There are plenty of smart, up-and-coming entrepreneurs in the Netherlands with fresh, innovative ideas for making manufacturing chemistry more sustainable. Setting up a start-up and progressing from start-up to scale-up is usually not a problem. But taking the next step, namely setting up demos and pilot plants, turns out to be considerably more difficult. All the more so because investors are not eager to put money into high-risk technological developments that call for perseverance and patience. Chair Arnold Stokking presented the platform’s program for the next two years at the meeting of ‘Green Chemistry, New Economy’ (GCNE) in Driebergen on 9 February. Several experts also elaborated on their vision of the challenges and solutions around the issue of financing.
A matter of urgency
It is a matter of urgency, stressed GCNE chair Arnold Stokking in his opening speech. By 2050, the chemical sector must be completely CO2 neutral. And even faster, by 2025, the chemical manufacturing industry must be well on its way to replacing oil with bio-based and recyclable raw materials.
Appropriate steps have already been taken to this end. For example, on the occasion of this first hybrid event since the corona outbreak and with several dozen people in attendance, the official launch of the Green Chemistry, New Economy platform has been taking place. The platform now encompasses not only the ENZuid region, where the three major chemical clusters Geleen, Moerdijk and Zeeuws-Vlaanderen are located in the Netherlands. With the inclusion of the other chemical clusters in Groningen and South Holland, it has grown into a partnership of national stature.
Over the past few months, a coalition has been established with companies, financial and knowledge institutions. Regional authorities and regional development agencies (ROMS in Dutch) are also on board, Stokking adds. He is also pleased with all the positive developments, such as the recent commitment to financing the construction of the first plant by Avantium to produce raw materials for bioplastics. Congratulations are also in order for the founder and CEO of green capital venture investor Polestar Capital, Reinier van der Vusse, who is also one of the speakers at the event. It was announced only a day earlier that Polestar Capital had raised 100 million euros to finance circular projects.
Unfortunately, there is also cause for concern. For example, the chemical sector is still responsible for a substantial amount of CO2 emissions. Although, according to Stokking, most emissions are not so much caused by manufacturing as by the fact that products are later discarded by society and mostly incinerated.
Cooperation and chain formation
Yet things can also be done differently. Take the production of bio-based plastics from agricultural waste streams for example, the recycling of waste into raw materials, or cleaner working practices by means of electrification. To get such transitions off the ground, however, requires not only a strategic vision but also cross-sectoral cooperation. Green chemistry involves multiple sectors, such as agriculture and forestry, the food and high-tech industries, as well as the energy and recycling sectors. It goes without saying that this type of cross-sector cooperation is not something that happens by itself. Yet Stokking firmly believes that, if everyone does their bit, 2050 is still a viable proposition.
What matters, according to Stokking, is that solid interconnections are made between the various sectors. For example, by processing waste and agricultural products, such as sugar beet, into fully-fledged raw materials. But also by working with the high-tech industry on the transition to electrification to help phase out fossil fuels like gas and oil. An excellent start has recently been made in this respect at Brightsite in Geleen with the opening of the Plasma Lab.
A number of things that play a key role here, according to Stokking, are: chain formation, financing, policy and scaling up. Real impact is achieved by working through all these aspects in conjunction with each other.
Strategic cooperation within the chain, emphasizes Maxine Tillij, Director of Strategic Analysis and Policy at the Netherlands Organization for Applied Scientific Research (TNO), is also a precondition for making the manufacturing chemical sector more sustainable. That is why TNO is investigating what is called for – in addition to technology – to set up a new chain. In which, for instance, beet sugar can be used as a raw material for various polymers. It is not as simple as this chain seems on the picture that illustrates the circular production process. It entails quite a few steps that necessitate close cooperation within the chain. Consider e.g., the fine-tuning of new business propositions and a fair distribution of risks and returns. And for all players in the chain – from farmer to consumer.
Financing is a bottleneck
That doesn’t get you there, however. Financing is a bottleneck for a lot of green chemistry entrepreneurs. Only 1 in 20 of them eventually manage to make the step from scale-up to the next phase, Annieke Wierenga, owner-founder of ScaleUp Practitioners, knows all too well from experience.
Financing for scaling up is perhaps the most thorny issue in the transition from fossil fuels to green chemistry. Unlike renewable energy, for instance, the chemical sector does not have a very sexy image. But above all, making the chemical sector more sustainable involves disruptive, complex technologies that can trigger unexpected developments. This in itself entails risks for the investor. Lastly, these investments do not pay off overnight.
This is precisely where Alain Cracau, Director of Sustainable Business Development at Rabobank, can make a contribution. By helping green entrepreneurs on their way.
To do this, he has regular discussions with other parties in Brussels about the allocation of money for what he calls “The Green Wave” coming our way, which also includes green chemistry. There is money available. You cannot get it just like that though. “What we do as a bank is write reports and outline how we are going to measure sustainability. Measuring impact is becoming ever more important for Brussels. That is also what we will be judged on over the next five years.”
Along with banks and subsidy providers, venture capital has an important role to play in financing the transition to green chemistry. An example is Polestar Capital, a green fund manager and financier that invests in circular companies. Where banks and funds tend to pull out, because they consider the risks too high, for example, Polestar steps in, explains CEO and founder Reinier van der Vusse. With his new capital fund, he is going to focus on financing the circular economy. The point to take note of here, however, is that with circular initiatives there is usually a funding gap between supply and demand. We then examine: ‘Where is that gap?’ And we try to fill it. That can be in terms of finance in the way of extra capital, but also, for example, by consolidating teams.”
Team formation
Annieke Wierenga has seen in practice how entrepreneurs are hounded by investors. Consequently, at a certain point they are only concerned with how they can become bigger and bigger. But then they forget that entrepreneurship is also about people. And that you need to put together a well-functioning and expert team through which you can accomplish that growth.
An example is accelerators, which are linked to knowledge institutions such as universities and TNO, that invest in start-ups. But few succeed in moving from scale-up to the next phase within five years, according to the statistics. Whereas Stokking keeps hammering away at the urgency of the green chemistry transition, Wierenga warns against rushing into things and she advocates the need for patience.
“Invest in building up a team. That is the foundation – that is what you have to do everything with.” Moreover, experience shows, according to Wieringa, “Sometimes you can go faster if you start off slowly.”
Incidentally, Cracau couldn’t agree more, he says a little later during the networking drinks afterwards. “In the end, you have to rely on your own people. If someone comes up to me and asks if I can lend them 20 million, I’ll ask: “Is your team up to scratch?’ If that turns out not to be the case, I won’t take the plunge. And so they won’t get the money. It’s as simple as that.”
Are you interested in watching the event? Then visit the GCNE website.
You can also read our other articles on green chemistry via this link.
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