From hailing a cab to healing the sick, digital disruptions are transforming virtually every aspect of modern life, rattling formerly stable industries and offering new, profitable growth opportunities. There’s little wonder, then, that digital solutions will play a major role in bringing the concepts supporting the circular economy, with its focus on sustainable growth, into the mainstream.
Businesses have traditionally exploited resources in a linear way, extracting raw materials to manufacture products for customers worldwide who then use and ultimately discard them. Today, however, critical nonrenewable inputs like metals, minerals and energy supplies are increasingly scarce, while the regenerative capacity of forests, land and oceans is under mounting pressure. As a result, these conventional straight-line business models can expose firms to unacceptable levels of risk, including wild price volatility.
Consequently, leading companies have begun to adopt new, more circular approaches to using resources. These approaches focus on reuse and repair, on upgrades and refurbishments, on capacity sharing and renewability. We have identified more than 100 companies that are guided by circular economy principles, and they range from massive global enterprises to feisty, fast-moving startups.
Five primary circular business models have proven successful and scalable.
Circular Supply Chain. Provide renewable energy, and bio-based or fully recyclable materials in place of traditional inputs to enable regenerative use of the same resources again and again
Recovery and Recycling. Recover useful resources or energy from disposed products or byproducts, effectively turning waste disposal costs into resource management revenues for any business
Product Life Extension. Extend the working life of products and components by repairing, upgrading or reselling them to transition from product to lifecycle revenue generation
Sharing platform. Enable, for a transaction fee or access to a similar device, increased product utilization by making it possible for consumers and/or companies to co-use and exchange goods on a central service
Product as a service. Offer product access rather than ownership to let customers pay for performance only, and integrate incentives to make products that last and can be effectively upgraded and serviced
Digital technologies provide remote visibility and asset control, making them perfect enablers for three of the five circular economy business models: product as a service, sharing platform and product life extension. By enabling “dematerialization” (e.g., replacing physical newsprint with virtual online content or physical stores with direct-to-consumer retail) and changing how people interact with physical and virtual assets, digital technologies can transform value chains so that they no longer need additional physical resources to grow.
Five key digital technologies enable the circular economy.