The era of the “take-make-waste” production model has gone. Some might say it is not before time: if the world were to continue as it is, worldwide demand for resources would almost triple by 2050, using up the planet’s resources by over 400%. Consumers certainly seem to be saying it is time for change, too, with 43% of them now actively choosing brands based on environmental values.
According to the Ellen MacArthur Foundation, a circular economy strives to design out waste and pollution from production, keep products and materials in use for as long as possible, and regenerate natural systems – avoiding the use of non-renewable resources and supporting the use of renewable energy as opposed to fossil fuels. Consumers and businesses seek to:
- Reduce product purchasing, and design products that use less raw materials and are more durable, repairable and recyclable
- Reuse product consumption through sharing, renting, leasing and buying second-hand goods
- Redesign products so they can be remanufactured
- Repair, refurbish and remanufacture goods to keep them in use longer
- Return/recover products, materials and packaging from manufacturing and consumer ecosystems
- Recycle products and materials at their end of life
Digital solutions and data analytics are proving vital to expedite and incentivize the adoption of circular economy business models. Technologies such as Internet of Things (IoT), blockchain, AI and machine learning help with tracking and tracing product and material flows within their supply chains. Further, marketplaces, platforms, apps and websites that connect consumers and producers allow sharing and waste reduction.
For example, furniture and home goods giant IKEA has a target of being 100% circular by 2030. The company has assessed over 9,500 of its products for circularity, and in 2020, over 14 million spare parts were offered to customers with the aim of extending the life of products. IKEA has also introduced a buy-back scheme for its customers, which offers them vouchers in exchange for returning unwanted furniture and other items, also known as a “recommerce” platform.
In the clothing sector, recommerce merchants are growing 20 times faster than the general retail market and five times faster than the off-price market (retailers who sell excess branded goods at a lower price). Companies that offer recommerce platforms for clothing, such as Vinted in Europe and North America, are enjoying great growth and success. Vinted raised $303 million in second-round funding in 2021 to value the company at $4.5 billion.
Electronics is another area where circular economics are important. Smartphones alone make up around 10% of global e-waste, which in 2019 equated to over 50 million tons. In 2019, recycling rates in electronics were around just 17%. Significant efforts are being made to address this issue. Orange-branded mobile devices are eco-designed, and the company’s “Marketis” platform enables consumers to buy and sell reconditioned equipment. End-of-life equipment is collected and recycled. Orange is also working with Nokia, Ericsson and Juniper to use refurbished equipment in its networks.
In the automotive industry, companies like Lynk & Co, formed as a joint venture between Volvo and Geely Auto Group, offer innovative new ways to buy cars through flexible online subscription systems. The company has a mission to “change mobility forever” through sustainable production and recycling of its cars and by offering consumers a car-sharing platform that aims to reduce the number of individual cars on the road and make better use of urban space. The company points out that cars are generally only in use 4% of the time.
Increasing traceability across the supply chain
Consumers increasingly want to know that their goods were produced in a sustainable way. For example, Auscott Limited, a leading Australian agricultural firm, uses RFID tags to track the exact GPS location of harvested cotton bales. It is able to monitor variations in quality across its fields to optimize irrigation and the use of fertilizers. This is combined with real-time monitoring of its water cycle on site, river-based sensing, satellite-based remote sensing and weather information. The company estimates that every 1% of water saved is worth 200,000 Australian dollars.
The use of digital identities to track a product’s raw materials from source and throughout its lifecycle is gaining traction. For example, brands are assigning digital identities to the raw ingredients in food and beverages to track their source, manufacturing processes and transit through the supply chain. In its “barley to bar” initiative, AB InBev is using blockchain and QR codes to enable consumers to discover where and how their beer was grown. This makes every aspect of its supply chain transparent and lets consumers make better-informed decisions about what products they choose to buy.
Role of blockchain
To maximize the reuse and recycling of an item, information on its component materials and usage is increasingly shared between supply chain partners using blockchain. Individual products are given a digital identity for their entire lifecycle, and transactions are stored in distributed ledgers that are verified collectively, making them ideally suited to processes that traverse multiple organizations.
For example, Orange has developed a blockchain and Self-Sovereign Identity (SSI-based solution) to enable full traceability of the raw materials used to manufacture its Livebox TV set-top boxes and Wi-Fi routers. This is helping Orange to ensure that the same device is refurbished at least five times on average during its lifespan. The company will also be able to better track and maximize the recycling of rare-earth metals. According to the United Nations, precious metals, like gold, can make recycling economically viable — there are generally 280 grams of gold per tonne of electronic waste.
There’s an urgent need for circular economics. According to the World Economic Forum (WEF), under a “business as usual” scenario, by 2030 the resource capacity of two earths will be required to keep up with our one earth’s natural resource consumption. The WEF also reports that the economic benefit of material savings of transforming to a circular economy industrial system is $1 trillion. Circular economics – enabled by digitization – has to be our way forward.
I am a technology writer with a decade of experience in business, technology and logistics. From starting off my career writing questions for a TV quiz show, I’m now spending my time looking at how the world of business is going digital and transforming a variety of sectors and industries.