Digital Cycles and Digital Scrap: How Digitization Improves Resource Efficiency in the Circular Economy - and Where it Tends to Cost Resources

The basic idea of a circular economy sounds simple: Instead of disposing of products at the end of their useful life, the value of the raw materials contained in them should be preserved as much as possible. In order to be able to implement this idea, one needs information about the material composition of the products, the expenditure on recovery, the demand for recycling materials, etc. which however are lost in the current linear system. Theoretically it would be possible to collect such data, but the amount of data would be gigantic. The resulting transaction costs would ultimately exceed the economic benefits. Against this background closing material loops often fails because of an information problem. This is exactly where digitalization begins. Due to the technical development of computer chips, computer performance and data communication, we are nowadays able to process more and more information and therefore need less and less time. The term "digitization" encompasses completely different developments, each of which has the potential to contribute to a radical improvement in the recycling of raw materials. In many sectors, the necessary technologies have already been successfully tested; however, the closed-loop economy is lagging far behind, even though the potential for reducing environmental pollution is nowhere higher and digital readiness is not estimated to be anywhere lower. In order for the circular economy to become a truly "green" project, the use of raw materials required for this must not be overlooked. It still requires a lot of intelligent innovations and new framework conditions in order to fully exploit the potential of the circular economy 4.0.

Author(s): Henning Wilts and Holger Berg

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