How can digital platforms enhance circular economy practices in value chain networks?

The emergence of digital technologies (DTs) to promote circular practices across all industries plays a key role to tackle challenges we currently face to overcome climate change. In this context, digital platforms are an effective tool to unite different technologies and strengthen information flows between stakeholders of common and cross-sectorial value chains. The first platforms to enhance sustainable practices were already developed in the early 2000s, but to date, there is still no lucidity about what recipe a platform needs to follow to promote circular strategies. To shed light on this  question, we conducted a first study about the current state-of-the-art in circular economy (CE) platform development.

Nowadays, global industries are embossed by a “take, make, waste” mentality, also known as the linear economy model (Lacy & Rutqvist, 2015). The consequences of this narrative are already devastating today. In Switzerland, around 80 to 90 million tons of waste are generated every year, which is one of the highest amounts of municipal waste in the world (Bundesamt für Umwelt, 2022). Additionally, we face an accelerating climate crisis that can only be stopped if greenhouse gas emissions are reduced radically. A circular economy that is “restorative and regenerative by intention and design” (Ellen McArthur Foundation, 2013) pursues to counteract these challenges by three principles: Narrowing material flows through an optimized resource input, slowing the lifetime through product reuse, and closing the loop by high-quality recovery of materials.

Circular economy transition through digital technologies

The widespread application of DTs is known as driving force to boost the transition towards circular industries and societies. Today, as the digital transformation has considerably progressed, DTs offer solutions to improve market transparency and information symmetries in value chain networks. Here, digital platforms assume a special function, which are often recognized as marketplaces to exchange discarded products and materials between value chain businesses to enhance circular activities, such as reuse or recycling (Berg & Wilts, 2019). Further studies acknowledge digital platforms as link to an online data storage to extensive information about products (Honic et al., 2021, Çetin et al., 2021). However, current research still lacks insights about features and services that are offered by the myriad of platforms to ensure their environmental and financial sustainability.

Thus, the presented desk research comprises an analysis of 24 organizations from various industry sectors with a focus on features and services being offered by each platform. A distinction is made between platforms that have been launched as for-profit business models (12 platforms), research projects (3 platforms), or based on a new regulation (9 platforms) that obliges their usage for actors of specific industry sectors. It should be noted that some of the current for-profit platforms were originally initiated in a project-based scope.

Figure 1: Development of platform launches in the period from 2000 – 2022

Which platform features and services enhance circular practices?

Our study revealed the identification of ten feature categories (see Figure 2). As every platform requires a database management system, the corresponding feature was considered as default attribute of the platform design. The first CE platforms were mainly developed to digitally support stakeholders in complying with new regulatory frameworks by collecting and distributing relevant information to other actors in the value chain. Still today, a vast majority of CE platforms offers digital compliance support, regardless of whether they were initiated based on an emerging regulation. The implementation of further features can be recorded at a later stage beginning in 2015 within the course of project-based platforms, such as the Building as Material Banks (BAMB) platform, which aimed at the development of material passports (MPs) for buildings.

While digital product or material passports are recognized as electronic data sets that describe the characteristics of contained substances to value their circular potential (Honic et al., 2021), a digital twin is a virtual simulation of a physical object observing its in-field behaviour through real-time data acquisition (Posada et al., 2015). The first platform that implemented digital twins was also founded in the building and construction sector and combines big data, geoinformation systems and market intelligence to create property maps, especially for the real estate market (Praedia | NOMOKO, 2022). Another feature being frequently offered by the listed platforms in the building sector is the synchronization of the Building Integrated Modelling (BIM) and other simulation tools, which provide the basis for the calculation of sustainability metrics, such as the recycling rate or lifecycle assessments.

In this context, some platforms provide an automatized certification process in collaboration with accredited assessment agencies (e.g., cradle-to-cradle or Environmental Product Declarations). Moreover, a large part of digital businesses promise an improved product and material traceability through the platform services. As an example, Circularise enables decentralised information exchange and storage for different stakeholders in the value chain through blockchain technology (Circularise – Whitepaper, n.d.) and Circular Fashion links product identifiers with product and material data to optimize circular services in the reverse supply chain (Circular.Fashion, 2022). Another approach to tracking the use of material quantities across the value chain is the application of material and waste flow analysis, a methodology that is increasingly being inserted for large enterprises. Finally, even though conventional demand-supply matching websites such as eBay were intentionally excluded from our analysis, a considerable number of platforms offer reuse product and material trading, of which some include extended services, such as a prior quality check.

Figure 2: Allocation of feature and service categories according to occurrence in CE platforms

Outlook

This preliminary investigation paves the way for an extended study in which the first insights about platform features will be validated and deepened within expert interviews. A further focus will be on analyzing how political instruments promote data sharing and foster the long-term viability of platform ecosystems. In summary, it can already be seen from our study that the integration of DTs into the sustainable development among all businesses is gaining increasing attention, not only to boost resource efficiency and cost reduction but also to improve their sustainable image.


References

  1. Berg, H., & Wilts, H. (2019). Digital platforms as marketplaces for the circular economy—Requirements and challenges. NachhaltigkeitsManagementForum | Sustainability Management Forum, 27(1), 1–9. https://doi.org/10.1007/s00550-018-0468-9
  2. Bundesamt für Umwelt. (2022). Abfall und Rohstoffe: Das Wichtigste in Kürze. https://www.bafu.admin.ch/bafu/de/home/themen/thema-abfall/abfall–das-wichtigste-in-kuerze.html
  3. Circular.fashion. (2022). Circular.Fashion. https://circular.fashion
  4. Circularise—Whitepaper. (n.d.). Retrieved October 26, 2022, from https://uploads-ssl.webflow.com/605b4d6308d1c40972116d02/6082d0465a3f766f1f673b2d_CirculariseWhitepaper.pdf
  5. Ellen McArthur Foundation. (2013). Towards the circular economy Vol. 1: An economic and business rationale for an accelerated transition. https://ellenmacarthurfoundation.org/towards-the-circular-economy-vol-1-an-economic-and-business-rationale-for-an
  6. Honic, M., Kovacic, I., Aschenbrenner, P., & Ragossnig, A. (2021). Material Passports for the end-of-life stage of buildings: Challenges and potentials. Journal of Cleaner Production, 319, 128702. https://doi.org/10.1016/j.jclepro.2021.128702
  7. Lacy & Rutqvist. (2015). Waste to wealth: The circular economy advantage (First published). Palgrave Macmillan.
  8. Posada, J., Toro, C., Barandiaran, I., Oyarzun, D., Stricker, D., de Amicis, R., Pinto, E. B., Eisert, P., Döllner, J., & Vallarino, I. (2015). Visual Computing as a Key Enabling Technology for Industrie 4.0 and Industrial Internet. IEEE Computer Graphics and Applications, 35(2), 26–40. https://doi.org/10.1109/MCG.2015.45
  9. Praedia | NOMOKO. (2022). https://www.nomoko.world

AUTOR/AUTORIN: Ässia Boukhatmi

Ässia Boukhatmi is a Doctoral researcher in Digtal Technology Management and Circular Economy at BFH University of Applied Science and the TU Berlin. She ist holding a master degree in industrial engineering with a focus on environmental resources and renewable energies.

AUTOR/AUTORIN: Stefan Grösser

Stefan Grösser is Professor of Strategic Management and Business Analytics. and heads the Industrial Engineering Department at BFH Technik & Informatik. He lectures in the Master of Engineering (MSE) and works on several research projects in the areas of simulation methodology (System Dynamics, Agent-based Modelling), decision making and strategy tools (Decision Making and Strategy Tools), circular economy and business models (Business Models).

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