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A pilot project of Dura Vermeer and Overijssel Province has provided a practical case for investigating how a circular road can be exploited as a&nbsp;Road-as-a-Service. A white paper on this project, launched by a new coalition for circular accounting, demonstrates how to modify and rethink current financing and reporting practices for the circular economy. A discussion about contractual structuring and its implications has led to new insights. Dura Vermeer wants to retain the economic ownership of the road while providing its functionality (i.e. the use of the road) as a service to their client Overijssel Province. This incentive ensures that it will maintain the road as well as possible from its knowledge and expertise. This will ultimately lead to a higher residual value.The participants formed a Coalition Circular Accounting (CCA). This is a collaboration between&nbsp;Circle Economy,&nbsp;Sustainable Finance Lab,&nbsp;The Netherlands Institute of Chartered Accountants&nbsp;(NBA),&nbsp;Dura Vermeer,&nbsp;ABN AMRO,&nbsp;Rabobank,&nbsp;KPMG,&nbsp;Provincie Overijssel&nbsp;and scientists of&nbsp;Erasmus University,&nbsp;Open Universiteit,&nbsp;University of Groningen,&nbsp;Nyenrode Business University&nbsp;and&nbsp;Avans University of Applied Sciences. The CCA was co-funded by&nbsp;Nederland Circulair! To sell or not to sellThe fundamental question is “to sell or not to sell”, according to CCA. Financial reporting is about economic ownership and the transfer of risks and rewards. If at the end of the contract, economic ownership is transferred to the client (in this case Overijssel Province), it still appears on their balance sheet from the start as it would in a ‘normal’ sale. The alternative is to specify explicitly the ongoing nature of the agreement, which excludes a transfer. This ownership question has implications for the reuse of the road and its materials at the time of harvesting. The owner of the road is incentivised to optimize the durability of the road, its maintenance and (re) use of raw materials, with potential effects such as a longer lifespan, lower overall maintenance costs, and higher residual material value.&nbsp; Combining different financial structuresThis above decision has important consequences for the balance sheet of both parties and how to obtain financing for the investment. When no sale takes place, we have to alter our traditional financing perspective. A possible solution is to create a combination of financing projects, while also having some corporate debt that should lead to a different type of financing. A surprising result is the fact that the actual accounting of the circular road turned out not to be the main challenge in this case. Creating a financial incentive for circularity is the foremost objective. A contractual agreement should express circular incentives and the distribution of risk and reward. The actual accounting ultimately follows.

Pursuing Financial Reality of the Circular Road: A pathway to Road-as-a-Service

In its second whitepaper, the Coalition Circular Accounting (CCA) explores Facades-as-a-Service as a method to battle waste and increase the circularity of buildings. The Facades-as-a-Service will provide a customisable, dismantable facade that provides a building with ventilation, sunlight regulation and energy generation, all adjustable by remote control. The Product-as-a-Service business model benefits circular construction by incentivising manufacturing companies to retain responsibility for their product and their performance before, during and after its lifespan.&nbsp;‍However, current financing models can present major barriers for companies with circular business aspirations. Asset ownership for example, characterized by an extended balance sheet, is unpopular amongst financiers and suppliers, whilst essential for incentivising a long term business perspective.‍In light of these current and persistent financing barriers, the Coalition Circular Accounting has launched a white paper that elaborates on the opportunities and risks of Product-as-a-Service business models. The paper proposes a new contractual structure as an enabler and raises the issue of the misfit between current financing structures and circular business models.

The Circular Facade: Building a sustainable financial reality with Facades-as-a-Service

This white paper details the importance of measuring circular impact and using it to steer decision making in business. Using the case study of Meerlanden, the paper shows how data on circularity can bolster profitability in business while limiting negative environmental and social externalities through two avenues: integrated profit and loss and multiple balance sheets. Next steps and recommendations are provided for companies, financiers and accountants.&nbsp;

How to find the value of circular impact in business: Circular impact management and financial reporting

ABN AMRO, ING and Rabobank co-developed international circular economy finance guidelines to support a common framework for financing circular business models. By introducing these guidelines, the three banks aimed to 'lay the groundwork for accelerating investment in and funding of circular business models' and are encouraging financial players across the world to follow suit.