Toward a circular economy: The role of digitalization

Abstract

Although not actively recognized, the ongoing digital transformation can serve as an enabler and even as a catalyst for creating a circular economy. It is time to build on this potential and create a digital circular economy that can benefit people, businesses, and the planet. Although not actively recognized, the ongoing digital transformation can serve as an enabler and even as a catalyst for creating a circular economy. It is time to build on this potential and create a digital circular economy that can benefit people, businesses, and the planet. The current exhaustion of natural resources, degradation of ecosystems, and generation of hazardous substances, waste, pollution, and greenhouse gas (GHG) emissions are directly linked to the way we produce and consume. For example, the extraction and processing of raw materials account for 90% of biodiversity loss worldwide.1Oberle B. Bringezu S. Hatfeld-Dodds S. Hellweg S. Schandl H. Clement J. Cabernard L. Che N. Chen D. Droz-Georget H. et al.Global Resources Outlook 2019: Natural resources for the future we want. United Nations Environment Programme, 2019https://www.resourcepanel.org/reports/global-resources-outlookGoogle Scholar There is a growing global recognition that we need to shift from the linear “take-make-dispose” model to a circular economy. This new economic model would aim to maintain the value of products and materials for as long as possible and minimize resource use and waste by increasing the repair, recovery, reuse, and recycling of materials and products. The benefits of a circular economy would be significant. If the world economy doubled its level of circularity—currently estimated at only 8.6%—this would support climate action and help keep the world’s temperature increase below 2°C.2Circle EconomyThe circularity gap report.https://drive.google.com/file/d/1MP7EhRU-N8n1S3zpzqlshNWxqFR2hznd/editDate: 2021Google Scholar,3Material EconomicsThe circular economy – A powerful force for climate mitigation.https://materialeconomics.com/publications/the-circular-economy-a-powerful-force-for-climate-mitigation-1Date: 2018Google Scholar It would ensure access to critical materials, create new jobs, and contribute to economic growth and prosperity.4Ellen MacArthur FoundationGrowth within: A circular economy vision for a competitive Europe.https://www.ellenmacarthurfoundation.org/publications/growth-within-a-circular-economy-vision-for-a-competitive-europeDate: 2015Google Scholar, 5International Labour OrganizationSkills for a greener future. Key findings.https://www.ilo.org/skills/projects/WCMS_709121/lang–en/index.htmDate: 2019Google Scholar, 6RREUSEBriefing on job creation potential in the re-use sector.https://www.rreuse.org/wp-content/uploads/Final-briefing-on-reuse-jobs-website-2.pdfDate: 2015Google Scholar, 7Cambridge EconometricsTrinomics, andICFImpacts of circular economy policies on the labour market: final report. European Commission, 2018https://op.europa.eu/en/publication-detail/-/publication/fc373862-704d-11e8-9483-01aa75ed71a1Google Scholar It could also help ensure the resilience of economies when global supply chains are disrupted. There are, however, still several bottlenecks to realizing a circular economy. For example, one of the greatest barriers is that product- or material-related information (e.g., on content and instructions for reuse, repair, and recycling) does not travel with products and materials down the value chain. This can hamper circular practices such as maintenance, reuse, repair, and recycling when consumers or recyclers do not know what to do with products or materials. It can be argued that data and digital solutions can play an important role in supporting the creation of a circular economy.8Hedberg A. Šipka S. The circular economy: Going digital. European Policy Centre, 2020https://www.epc.eu/en/publications/The-circular-economy-Going-digital∼30c848Google Scholar, 9Ellen MacArthur FoundationIntelligent assets: Unlocking the circular economy potentials.https://www.ellenmacarthurfoundation.org/publications/intelligent-assets#:∼:text=The%20report%2C%20Intelligent%20Assets%3A%20Unlocking,lead%20to%20broad%20social%20benefitsDate: 2016Google Scholar, 10Ellen MacArthur FoundationArtificial intelligence and the circular economy: AI as a tool to accelerate the transition.https://www.ellenmacarthurfoundation.org/publications/artificial-intelligence-and-the-circular-economyDate: 2019Google Scholar As shown in Figure 1, they can help address existing barriers across the value chain. They can help improve the design of products; design and manufacturing processes; the usage of products; the reuse, recycling, and remanufacturing of products; and ultimately waste management. Digitalization has the potential to disrupt the current linear take-make-dispose model, reduce the consumption of resources, and even support dematerialization across the economy. These possibilities can be exemplified by the role that digitalization plays in improving information sharing and business models. A transition to a circular economy could benefit greatly from enhanced access to better information and improved connections between relevant stakeholders across the value chain. This includes tracking and tracing valuable materials, products, and components, as well as dangerous chemicals down the value chain, which would enable safer and more efficient reuse and recycling. Solutions such as databases, as well as QR codes, barcodes, RFIDs, and watermarks, are already used to improve such tracking. For example, SCIP is the European Chemical Agency’s database for information on substances of very high concern in different products. It aims to ensure that this information is available throughout the life cycle of a product, including to recyclers to enhance waste management. TagItSmart again has developed smart tags that allow stakeholders—from producers to consumers and recyclers—to track items and provide additional information by using QR codes, for example, on how and where to recycle products. In the future, advanced digital solutions such as blockchain carry potential to store and share data in secure and efficient ways. Blockchain is interesting because it can help strike a balance between sharing required information for recipients and respecting intellectual property rights and companies’ right to protect confidential information. As an example, Circularise is developing blockchain to improve transparency and communication across value chains. Stakeholders, like recyclers, can ask questions about products via secure communication by using its Smart Questioning feature. Digital solutions are already used to improve how businesses work. Businesses are using digital solutions such as artificial intelligence (AI) to improve the design of products and production in general. Also, 3D printing can optimize production by using only the exact amount of material needed—this technology of adding layer upon layer when printing a product can avoid the use of surplus materials and minimizes the waste in the production process. It can also be used to produce replacement parts locally, thus supporting reuse and remanufacturing. Internet of Things (IoT) can be used for predictive maintenance and, as such, help extend the life cycles of products. Moreover, sensors or robots can be used to enhance recycling and waste management. Digital solutions such as IoT and online platforms are also enabling service-based business models such as products as a service (PaaS), where consumers purchase the desired services (e.g., lighting, mobility, or healthy food) rather than just the equipment or products (e.g., lamps, cars, or pesticides). When customers can pay for the usage of products, this can result in the smarter use of resources. Renting and sharing reduce the need for individuals to own products, which decreases the demand for continuous production. As an example, clothing-as-a-service online platforms are growing in Europe and beyond: the Dutch brand MUD Jeans rents and recycles denim clothing, and Urban Outfitters has started its own rental service, Nuuly. Considering the linear trajectory for textiles—for example, 73% of clothing is landfilled or incinerated worldwide11Ellen MacArthur FoundationA new textile’s economy: Redesigning fashion’s future.https://www.ellenmacarthurfoundation.org/assets/downloads/publications/A-New-Textiles-Economy_Full-Report_Updated_1-12-17.pdfDate: 2017Google Scholar—these kinds of new approaches to producing and consuming clothes could help curb the production of new apparel and reduce related GHG emissions, water intake, pollution, and waste. Digital solutions have great potential to enable business models that can provide customers with what they need while encouraging product longevity, reusability, and sharing to reduce demand for materials and negative externalities, such as waste and pollution. They have the potential to disrupt business models as we know them. Despite the progress that has already been made in using data and digital solutions to enable a circular economy, several barriers remain to be addressed. As a starting point, digital solutions are not actively developed to benefit the circular economy. Policies and investments have been slow to encourage purpose-driven digitalization, where the use of data and development of digital solutions would be geared toward achieving a circular economy. Also, as a result of a lack of framework conditions, knowledge, and skills, many businesses are slow to transform their businesses and business models to gain benefits from digitalization. Without guidance, incentives, and framework conditions, the full potential of digitalization to address sustainability challenges will not be realized. In a worst-case scenario, digitalization can run the risk of promoting linear take-make-dispose models and over-consumption. Second, data sharing between the different stakeholders across value chains is hampered by a lack of standards and trust, as well as concerns over data protection (including personal data and intellectual property rights). When data are made accessible, they are not always provided in a user-friendly form, thus making them less actionable. Third, the cost of digital solutions, such as AI, 3D printing, robotics, and other digitally enabled new business models, can slow down their uptake. For example, 3D-printed shoes can cost hundreds of dollars, and using robotics for waste management requires significantly higher investments than conventional approaches. Fourth, stakeholders such as consumers do not always have the awareness, literacy, or skills to use digital solutions to purchase more sustainable products or maintain and dispose of them in alignment with circularity goals. Moreover, although apps can help connect, inform, educate, and even empower stakeholders, the app market can be overwhelming for many people to navigate. Lastly, digitalization can result in significant negative side effects. The information and communication technology sector accounts for 2% of global GHG emissions, making it comparable to the aviation sector.12Avgerinou M. Bertoldi P. Castellazzi L. Trends in data centre energy consumption under the European Code of Conduct for Data Centre Energy Efficiency.Energies. 2017; 10: 1470https://doi.org/10.3390/en10101470Crossref Scopus (147) Google Scholar Mining, material processing, and product manufacturing for electronics contribute also to pollution, water stress, and biodiversity loss. Moreover, e-waste is currently the world’s fastest-growing waste stream: around 53.6 million metric tons were generated worldwide in 2019.13Forti V. Balde C.P. Kuehr R. Bel G. The Global E-waste Monitor 2020: Quantities, flows and the circular economy potential (United Nations University- and United Nations Institute for Training and Research- co-hosted SCYCLE Programme, International Telecommunication Union, and International Solid Waste Association).http://ewastemonitor.infoDate: 2020Google Scholar A policy and financial framework that supports the development of a digital circular economy should incentivize the creation of a circular economy and address remaining barriers with the help of data and digital solutions. The European Union’s (EU) current efforts to align a circular economy and digitalization14European CommissionCircular economy action plan: For a cleaner and more competitive Europe.https://ec.europa.eu/jrc/communities/en/community/city-science-initiative/document/circular-economy-action-plan-cleaner-and-more-competitiveDate: 2020Google Scholar,15European CommissionA European strategy for data.https://ec.europa.eu/info/sites/info/files/communication-european-strategy-data-19feb2020_en.pdfDate: 2020Google Scholar can offer learnings beyond its borders. Product-related data requirements within the EU market could, through global supply chains, exert an influence outside of Europe. But real success in aligning the circular and digital agendas will also require global collaboration. The EU is planning to develop a common European data space for a circular economy, which would enhance information transfer and drive the deployment of digital tools such as digital product passports. This is a very much needed—although also ambitious—initiative to overcome current challenges related to the sharing of data and information. At the same time, given that value chains are global, the effectiveness of solutions such as digital product passports will ultimately depend on international cooperation. The EU is also looking to promote the use of AI to help achieve environmental and sustainability goals. Europe and the world need sustainable AI solutions that are trained to make choices that are positive for the environment and can also critically examine AI’s own energy consumption. Developing sustainable AI, possibly even indicators for the energy-efficient use of AI, would surely benefit from international collaboration. The EU is also creating new eco-design rules for electronics to make them more durable, reparable, and recyclable. Although it is a complex exercise, these new rules can be very effective at ensuring that only sustainable electronics can enter the European market and thus promote their development outside EU borders as well. It is worth recognizing that these new eco-design rules could also have socio-economic impacts on producers in the Global South. It would be important to have an exchange with global trade partners to understand the impacts and ultimately aim to create a global path for sustainable electronics. Moreover, financing also matters. The EU’s budget for 2021–2027 recognizes the need to invest in the green and digital transition. It is now essential to ensure that the rhetoric will be reflected in how the public money is actually spent. Digitalization can serve as an enabler and even as a catalyst for a circular economy. However, this will not happen overnight and requires addressing challenges such as access to adequate digital solutions, concerns over data protection, negative side effects of digitalization, and people’s lack of digital skills.