How can the circular economy benefit from digital transformation?

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4 September, 2019

The digital era has brought about a complete revolution, both in terms of the markets and the way in which companies understand business; it has been a real game changer for the industry. By substituting analogical spaces and processes with digital ecosystems, companies have been able to become more competitive, and likewise they have been able to find new ways to reach their target consumer; target consumers who are also undergoing a considerable transition process, and who no longer have the same needs and concerns as they did 10 years ago. Needless to say, a growing concern for sustainability has also been instilled in the minds of these new consumers. This makes many companies wonder how can the circular economy benefit from digital transformation.

The circular economy and digital transformation, two intertwining trends

To say that digital transformation is a growing trend would be a complete understatement. Nowadays it is practically impossible to think of a corporate future which is unconnected to digital technology. Despite being a relatively new concept, the circular economy model has revealed the growing demand for products and services that are both sustainable and more respectful of the planet.

There is tremendous potential for combining the circular economy model with digital ecosystems. As a matter of fact, both of these concepts seek to improve efficiency levels and therefore there really is no reason why circular economy models should not be implemented as part of the digital transformation process. One of the main ideas behind the digital transformation process is the concept of economising; an idea which refers, not only to economising on time, but also to economising on the use of any resources which could have a negative impact on the environment when used in excess.

A good example of this is Katty Fashion; Katty Fashion is a fashion company that has replaced standard prototypes with 3D models in order to ensure that no materials are wasted. By implementing this 3D model system, the company is not only able to save money and make a positive impact, but it is also able to create value through innovation and sustainability.

The circular economy and the collaborative economy

It is hard to deny the role that the internet and the increasing studies into climate change have played on the increasing level of environmental awareness among the general public. Numerous initiatives implementing circular economy models have emerged in recent times, clearly demonstrating the adaptability of the current market. These initiatives offer solutions which combine sustainability with money-saving practices.

This phenomenon can be seen in the countless apps that have been created based on the idea of a collaborative economy. There are now dozens of platforms that you can use to car share or even to rent out personal goods such as bicycles, work tools, sports materials, etc. to private individuals. Rental schemes such as these help to maximise a product’s useful life, rather than letting it just collect dust in the garage. And, this can all be done from an easy-to-use mobile phone app.

Business models based on the collective purchase of energy have also emerged. Through these platforms, consumers are able to club together to attain more competitive energy prices, and it is the energy networks themselves that have to compete in a bidding war to see who is able to offer the best rate.

Big Data and Blockchain, giants with great potential for sustainability

If there is one form of technology which is closely connected to digital transformation and which has the potential to make a huge contribution to the digital economy, it is Big Data. Processing massive amounts of information related to energy consumption and the use of plastics and other raw materials offers a real opportunity for optimization plans to be drawn up to regulate the use of said materials.

There are markets in which big data packages are bought and sold for this purpose. However, there are also multiple initiatives in place in which companies are able to contribute their collected data to help create enormous open source repositories that can be used by other companies.

The Blockchain is another form of technology that offers numerous advantages. One such advantage is its use in product traceability; it provides more transparency with regards to the production processes and product composition, which therefore enables consumers to make more informed decisions.