Closing the Loop with Tech: The Role of Technology in Powering the Circular Economy

The tech industry has often enjoyed a reputation for existing outside the realm of traditional environmental concerns.? Its relatively low industrial footprint, focus on digital products, and contributions to eco-friendly advancements, like renewable energy—everything about it supports this perception. However, as tech’s dominance grows and its physical footprint expands—think electric vehicles, rare earth minerals, and the ever-growing server farms and energy needs required to power AI and blockchain—questions about its long-term sustainability become unavoidable.?

Fortunately, the answer to this conundrum might already exist.?

The circular economy model, which prioritizes product longevity and waste minimization, presents a unique opportunity for tech to embrace sustainability and become its main driving force. By leveraging its innovative capacity, the IT industry can help enhance solutions that make the circular economy not just a talking point on corporate end-of-the-year reports but a practical and tangible reality.?

Join us in this deep dive, where we’ll explore the most promising ways in which technology can become the engine for a more sustainable future, propelling the circular economy into the mainstream. But first, let’s briefly examine the state of the circular economy model in 2024.?

The state of the circular economy?

Sadly, despite a wellspring of enthusiasm and increased awareness, the current state of the circular economy is rather disappointing. Though numbers can vary significantly by industry, organizations have generally struggled to hit their targets, and the hard-nosed realities of implementation have dulled the initial fervor surrounding the model.?

With just two statistics from the 2024 Circularity Gap Report, we see the grim reality of the situation:?

• The circular model is falling out of favor: The proportion of secondary materials used by the global economy has dipped from 9.1 percent in 2018 to 7.2 percent in 2023, reflecting a 21 percent decrease over a five-year period.?

• Take-make-dispose consumption continues growing: Our consumption rate is skyrocketing. In just five years, we've used 500 gigatons of materials—that's 28 percent of what humanity consumed in the 20th century!?

This is a troubling state of affairs. We are effectively moving away from sustainability on two different fronts.?

It’s not all bad news, though. The inability to hit circularity targets does not stem from a lack of trying; it has more to do with the fact that it’s a much more challenging problem than initially thought. As such, these initial attempts have been immense learning experiences, helping us increase our understanding of what it takes to tackle this problem.?

And that’s where tech comes in.?

How tech can re-energize the circular economy?

The main problem in making the circular economy work is twofold. Firstly, there is a dire necessity to coordinate information flows and collective action across stakeholders. Secondly, companies and larger global institutions must attain a highly abstract and systemic understanding of both larger processes like industry-wide supply chains as well as more granular domains like product design.?

Here are some tech-based solutions the circular economy world is currently exploring.?

#1 AI for product design and material analysis?

Artificial intelligence has a tangible potential to revolutionize the circular economy. AI can?guide product design toward sustainability, prioritizing materials that are easy to disassemble, reuse, or recycle by efficiently analyzing massive amounts of data in seconds. Additionally, AI-powered sensors can improve the sorting process for recyclables, separating materials with higher accuracy. This not only reduces contamination but also boosts the quality of recycled materials, making them more attractive for manufacturers and further closing the loop in the circular economy.?

#2 Product knowledge?

One of the central difficulties in implementing circular supply chains is gathering accurate data about products and raw materials. For example, many corporate actors refrain from using secondary materials because they doubt their quality and resilience. Tech-based solutions, however, could enable widespread gathering and dispersal of valuable information, thus promoting all sorts of beneficial adaptations.?

But what would this look like? Well, by embedding Internet of Things (IoT) devices throughout a product’s lifecycle, companies can gather real-time data on everything from manufacturing efficiency to usage patterns and even end-of-life scenarios. This rich data stream allows for process optimization and predictive maintenance and, most importantly, facilitates the identification and recovery of valuable materials for recycling.?

#3 Blockchain platforms for safe data sharing?

The age-old problem of who?gets to control?said data hampers the previous solution of data sharing. Luckily, there is now a way for no one to control the data and for it to be immutable and thus incorruptible, blockchain.?

Through distributed ledger technology, all the different stakeholders along the supply chain could share their data, knowing that it could not be owned or manipulated by any single actor. Due to this crucial innovation, several industrial giants have started?experimenting with blockchain to improve?their production process through traceability and data collection.??

#4 Tech thought leadership and collection action tradition?

While technology shines in optimizing the circular economy, collective action, such as agreement on standards and platforms, remains a hurdle. This challenge lies squarely in the realm of politics, not code. However, when it comes to this matter, the tech industry is still poised to lead.?

Tech companies wield immense influence, acting as thought leaders with a history of fostering collaboration through open-source projects and standardized protocols. By leveraging this influence, the tech sector can bridge the gap and shepherd various stakeholders toward a unified vision of the circular economy trend.?

Final thoughts?

While the circular economy might not be able to solve the problem of sustainability entirely, its principles offer the most promising pathway to reduce our ecological footprint without sacrificing economic growth. Ultimately, it’s all about embracing the responsibility to do better when it comes to sustainability pledges.?

As it becomes the dominant economic sector, the tech industry has a critical role to play. By embracing the circular economy model and applying its unparalleled tradition of innovation, tech can tackle the vast difficulty we’ve experienced in making this model a reality. From developing AI-powered design tools that prioritize reusability to creating transparent blockchain-based material tracking systems, tech providers can unlock the circular economy's full potential. This collaborative effort, propelled forward by IT companies, can usher in a future where economic prosperity and environmental responsibility go hand in hand.?