How can Digitalisation Enable the Transition to a Circular Economy?

Abstract

Our world is currently facing economic challenges, growing populations, resource scarcity, environmental challenges, and social issues. The linear economic model that led to this situation is not sustainable anymore. The circular economy is an emerging concept, and an alternative solution, representing an economic model that strategically reduces waste in a closed-loop system. New technologies of the Industry 4.0 era can potentially enable circular economy principles and facilitate the transition to a circular economy. However, the link between these fields is yet to be widely established and understood. Therefore, this study provides a comprehensive systematic overview to contribute to the understanding of circular economy business models and the enabling role of advanced digital technologies. The findings suggest new value chain characteristics, new operations models, and highlight the role of circular design, reverse flows, and collaboration. Merging circular economy and Industry 4.0 underlines that many factors are interrelated and indeed should be combined instead of analysed in siloes. This paper proposes a conceptual model to address how new circular business models can integrate digitally adaptive transformations and to emphasise the need for a more interconnected system. Finally, proposals for future research will be reflected upon.