Industrial companies generate 16% of global GDP. They are also responsible for one-fifth of the world’s carbon emissions and consume 54% of the world’s energy sources. Today, they are aware of the impact they have on the environment, and they are prepared to do whatever they can to reduce emissions. A shift to a circular economy business model is a desirable end goal.
What circular economics is all about
Circular economics seeks to design out waste and pollution from production processes. It aims to keep products and materials in use for as long as possible and regenerate natural systems. And it strives to avoid using non-renewable resources, including fossil fuels.
In industrial companies, this can mean techniques like product as service, remanufacturing, refurbishing, asset sharing and alternative organic or secondary raw materials. It’s about designing products that use fewer raw materials and are more durable, repairable and recyclable. It’s become an imperative: the traditional industrial production model of “take-make-waste” is no longer sustainable. According to JP Morgan, if the industrial world continued along this path, worldwide demand for resources would almost triple by 2050, using up the planet’s resources by over 400%.
What is being done about it?
Initiatives are underway to address the issue. In response to a study that found 50% of total greenhouse gases and over 90% of biodiversity loss and water stress come from resource extraction and processing, the European Commission adopted the new circular economy action plan (CEAP) in March 2020, as part of the European Green Deal. But so far, the world has only reached 8.6% circular economics, leaving what’s known as a circularity gap. The figure has fallen from 9.1% in 2021 to 7.2% in 2023.
Forward-thinking industrial companies are taking steps towards circular economics, which is a massive job. It involves transforming business practices that have been in place for decades and bringing them into the digital, sustainable era. Many companies now have chief sustainability officers (CSOs), who are responsible for the company’s ethical and social governance (ESG) activities and overall environmental policy. CSO teams now include circular program managers, who have a dedicated responsibility for circular activities in the company.
In practice, the role of the circularity program manager requires using their company’s ecosystem and innovation projects to drive towards circular economics and away from traditional, linear take-make-waste. It encompasses things such as finding innovative ways to use recycled materials, designing recyclable products, and creating novel partnerships that facilitate circular commercial collaborations. It covers replacing fossil fuel use with biomaterials, creating and implementing take-back and on-demand new business models, and much more.
The journey towards circular economics is complex and is a gradual process, which is why it is also important to measure your activities and monitor your progress. This means ESG reporting is vital and product carbon footprint (PCF) measurement is essential, too. But industries suffer from lack of approved standards by which to do these things. End-to-end traceability requires data gathering across the entire value chain, which is hard to do when your data is scattered and siloed. Data-driven collaboration is key to driving optimized and efficient collaboration on circularity.
Companies making circular commitments
Orange Business recently hosted an Innovation Roundtable® workshop in Paris, where several industrial experts spoke about circular economics and the importance of sustainability. Nina Fechler from specialty chemicals company Evonik commented, "For Evonik, innovation and digitalization basically go hand-in-hand because if we talk about circularity, data is key. We have a lot of data in our products and on different technologies and then we can combine this and make predictions, for example, how do you make a perfect formulation, how can you prevent waste. It helps us and our customers navigate towards more circular chains."
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Peter Lukassen from Bosch Automotive Aftermarket said, "When we talk about sustainability and circularity, what is most important for a company like Bosch, it is to say that we know about the challenges ahead and that we can only sustain our business if we change and if we have a true transformation of our current habits. At Bosch we know that digitalization and innovation are core for this transition."
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And Amit Limaye of medical device and diagnostics manufacturer Becton Dickinson commented, "I really see sustainability as a vector for innovation by itself. Sustainability or incorporating sustainability in the way we do things really is an innovative way of looking at existing products as well as future products. Innovation in the way we design products, design for disassembly, innovation in the ways we make products and make sustainability inherent in the product design itself are great examples of innovation in this space."
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Digital enabling change
Industrial companies can leverage many digital solutions to power transformation and make circular economics a more achievable reality. Data-driven operations can make processes more robust and operations more efficient, for example. IoT technologies generate data that can be used to reduce waste and pre-empt faults in production, saving precious resources. Digital product identities and blockchain can be used to share sensitive information between supply-chain partners to maximize reuse and recycling.
Furthermore, industrial companies that want to shift towards circular economics also think ecosystem-centric. Circularity requires more coordination across value chains, more insights about materials, products and processes, such as reverse logistics and supply chains. It also requires more consideration when designing new circular materials to supply circular product manufacturers with. Companies that are data-centric and have data-driven operations have a head start on this.
In the traditional, linear industrial process, everything was largely product-centric, with companies focusing on up-front product sales to the next in line. There was little thought of creating benefits across a product's full usage cycle, and no business model incentivized companies to extend product lifespans. Cloud computing, IoT and real-time data are key to managing these types of business model innovations.
According to the Ellen MacArthur Foundation, if industrial companies were to organize themselves in line with circular principles, they could save as much as $630 billion a year on raw materials in the EU alone. This equates to a reduction of up to 15% on direct materials required for production processes.
Decide what you want to be
Orange Business has committed to circular economics as a key pillar of our future strategy. As Jérome Goulard, Chief Sustainability Officer at Orange Business, says, "There are two sides of the digital coin. Are we part of the problem or part of the solution? We are both."
As part of the Orange Business Lead the Future 2030 strategy, our goals are a 45% decrease in our greenhouse gas emissions in scopes 1, 2, and 3 by 2030, 50% renewable energy in our energy mix in 2025, and 30% of mobile phones sold will be collected for reuse or recycling by 2025. Under the umbrella of our Engage 2025 program, we are committed to promoting the circular economy in the shape of eco-design and then collecting, reconditioning, repairing, recycling and increasing the overall lifespan of our products.
The Orange commitment is further evidenced in our OSCAR program, which puts circular economics at the heart of our infrastructure procurement activities. Our goal is to have all our IT infrastructure, networks and data centers operating using more reconditioned equipment by 2025. The OSCAR program also incorporates the “Marketis” platform for buying and selling reconditioned equipment, designed to incentivize our procurement teams to select reconditioned equipment where they can. Furthermore, our Green Act encourages us to put environmental issues front and center in our processes and activities. It establishes key actions we can take that drive sustainability, including circular economics, and informs the products and services we offer to our customers.
Linear economics have had their time in industrial processes and manufacturing, and a traditional industry has, for too long, been built on never-ending consumption and waste. It is time to end it and make the shift to a more sustainable circular economy model: a deep, transformative path that should be embarked on in a sincere, determined manner.
To read more about how Orange is helping industrial companies become more efficient and sustainable and use IoT technologies to power circular economy thinking, please visit: https://www.orange-business.com/en/solutions/iot.
Zane Smilga
As an expert in digital innovation at Orange Business, Zane is involved in multiple industries supporting enterprises in navigating wisely through a combination of various technologies, processes and solutions in order to reap the benefits of making operations and products smarter and more efficient.
Cécile Bidois
Cécile is Head of Smart Industries Marketing at Orange Business. Cécile supports our account teams and their customers in the digital transformation of their industrial processes. Together, we aim at pinpointing the challenges of this industrial revolution to improve security, quality and productivity within factories, with digital at the service of human and sustainability.
A division of the Orange Group dedicated to B2B, Orange Business is a network-native digital services company connecting, protecting and innovating for sustainable business growth. We meet our customers’ challenges at every stage of the data journey to take advantage of new business ecosystems.