that cover carbon emissions associated with transportation.
However, reducing the distance between suppliers and providers will need Agave Network’s client base to grow substantially. Already, the type of materials they work with means that Agave Networks already has close contact with procurement professionals. Company growth will now depend heavily on this client-facing work.
AI And The Circular Economy: Aspiration and Reality
Expanding trade in circular goods heightens the central problem of market-building in general: how to collate up-to-date information on goods and buyers. Setting up a flourishing market for waste might be trickier than for goods with a regular rhythm of supply. Still, both resolve to a pretty simple matching problem: who wants what when at a certain price? And who can deliver it in the amounts required at that moment?
Because Agave Network’s purpose revolves around optimization – quickly finding the best materials for the consumer that need it most – its business model lends itself well to novel digital tools. Indeed, it is a textbook example of what’s known as the product service systems models (PSS) – a type of business that has found particular favour in the circular startup space.
In PSS companies, value creation lies either just in offering services or products twinned to services: Agave Networks fits the latter model. Their service-product nexus is comprised of their material recognition software, blockchain tracing, and their capacity to build a large client network to aggregate supply and demand.
This fits a trend in the circular sector more generally, where services-product combinations offered by PSS companies rely on relatively new techniques and technologies like big data, internet of things, and cloud computing.
Nonetheless, platforms and machine learning software cannot be isolated solutions, even in the relatively straightforward task of market-building. Cultivating consumer trust, striking deals, and forging industrial partnerships remain critical. Agave Networks is actively seeking out adjacent companies to make their process for sorting and order fulfilment more efficient. In July, Agave Networks met with Wincanton, an automated fulfilment facility that it has earmarked for future collaboration.
The continuing importance of deal-making and client-facing work in building up a circular input economy underlines another point. Many AI and blockchain technologies float adrift in the venture capital world as answers in search of solutions. While their novel capabilities might interest entrepreneurs and tech-savvy consumers, they do not necessarily translate into easy fixes for real-world problems such as sustainability.
Building a large circular marketplace for particular sectors is a clearly delimited problem where computational technologies can make a difference. But achieving sustainable production requires more than technical fixes. This is because it involves confronting social behaviours that play out at systemic scales. Changing long-worn channels of economic habit cannot be reduced to finding novel algorithmic procedures – however impeccable the software.