From ordering food to curing diseases, technological developments are transforming every aspect of life nowadays. Hereby disrupting former well established, stable industries and providing opportunities for new, profitable and sustainable initiatives. Businesses have exploited natural resources in a linear manner, using raw materials for manufacturing, where products get used by consumers and eventually discarded. However these natural resources are rapidly growing scarce, driving up the prices and, impacting the profitability (Accenture, 2017). An alternative for this traditional straight-line business model could be circular economy. Circular economy is seen as a sustainable development strategy, which is being proposed to tackle urgent problems of environmental degradation and resource scarcity, Circular economy is based on the 3R principles: reduce, reuse and recycle materials (Heshmati, 2015). It is characterized as an economy that is restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times, whilst distinguishing between technical and biological cycles (Ellenmacarthurfoundation.org, 2016). A study conducted by the German Federal Environment Ministry (Wuppertal Institute for Climate, Environment and Energy, 2017) articulates that the circular economy could especially benefit from information technology, as well as the ‘still to be overtaken’ challenges.
1. Underdeveloped availability of information:
Information could provide insights in the quality of secondary materials, which is crucial when it comes to reuse. Also there is insufficient information available regarding the quantities of recycled resources on the market, which limits the possibility for economies of scale.
2. Increased transaction and search costs:
This lack of information regarding the quality increases transaction and search costs makes the pricing processes more complicated as well as increases the need for contracts and guarantees.
3. Potential customers have a distorted perception:
Customers view secondary materials as inferior because of the lack of knowledge regarding the usability and quality of secondary materials.
4. Technological barriers:
Recyclability is not perceived as a competitive advantage. Therefore organizations do not focus on recycling during the design process, which increases the cost of recycling.
In my opinion, information technology has the potential to amplify circular economy initiatives by providing remote visibility, as well as asset control. More insights in the quality of secondary materials would convince consumers from their quality. The potential of platforms to incorporate value chains, as well as increase visibility of circular economy initiatives offer the potential of economies of scale. Furthermore by using appropriate data analytics, for example cluster analysis, key areas for specific circular economy activities can be found.
Heshmati, A. (2016). A Review of the Circular Economy and its Implementation. Browser Download This Paper.
Wuppertal Institute for Climate, Environment and Energy. (2017, August 22). The circular economy: Resource-efficient and digital. ScienceDaily. Retrieved October 9, 2017 from www.sciencedaily.com/releases/2017/08/170822103214.htm
Accenture. (2017) Retrieved October 9, 2017 from https://www.accenture.com/us-en/insight-outlook-using-digital-tech-spin
Accenture. (2017) Retrieved October 9, 2017 from https://www.weforum.org/agenda/2017/09/new-tech-sustainable-circular-economy
Ellenmacarthurfoundation. (2017) Retrieved October 9, 2017 from https://www.ellenmacarthurfoundation.org/assets/downloads/Cities-in-the-Circular-Economy-The-Role-of-Digital-Tech.pdf
Hi Steyn,
I love this idea and I truly with this would already be the standard. I am convinced that the field of information strategy provides great tools to tackle such challenges. I have used sharing platforms myself before and I love the fact that social media e.g. allows someone to borrow a drilling machine for a Saturday to work on a project when the other person does not need it. This is a great example of a circular economy business model where social media connects individuals, allows to share information, review each other to build transparency and trust and to make to share arrangements for a car, a juicer or anything else basically (Accenture, 2017). Despite all the benefits of such business models, I often think people have this desire to own and possess something and that people get overly protective of what they own and that this might take out the momentum of such idea. In his article on Newscientist,com, Bond (2014) describes how “our relationship to the things we own goes far beyond utility and aesthetics” and that we humans define ourselves through what we own. This fact, might unfortunately pose an additional challenge on top of all the legal, regulatory and economic hurdles such business models have to take in order to success. Despite all these potential hurdles, I found it really encouraging to read the report “A Circular Economy in the Netherlands by 2050” by the Dutch Minister of Economic Affairs and Minister for the Environment (2016) where they introduce a Government-wide Programme for a Circular Economy. I think this is a big statement that contributes to overcoming the hurdles.
Accenture. (2017). Using digital tech to spin the circular economy | Accenture Outlook. [online] Available at: https://www.accenture.com/cr-en/insight-outlook-using-digital-tech-spin [Accessed 16 Oct. 2017].
Bond, M. (2014). Stuff: The psychological power of possessions. [online] New Scientist. Available at: https://www.newscientist.com/article/mg22129620-900-stuff-the-psychological-power-of-possessions/ [Accessed 16 Oct. 2017].
Government.nl. (2016). Cabinet: National raw materials agreement to foster circular economy by 2050. [online] Available at: https://www.government.nl/ministries/ministry-of-infrastructure-and-the-environment/news/2016/09/14/cabinet-national-raw-materials-agreement-to-foster-recycle-economy-by-2050 [Accessed 16 Oct. 2017].
Hi Steyn,
Thank you for your contribution! I like the insights you gave us on the application of information technology on circular economy. I agree with you and I personally think that our generation should be focussed on reducing, reusing and recycling as much as possible. Last year, I came in touch with a circular economy application which was completely new for me, you might find it interesting too. I am talking about Circular Building. Typically, the construction industry operates within a linear economy of ‘make, use, dispose’ yet unlike most structures, the Circular Building is designed for all the elements to be dis-assembled and re-used. This entails making use of the old skeleton of the building, instead of completely destroying it and building up from scratch. But also reusing materials to build walls, stairs and even furniture! Furthermore, it tries to effectively make use of natural resources such as sunlight. How cool is that? Even though it is a very new concept and also deals with complications such as legal constraints and high production costs, I think it is very promising. One of the best examples is the renovated building of the Dutch company Alliander, you can see the result here: https://www.youtube.com/watch?v=S2iqjIY4oZo
How is information technology contributing? Apart from the applications within the buildings itself, IT is serving as a thinktank on the internet. Because of the many complications individuals were facing trying to implement circular building ideas, the online platform Green Deals NL was recently introduced. It is a place where stakeholders and interested parties come together to brainstorm, discuss and eventually collaborate in order to make circular building an everyday practice. Hopefully they succeed!
Oh and in case you didn’t know; there is a really interesting event on this topic coming up! Check out the event: https://vencaf.nl/circular-rotterdam-venture-cafe-x-blue-city/
Schofield, C. (2016) The Circular Building: the most advanced reusable building yet [online] Retreived at: https://www.arup.com/news-and-events/news/the-circular-building-the-most-advanced-reusable-building-yet, 17 October 2017