We can envisage a balance sheet from which it is possible to glean the current state of the firm’s investment in circularity. A worked example is given below. Note that by circular infrastructure we mean infrastructure that:
- runs (or can run) on renewable energy
- uses recycled materials and recycles materials
| THE TRANSITIONAL COMPANY | ||||
| PERIOD ENDED 31/12/2016 | ||||
| CURRENT ASSETS | CURRENT LIABILITIES | |||
| Cash | 200 000 € | Accounts payable | 0 € | |
| Accounts receivable | 0 € | Accrued Expenses | 0 € | |
| Inventory | 0 € | Taxes owed | 0 € | |
| TOTAL CURRENT ASSETS | 200 000 € | Long term debt | 0 € | |
| TOTAL CURRENT ASSETS | 0 € | |||
| PROPERTY AND EQUIPMENT | ||||
| *Circular Infrastructure | 100 000 € | LONG TERM DEBT | ||
| *Non-circular Infrastructure | 50 000 € | *Loans for Circular investment | 100 000 € | |
| Less depreciation | -4 000 € | *Loans for other infrastructure investment | 30 000 € | |
| NET FIXED ASSETS | 146 000 € | Other loans | ||
| TOTAL LIABILITIES | 130 000 € | |||
| OTHER ASSETS | STOCKHOLDERS EQUITY | |||
| Licence | 0 € | Paid in Capital | 0 € | |
| Goodwill | 0 € | Retained Earnings | 0 € | |
| TOTAL OTHER ASSETS | 0 € | TOTAL NET WORTH | 0 € | |
| TOTAL ASSETS | 346 000 € | TOTAL LIABILITIES AND NET WORTH | ||
| *Percentage circular infrastructure value | 67% | *Percentage investment loans for circular infrastructure | 77% | |
As the example above shows, the infrastructure is 67% circular. In terms of loans the 77% invested in circularity gives a degree of transparency for investors. For example, if investors think that regulations will become stricter in future, then the investment is sound.
Extended Profit and Loss Statement
An extended profit and loss statement can also be created as shown below.
From this you can derive measures like % of sales of circular products, cost of circular technology, circular vs non-circular expenses and trends over time. This again creates transparency for the capability of the firm to operate in an environmental way.
| INCOME STATEMENT | |
| PERIOD ENDED 31/12/2016 | |
| CURRENT | |
| OPERATING INCOME | |
| *Circular product sales | 50 000 € |
| *Non-circular sales | 100 000 € |
| Net sales | 150 000 € |
| *Renewable energy | 2 000 € |
| *Non-renewable energy | 2 000 € |
| *Non-circular materials purchase | 2 500 € |
| *Circular materials purchase | 2 500 € |
| Other costs of good sold | 100 € |
| GROSS INCOME | 140 900 € |
| OPERATING EXPENSES | |
| *Renewable energy | 2 000 € |
| *Non-renewable energy | 4 000 € |
| *Non-circular materials purchase | 3 000 € |
| *Circular materials purchase | 10 000 € |
| *Repairs and maintenance on linear infrastructure | 20 000 € |
| *Repairs and maintenance on circular infrastructure | 30 000 € |
| *Costs for waste elimination, non-recycled | 2 000 € |
| Other expenses | |
| TOTAL OPERATING EXPENSES | 71 000 € |
| Other income | 0 € |
| Other expenses | 0 € |
| NET INCOME BEFORE TAXES | 69 900 € |
| TAXES | 25 000 € |
| NET INCOME | 44 900 € |
| Circular products 50/150 75%
Renewable energy 2/6 50% Circular materials 10/13 77% Circularity lost to waste 15% Circular infrastructure costs 30/50 60% |
Stephen Hinton Consulting 