Systems investing: The strategy reshaping global investment

The world is changing, and so too is the relationship between investors and those they invest in. A systems approach to investment — which expands on the classic investor-investee relationship to include other types of stakeholders and to deploy capital with a systems mindset and transformative intent — could be the best way to address the complex issues of our time.

These multifaceted challenges of our time demand a reimagined approach to investing. Our biggest environmental and societal challenges require a diverse set of stakeholders to urgently co-create transformative solutions. This asks for investments of both financial and non-financial resources into pioneering companies that help solve root causes and unlock economic benefits for co-creators participating and contributing to the transformation. We will not get far by only investing to address symptoms.

Investing for systems change is already one of the hottest topics currently discussed in impact Venture Capital (VC) investing, but tangible, real-life examples too often do not get the attention they deserve.

Practical success cases do exist, however. They demonstrate how the combination of impact investment and systems thinking can deliver meaningful impact and drive systemic change in the face of some of the world’s most pressing challenges, ranging from climate change and circularity to food security.

At the heart of the most successful of these projects is deep multistakeholder collaboration, building trust to foster customer adoption and raising awareness. These goals are aligned with those of systems thinkers: to deploy and coordinate investments with other types of interventions and collaborations.

One such example is the collaboration between VC firm Chi Impact Capital and Vytal, one of Europe’s fastest growing technology companies. Vytal works in the ready-to-consume food and drink packaging space, with the goal of transforming the packaging industry towards circularity and fostering behaviour change among consumers.

Key to the Vytal-Chi Impact Capital relationship — and other impact-focused, systemic investments — is a common intention and systemic vision to transform the packaging industry. Their collaboration started off with impact measurement and impact management support, as well as crucial introductions to like-minded investors from Chi Impact Capital’s side. It has evolved over time also helping to facilitate and strengthen new relationships with the public sector in Europe.

To reach its goals, Vytal does not only follow a circular Packaging-as-a-Service (PaaS) business model itself. It also provides the operating system and data enabling large packaging manufacturers like Berry Global to adapt a circular business model, too.

Now, Vytal is borrowing millions of containers from Berry Global on a pay-per-use model, already a radical transformation for a manufacturing business whose revenue is traditionally based on volume. This is a classic win-win partnership allowing Vytal to reduce its capital expenditures, while Berry Global benefits from the value creation of its containers during their lifetime and securing access to high-quality food grade material at the end of life.

These containers were deployed at Euro 2024 Fan Zones in several German cities, enabling millions of fans to avoid single-use packaging while generating only a fifteenth of the waste that usually comes from large events.

Vytal also collaborates with cities such as Bad Nauheim in Germany and Schaffhausen in Switzerland as part of its city-by-city growth trajectory. The city of Schaffhausen has incentivized its inhabitants to use reusables and has entered into a partnership with Vytal whereby the city is paying back two Swiss Francs ($2.36) in cash to each consumer per bowl use upon return of the Vytal containers. There is no deposit on the bowls — it is simply a cash incentive for the end consumer. The City of Schaffhausen’s goal is to promote behaviour change amongst consumers and accelerate the shift towards a circular economy.

Data-driven impact goes beyond impact measurement. By serializing its reusable containers, Vytal generates data to ensure that reuse can be operated at less and less cost and with increasingly attractive value-adds for all participants of the reuse value chain. Highlighting the path towards large economic benefits, Vytal continues to approach key stakeholders to complement its offering and accelerate expansion.

Going forward, Chi Impact Capital is planning to support Vytal in identifying systemic leverage points within the packaging sector to promote outsized effects and positive impact with small interventions.

Among future goals is investing in the physical infrastructure required for reuse to make its next leap of growth. Based on understanding the economic equation of large dishwashing centres that are heavily driven by personnel cost, Vytal has developed smart RFID-tagged containers and scanning hardware that can significantly reduce costs and bolster the incentive to continue the reuse revolution. Large event organizers and entertainment venues benefit from a similar reduction cost for handling reusables. Vytal’s customers also benefit from new sponsoring and engagement opportunities incentivizing the interaction of their guests with their smart reusable containers.

Driven by systems thinking, the Vytal-Chi Impact Investing partnership is funding and implementing the innovations pushing bottom-up change towards reusable packaging providing a case in point on how to overcome seemingly impassable barriers to change.

This collaboration is just one of many delivering real, tangible impact on a systems level. Other innovative companies and private or public stakeholders should follow suit and engage in radical collaboration, using systems investing to speed up the much-needed systemic transformation towards a circular and regenerative economy.