Research shows that businesses, governments, and consumers around the world are increasingly concerned about the environment. But despite our apparent concern, we seem to be doing very little about it. Per a recent report, material extraction and use has nearly quadrupled in the last 50 years, outpacing even population growth. The current economy is built on a linear approach where organizations harvest Earth’s natural resources, then create and sell products to consumers who eventually use and throw away these products. It is estimated that over 100 billion tons of material are harvested and consumed every year, with more than 90% ending up in landfills without being recycled.

The circular economy aims to change all this by promoting a more sustainable approach where natural resources are extracted efficiently; production is carried out in a manner where there is minimum wastage; and at the end of the product’s life, materials are recovered, regenerated, repaired, and reused for as long as possible so that businesses no longer have to extract virgin natural resources to fuel demand. The circular economy has the potential to significantly reduce pressure on the environment, create a multi-trillion dollar economy, stimulate innovation, and create enormous numbers of jobs.

What’s stopping the circular economy from taking over?

Achieving a circular economy is easier said than done. Even the most well-intentioned companies can run into major obstacles while going down the circular economy path. According to Gartner, there are four main challenges to the circular economy. First, returning ownership of end-of-life materials can be challenging. Organizations must do a deep dive in understanding how products are consumed and promote new supply chain models where expired products return to manufacturers. Second, raw materials must have enough residual value at end-of-life so they continue to be relevant to the business. Third, for businesses to make a compelling case to stakeholders, they must first possess an understanding of the quality, quantity, and intrinsic value of raw materials being returned. Fourth, the complexity of the product matters— the less complex the product being returned, the easier and cheaper the reprocessing, and vice versa.

How digitization of supply chains can boost circular economies

Digital innovation and the circular economy are kind of symbiotic in nature. In times of increasing internet proliferation, it’s hard to imagine any circular economy initiative that isn’t aided through technology. While there can be a number of ways in which digitization can positively impact the circular economy, here are the top three:

1. Digitization can help organizations make better, more sustainable decisions.

Digital technologies enable information to travel alongside the product. This enables businesses to capture, store, and analyze consumption patterns, which in turn helps organizations make better decisions. For example, research shows that 70% of greenhouse gas emissions (GHG) are related to material handling and use. If businesses have insights into how full their aircraft, ship, or truck is, they can determine in real time how efficient their delivery will be. This translates to better efficiency, lower fuel costs, shorter delivery cycles, and reduced GHG. Thyssenkrupp, one of the world’s leading elevator manufacturers, installed a cloud-based predictive maintenance system on 130,000 of its elevators worldwide. Its sensors collect health data of its components, systems, and performance. This helps Thyssenkrupp provide better service, extended elevator uptimes, and longer product lifespans.

2. Digitization can help unlock greater value across entire supply chains. Traditionally, most businesses are focused on connecting data and devices across their customer base. Digitization can be used to unlock a number of isolated parts, partners, and consumers from across the entire value chain. For instance, a raw material supplier can tap into the stocking system of a manufacturer (via APIs) to proactively validate if they are running out of certain raw materials. Once raw materials have reached end-of-life, manufacturers can leverage digital technologies to gauge whether the products have reached sufficient intrinsic value to be returned to them. This creates an opportunity for businesses to be more efficient, less resource intensive, and

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By: Gerry Lavin
Title: How digitization of supply chains can boost circular economies
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Published Date: Mon, 02 May 2022 16:28:34 +0000

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