The linear economy
Two centuries ago the first industrial revolution established a linear approach to economic and social growth. This linear economy, still in place today, is based on three different steps: make, use, and dispose.
Its founding principle is that raw materials are copious, easily sourced from Mother Nature and cheap to dispose of.
The linear consumption model fostered significant social and economic improvement around the world. However, natural resources are not infinite and are becoming scarcer and thus more expensive to be sourced.
Trends such as population growth, urbanisation, climate change and pollution, increase pressure on available resources and, combined with the linear economic model, create a significant amount of waste, which is expensive to manage and dispose of.
This waste could actually be a valuable resource, but for that to happen, supply chains, companies and products need to be designed accordingly.
The circular economy
In the last years, a new theory, looking into supplanting the linear economy, has been developed: the circular economy.
According to the Ellen MacArthur Foundation, the circular economy is “restorative and regenerative by design, and aims to keep products, components, and materials at their highest utility and value at all times”. The idea is to create “closed loop” systems, where materials are kept in use as long as possible and then, at the end of the life cycle, resources are not disposed, but recovered and reused.
The circular economy is based on industrial systems designed to reduce waste and optimise energy consumption as well. These circular systems need new supply chain networks, new product design and the introduction of new as-a-service business models.
As such, this new approach not only focuses on recycling, but considers the triple bottom line: economic, social, and environmental performance.
Benefits of the circular economy encompass the reduced cost of remanufacturing goods, the significant savings in terms of energy usage, the mitigation of the risk of raw materials price volatility, and a more resilient local economy which translates into a better social impact on local communities.
An analysis drawn up by McKinsey estimates that by 2025 circular systems could add £1 trillion to the global economy and that the EU manufacturing sector could realise materials cost savings up to £600 billion per year.
Digital technologies: The hub of the circular economy
Digital technologies have been identified as one of the drivers that can enable the shift towards a circular economy.
Information technology can be used to trace materials through the supply chain and create self-regulated systems able to optimise product utilisation. For example, RFID technologies and the Internet of Things (IoT) allow the tracking of materials, recording their usage, cost and remaining available life cycle.
Additionally, IT can be integrated into buildings, making them “smart”. In this way energy and resource usage can be monitored and planned efficiently, providing a positive impact on the environment and significant savings to the user.
Social media platforms and mobile technology can connect users with businesses, giving them access to products and services in ways that were unthinkable only a few years ago.
An example of this is the sharing economy, where resources are shared and used for their entire lifecycle among different users. AirBnb, Zipcar and bike sharing services are great examples of this.
These services, paired with big data analytics, can provide valuable insights on products’ usage and customer behaviour, allowing companies to design tailored services to users’ needs, such as predictive maintenance and iterative upgrades.
IT plays a major role in this circular revolution. Digital Technologies act as the main hub for the circular economy and the sharing economy, from social media, through IoT, to energy consumption platforms and big data analytics.
Sopra Steria is at the forefront of innovation for a sustainable future thanks to our end to end service offering, from consulting to systems integration; our in-depth knowledge of the public, energy and transport sectors; and its expertise in Big Data, Cloud, Mobility, Cyber Security, and Connected Objects. Through our Smart City offering, Sopra Steria aims to create innovative, more efficient and service-oriented cities. This can be translated to company level with specific services and products tailored on your company needs.
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