Why industry must embrace the circular economy

Connected industrial ecosystems support the transition to circularity. They can deliver the just, equitable future we need, says Lisa Wee, Global Head of Sustainability at AVEVA.

The World Economic Forum has referred to the circular economy as the business opportunity of our time in strengthening local economies and societies while decoupling the world’s growth from consumption. Expanding on the reduce, reuse, recycle maxim drummed into schoolchildren around the globe, four key circular actions are cited as critical to achieving circular objectives, including use less, use longer, use again, and make clean.

And we have some work to do with the global economy, which is currently only 7.2% circular. Analysts estimate that to bring human activity in line with safe limits for the planet, we need to reduce material extraction and consumption by one-third. Efficient and more circular use of materials in just four industrial segments (cement, steel, plastics, and aluminum) can help reduce global greenhouse (GHG) emissions by 40% by 2050.

C-suite strategists are already navigating geopolitical tensions, supply chain and workforce disruptions, an expanding population, and a shifting center of global economic gravity. Underpinning that delicate balancing act is an environmental emergency that is dramatically changing the way we live and work.

Digital transformation is essential to tackling these competing pressures while helping industry embrace the circular economy and accelerate a net-zero future.

From linear to connected networks of intelligence

Industrial companies have historically followed a linear path that relies on the idea that resources are plentiful and will be available across the life of the business. However, as resource scarcity and the impact of the take-make-waste model become apparent, the industrial community is being challenged to rethink its approach.

Companies can now leverage next-generation digital solutions to build more transparent and sustainable value chains and enhance circularity both for existing production models as well as greenfield projects. Digital twins, artificial intelligence (AI), and edge-to-cloud computing, are arming businesses with newfound levels of insight and empowering teams to reimagine projects and products while driving agility, resilience, and sustainability.

Together, these technologies create interconnected networks of intelligence that help industries to develop new products that are circular by design and redefine collaboration across their existing value chains to facilitate a more holistic and circular approach to resource lifecycles. This kind of connected industrial ecosystem, as we refer to it at AVEVA, can transform the way materials are conceptualized, created, used, and recycled.

Clarity about circularity

A recent McKinsey survey reported that by 2026, business leaders expect half of their revenues to come from products and services that haven’t yet been created. The path to long-term viability and sustainability lies in a circular model that embraces lifecycle thinking. It isn’t enough for industrial production to become more efficient and generate less waste. Businesses must also work to retain existing value and create new value from industrial materials to close the loop.

Lifecycle thinking advocates for a more mindful approach, wherein products are designed, produced, and managed to minimize waste and maximize their utility throughout their entire lifecycle. The focus shifts from a one-way street to a circular pathway. This ‘cradle to cradle’ approach ensures that from the outset, goods are recyclable, resources are conserved, waste is minimized, and the overall environmental impact is significantly reduced.

Data is critical to this approach, particularly when leveraged across a connected ecosystem with various inputs from the entire industrial process, enabling more holistic and advanced analysis and optimization. From the earliest stages of design and sourcing raw materials to disposing of the final product, connected industrial ecosystems provide real-time insights so teams can make more informed decisions aligned with circularity goals.

 Leading by example

From starting in the design phase to optimizing operations, connected industrial ecosystems can enhance circularity and drive sustainability transformation across a wide range of sectors.

• Use less as part of the manufacturing process: Connected industrial ecosystems allow seamless tracking and analysis at every step of the product journey. From sourcing raw materials to manufacturing, distribution, use, and eventual disposal or recycling, they offer a bird’s-eye view of the entire lifecycle, enabling companies to use fewer resources for a longer time. Measurable improvements include identifying and reducing inefficiencies, pinpointing improvements, process optimization and waste reduction—all on an ongoing basis. When Danone used a core Manufacturing Execution System for end-to-end traceability across its factories in Indonesia, it was able to standardize KPIs, compliance reporting and supply chain integration across multisite operations, and reduce energy use and waste. Danone is now extending the successful approach across its global network.

• Use longer critical equipment and assets: The global race to net zero is rapidly changing the electricity generation mix. ENEL, a leading global energy company with expertise in renewable power, has been using AI-infused predictive analytics for more than five years to boost production efficiency and extend the life of power generation equipment. Previously, ENEL monitored equipment health by having many experts, usually local to the equipment, manually review information coming from hundreds of IoT sensors measuring temperatures, pressures, flows, vibrations on their equipment day by day, searching for abnormal behavior. By centralizing the information into one digital platform and leveraging AI, the team was able to detect, diagnose and mitigate issues long before they pose a risk to production. Over 220 real events were detected early so failures could be prevented and the life of critical assets lengthened.

• Use again CO2 captured and stored: Data-centric engineering is a new design paradigm where industrial data from internal and external sources is centralized on one platform. Using this digital source of truth, companies can innovate for circularity and sustainability. Norway’s Aker Carbon Capture, for example, promotes circularity through reusing atmospheric carbon, turning it into new industrial products across a number of industries. For Dutch waste-to-energy company Twence, Aker technology reduces emissions from the incineration of non-recyclable waste by capturing up to 100,000 tons of CO₂ annually, which is then reused in the horticultural sector. To scale up these gains for far-reaching impact, Aker deploys a cloud-based solution to give teams across projects and time zones a single, holistic view of operations. With real-time collaboration, Aker has reduced the cost of its medium-sized offerings by 90% as of nine years ago. Operational efficiency is up, and time to market has been cut by over 50%.

• Make clean and profitable new materials: Digital twin solutions empower engineers to simulate, test, and optimize processes within a virtual space. This approach cuts the cost curiosity in the early phase of a project because multiple designs for processes and plants can be evaluated while change is still inexpensive. Global chemical giant Covestro has publicly committed to becoming fully circular and accelerating the transition to a fossil-free economy. A long-time user of digital twin technology, Covestro has been able to optimise plant operations by matching real-time data with simulation information. As a result, time spent on maintenance is significantly reduced, unplanned shutdowns are avoided and less resources are used. However, as part of their ambitious circularity pledge, Covestro is also now using digital capabilities to create new chemical polymers that are aligned to a closed-loop circular economy. By leveraging data from across their connected operations, new bio-based products can be produced reliably and profitably, accelerating the rate at which these green materials can be scaled.

 Pathway to our climate neutral future

Digital technologies are integral to accelerating our net-zero future. Most business executives (87%) at larger industrial companies agree. In a recent survey, they cited a need for connected data that delivers unique insights to address environmental challenges that impact sustainability goals while helping navigate economic volatility, supply chain disruption and environmental compliance. The next generation of engineers is also bringing new expectations to the workforce, from technology utilization to executing meaningful and impactful work.

As the world approaches the halfway mark to the UN Sustainable Development Goals 2030 deadline, it’s imperative that we all play our part. Connected industrial ecosystems hold the potential to revolutionize industrial business by infusing lifecycle thinking into their DNA. Industry, transport, and electricity currently account for over 75% of global emissions. With increasing environmental concerns and evolving consumer expectations, businesses that lead by example and prioritize circularity and sustainability will retain the competitive advantage. Use less, use longer, use again, and make clean are just the guiding principles we need.