A study conducted by MyPilz on behalf of the Federal Ministry of Agriculture and Forestry, Climate and Environmental Protection, Regions and Water Management (BMLUK) shows how fungal technologies enable sustainable solutions and economic growth in Austria.

Fungi are everywhere. Not only where we collect them as mushrooms, but also in the soil, in wood, and in compost. There they grow as a finely branched network, the so-called mycelium. Just like animals belong to fauna and plants to flora, fungi form their own kingdom: the funga. Even though they often go unnoticed and their diversity is still poorly understood compared to animals and plants, fungi have a special ability that makes them nature's recycling specialists. They decompose organic matter and convert it into new substances. In this way, they enable closed nutrient cycles and ensure that essential elements become available again for plants and animals. Precisely this ability to create new products from waste materials is a central component of the circular economy and the bioeconomy.

In a functioning circular economy, there is ideally no waste, as residual materials are used as raw materials for new products. This concept is reflected in the EU Circular Economy Action Plan, the Austrian Circular Economy Strategy, and the Bioeconomy Action Plan. The aim is to strengthen a system that produces as little waste as possible, reduces emissions, and strengthens regional value chains. It is therefore no wonder that fungi are increasingly seen as an important part of the transition to a fully circular economy.

Fungi-based products already exist, and many research projects are actively exploring this field. The best-known examples include the production of edible mushrooms, the manufacture of the antibiotic penicillin, the use of soil fungi for biological pest control and mycorrhizal fungi as biofertilisers in agriculture and forestry. The industrial production of citric acid using the mould fungus Aspergillus is also a well-established example of modern fungal biotechnology. The monetary value of all fungi-related products and services is estimated at around 54.57 trillion US dollars. Nevertheless, the potential of the fungal economy often remains invisible to the public and to policymakers, which makes it difficult to implement fungi-based solutions on a broad scale as part of the transformation towards a sustainable circular economy.

Figure: Austrian economic sectors that can benefit directly or indirectly from the potential uses of fungi and their products described in the study. Source: Pilze: Rohstoff für vielseitige Anwendungen in einer regionalen und biobasierten Kreislaufwirtschaft. BMLUK, 2025.

In this context, MyPilz was commissioned by the BMLUK to conduct the study „Pilze: Rohstoff für vielseitige Anwendungen in einer regionalen und biobasierten Kreislaufwirtschaft“ (Fungi: raw materials for multiple applications in a regional and biobased circular economy). It focused on three central application areas of fungal technologies: food production, material production, and waste treatment. It was based on a literature review, an exploratory survey, and personal interviews with relevant stakeholders. The aim was to identify key actors in the fungal economy in Austria and Europe, analyse the potential of fungi-based solutions, and develop concrete policy recommendations for policymakers, business, and research. A key aspect of the study is represented by the positive synergies that arise when these three areas of application are not viewed in isolation, but as part of the same network.

Circular food production through sustainable mushroom cultivation

In food production, high-quality products such as edible mushrooms and medicinal mushrooms are often cultivated on agricultural or forestry residues. Edible mushroom production is therefore particularly suitable as a starting point for circular production systems and regional value chains. Mushroom cultivation produces a residual material known as spent mushroom substrate (SMS), which is currently used mainly as a soil conditioner or animal feed. However, it has further potential. For example, bioactive molecules could be extracted from it for use in the pharmaceutical or cosmetics industries. This illustrates the principle of the circular economy, in which a residual material becomes a new raw material.

Figure: (A) Monitoring the growth of king oyster mushrooms under hygienic conditions in a production facility. (B) Growth chamber with automatically regulated temperature, humidity, and CO2 concentration. (C) Automated filling of culture bags with substrate. Photos provided by Neuburger Fleischlos GmbH. Source: Pilze: Rohstoff für vielseitige Anwendungen in einer regionalen und biobasierten Kreislaufwirtschaft. BMLUK, 2025.

The global market for edible mushrooms is growing steadily. The mushroom industry in Austria is represented by over 30 companies in this sector. At the same time, there are challenges that are still holding back the sector's full potential: the gap between research and market launch, a lack of networking within the industry, and limited awareness of the health and environmental benefits of mushrooms. Regional production plays a key role in a functioning circular economy, as short transport routes and the use of regionally available residual biomass make a significant contribution to closing resource cycles.

Mycelium-based materials: fungal-based materials as an alternative to plastic

Producing materials from fungi sounds futuristic, but it is already a reality. In the production of mycelium-based materials, fungi are cultivated on plant residues such as straw or wood shavings. The mycelium grows through the substrate, breaks down organic particles, and combines them into light, stable, and biodegradable materials. These are already being used as insulating materials, sound absorbers, packaging, coffins, or even as building elements and are seen as a promising alternative to polystyrene or synthetic foams. The advantages over conventional materials are clear: lower energy consumption in production, use of agricultural waste, biodegradability, and the potential for regional production.

Figure: (A) Growth of fungal mycelium on lignocellulosic substrate. (B) Fully grown substrate block in prefabricated form. (C) Mycelium-based materials during drying. Photos provided by SQIM S.r.l. Source: Pilze: Rohstoff für vielseitige Anwendungen in einer regionalen und biobasierten Kreislaufwirtschaft. BMLUK, 2025.

However, only a few players have been active in this area in Austria to date. The study sees opportunities here in relieving the burden on waste management, reducing dependence on fossil fuels, and strengthening regional innovation. At the same time, without targeted scale-up strategies and investments, the innovation potential remains limited, and regulatory uncertainties and high capital requirements represent additional hurdles.

Fungi in waste treatment and mycoremediation

Another focus of the study is waste treatment with fungi. Fungi produce enzymes that can break down complex organic compounds, including lignin and cellulose, as well as various pollutants. They can decompose polycyclic aromatic hydrocarbons, insecticides such as DDT, drug residues such as paracetamol or ibuprofen, and in certain cases even plastics such as PET. This ability makes them particularly interesting for mycoremediation, the biological decontamination of soil using fungi. Compared to conventional methods such as landfilling or thermal treatment, mycoremediation enables the environmentally friendly and resource-saving remediation of contaminated areas.

Figure: Structure of lignin. Due to the large number of aromatic rings and functional groups, lignin is considered a polymer resistant to degradation. Fungi that can enzymatically decompose lignin are often also able to break down structurally related molecules, including environmental pollutants. These include the widely used drugs paracetamol and ibuprofen, the explosive TNT, thermoplastics such as PET, the insecticide DDT, and polycyclic aromatic hydrocarbons such as naphthalene. Source: Pilze: Rohstoff für vielseitige Anwendungen in einer regionalen und biobasierten Kreislaufwirtschaft. BMLUK, 2025.

There is also a clear gap between research and practical application in this area. Companies in the field of mycoremediation are still rare in Europe, and the study emphasises that a clear legal framework, targeted funding instruments, and citizen-science initiatives are needed to make fungi-based remediation processes economically competitive.

Closed loops through fungal technologies

Particularly important synergies emerge when the three areas of application are not considered separately, but as a integrated system. Spent mushroom substrate from mushroom cultivation can serve as a starting material for mycelium-based materials or for the production of enzymes, which in turn can be used in waste treatment. Fungal technologies thus combine food production, material development, and waste treatment into integrated closed-loop systems. The fungi-based solutions described in the study can contribute to nine of the 17 Sustainable Development Goals of the United Nations and be part of a future-oriented economy, provided that the appropriate framework conditions are in place.

What is needed for a strong fungal economy in Austria?

The study formulates concrete measures to strengthen the fungal economy in Austria. These include targeted funding programmes for research and companies, investments in scale-up and knowledge transfer, as well as stronger networking between stakeholders. Recommendations include the establishment of specialised competence centres, interdisciplinary research programmes, pilot projects, and clear regulatory guidelines for mycelium-based materials and applications. Equally important is promoting regional value chains and raising awareness of the potential of fungi in society. The first steps have already been taken, and we at MyPilz are continuing to work on advancing fungi-based solutions for practical challenges and further harnessing the potential of fungi for a sustainable future.