Are digital servitization-based Circular Economy business models sustainable? A systemic what-if simulation model

Abstract

Manufacturing companies are struggling with the implementation of Circular Economy, especially due to the uncertainty regarding its potential sustainability benefits. In particular, and despite digital servitization is advocated by several studies as a way to achieve environmental gains, circular business models based on digital servitization are not always sustainable due to burden shifting and unexpected consequences which are difficult to assess before implementation. This is particularly relevant for the Electrical and Electronics Equipment industry, which suffers structural weaknesses such as the dependance on critical raw materials and an increasing waste generation. However, literature lacks models and tools able to address the complexity inherent in the systemic micro-macro perspective envisioned by Circular Economy, while studies that quantitatively assess the sustainability impacts and trade-offs of digital servitization-based circular scenarios are limited. This article aims to develop a better understanding of how the sustainability impacts of circular and servitized scenarios can be assessed and quantified at the economic, environmental, and social level, adopting a systemic perspective through the development of a what-if simulation model. The model is implemented in a spreadsheet tool and applied to a digital servitization-based Circular Economy scenario inspired by the case of a company offering long-lasting, high-efficient washing machines as-a-service. Results show that digital servitization can actually lead to a win-win-win situation with net positive effects to the environment, the society, and the economy. This result is based on the joint application of product design for digitalization and life extension, pay-per-use business models, and product reuse. These results are robust within a significant range of key parameters values. Practitioners and policymakers may use the model to support the evaluation of different circular and servitized scenarios before implementation.