IoT is Powering the Circular Economy

With the current population figure at 7.7 billion people, humans are draining the Earth of its resources which is putting immense pressure on the natural environment¹. How can data impact this scenario?


As a solution to the issue, many countries are now transitioning from a linear to a circular economy in order to reuse assets and minimize large amounts of industrial waste. In the manufacturing and building sectors, energy consumption is a major cause for concern, where heating, ventilation, air-conditioning, and refrigeration (HVACR) systems are responsible for up to 60% of energy consumption². In tandem with this alarming figure, the European Union alone produces more than 2.5 billion tons of industrial waste every year³.

 

The Manufacturing Industry’s Impact on the Environment:

  • Increases energy consumption significantly
  • Produces unwanted and potentially hazardous waste
  • Causes pollution and damage to the air, soil, and water
  • Increases CO2 emissions and harmful greenhouse gases
  • Scarce raw materials and non-renewable resources are often wasted

 

It’s evident that a gearshift is urgently needed. If organizations don’t lead the charge and change this approach, the world will be at breaking point where it will lose the capacity to sustain its people and itself.

 

The Solution — Replace Tradition with a Circular Approach

The traditional linear economy model is based on the take-make-consume-waste approach. In this model, raw materials and scarce resources are collected, transformed and processed into products that are used until they are finally discarded as waste. The linear economy is an inefficient use of resources and a creator of unwanted and often dangerous waste.

 

The Circular Economy Model

 

In order to create a sustainable future for generations to come, a plausible solution to these challenges has finally evolved - the Circular Economy (CE). At its core, the circular economy is a system that is restorative and regenerative by design. The system aims to eliminate waste and follows a resource-conscious business strategy by protecting social, economic and natural environments. A circular economy follows the 3R approach: reduce, reuse and recycle with the overarching goal of designing out waste.

 

Built on the backbone of these principles, the four main value drivers of the circular economy are: 1) extending the life cycle of resources; 2) optimizing utility and yield of resources; 3) creating additional use cycles for resources, and 4) increasing system efficiency and value by designing out negative externalities.

 

Combining IoT with Sustainability Unlocks New Value Streams

IoT is undoubtedly the driving force responsible for digital transformation within the economy. When circular economy models are combined with connected devices that gather unprecedented amounts of data, there’s an opportunity to use technology for the better — to conserve and protect natural resources, whilst promoting sustainable business practices.

 

By merging the CE with IoT, businesses can explore novel ways to evolve traditional business models and unlock previously untapped opportunities. This innovative framework uses smart IoT sensors, devices and intelligent machinery to promote sustainability. The appeal of combining the CE with IoT is largely due to the characteristics of smart devices: awareness, scalability, connectivity, security, intelligence, and autonomy.

 

Intelligent assets can sense, communicate, analyze and store information about themselves and surrounding environments. This enables a system where sensors can detect wasteful patterns and signal issues that arise, determine when repairs are needed, and schedule their own maintenance.

 

Examples of IoT Solutions for Positive Environmental Impact

As a data-prolific and asset-intensive sector, the manufacturing industry has the potential to positively impact environmental conservation by reducing harmful emissions and waste. Here are several examples of how IoT data can be utilized to conserve and protect the natural environment.

 

IoT Solutions for Positive Environmental Impact-1

 

Building Fit-for-Purpose Sustainable Supply Chains

The largest opportunity for corporate sustainability improvement is found in supply chains, which typically account for 80% of a business’s greenhouse-gas emissions and more than 90% of its impact on air, land, water, and biodiversity. To put this into perspective, manufacturing and producing a single new smartphone takes as much energy as recharging and operating a smartphone for an entire decade⁶. Unfortunately, the consumer electronics market remains one of the biggest culprits and contributors to harmful emissions and waste.

 

To combat this, IoT technologies open up entirely new possibilities to monitor, analyze, and manage the carbon footprint across an organization’s supply chain in novel ways.

 

Data gathered from connected sensors throughout the supply chain has enormous potential to more effectively manage the Earth’s finite resources and ultimately improve the manufacturing process from beginning to end. Sensors provide business owners with real-time, insightful data, as well as historical data for more informed decision making. IoT enables companies to track and monitor machine performance along the company’s production lines. This data provides insights to help companies improve overall equipment effectiveness (OEE) and energy usage per production unit.

 

To translate the impact of IoT on a macro-scale, companies and governments adopting sustainable practices can collectively contribute and cooperate toward addressing the global Sustainable Development Goals (SDGs).

     The Sustainable Development Goals

The United Nations Sustainable Development Goals are a call for action by all countries to achieve a better and more sustainable future by developing ways to protect the planet. IoT offers a path to accelerate SDG progress as these tech solutions are easily scaled and replicable in a wide variety of business models.

 

According to The World Economic Forum's analysis of more than 640 IoT deployments– conducted in collaboration with IoT research firm IoT Analytics– 84% of existing IoT deployments address the SDGs. What’s even more interesting is that 75% of these projects concentrate on five distinct SDGs:

  • Goal #3 Good health and well-being (7%)
  • Goal #7 Affordable and clean energy (19%)
  • Goal #9 Industry, innovation, and infrastructure (25%)
  • Goal #11 Smart cities and communities (19%)
  • Goal #12 Responsible production and consumption (5%)

 

Additionally, the World Economic Forum states that IoT and complementary technologies could have a high impact on at least 10 of the SDGs:

 

IoT for Sustainable Development Goals

 

Businesses are unlocking insights that can optimize systems and generate breakthrough discoveries to help tackle the SDGs. This technology-enabled, sustainable future will be driven by data and the purposeful action, collaboration and coordination of businesses and governments alike.

 

Although some significant solutions are already in place, it’s exciting to think about the applications still to come that will unleash innovative solutions for the greater good.

 

Playing the Long Game with IoT-Driven Business Models

With circular economy thinking, developing an economy that doesn’t create harmful and unwanted waste makes good business sense. This kind of mindset requires manufacturers to view the resources in their products as assets rather than inputs, and their customers as users rather than buyers.

 

There are several well-known business models that are contributing toward the circular economy: 1) next life sales; 2) product transformation; 3) recycling 2.0; 4) product as a service; 5) and collaborative consumption.

 

To paint a more realistic and understandable picture of how IoT is enabling new circular models, we will focus on the latter of the two business model types - product as a service and collaborative consumption.

 

1: Product as a Service (PaaS): is a business model where consumers purchase the desired result rather than the asset that delivers that result. Businesses sell these services that a product can provide rather than the product itself. Put simply, manufacturers own and maintain the product and consumers lease or subscribe for its use or service. Consumers can also own the product but are not responsible for maintenance or upkeep according to licensing agreements.

 

Examples:

  • Rolls Royce: charge clients on an hourly basis for power from their jet engines (Power by the hour).
  • HP and Xerox: use sensors to determine when ink cartridges are low and automatically order and ship replacements.

 

2: Collaborative Consumption: is when consumers have access to goods and services based on an interdependent peer-to-peer model. This enables resource circulation systems and new marketplace models, where consumers can both consume and provide products or services through direct interaction with other consumers or through a third-party application. With collaborative consumption, also known as the sharing economy, the purchase price is recouped through renting or exchanging. By 2025, the impact of the sharing economy could reach around $335 billion of global revenues.

 

Examples:

  • Fon: are pioneers of residential WiFi sharing, where members share a part of their bandwidth as a WiFi signal, so that they could connect to other members' hotspots.
  • Getaround: is an online car sharing or peer-to-peer sharing service where drivers can simply book a car and unlock it with their phone when they rent from private owners.

 

More and more businesses are looking through the lens of environmental change to prioritize business practices that promote sustainability and efficiency. These companies are continuously striving to meet the changing needs of a dynamic world as well as increasing innovation demands, all while aiming for the highest returns with the lowest environmental impact.

 

If companies were to strategically implement more IoT solutions and waste prevention measures, it could save European companies €600 billion —which is equivalent to 8% of annual turnover — while also reducing total annual greenhouse gas emissions by 2-4%¹⁰.

 

IoT solutions prove that big data can solve big problems. With a pivotal shift toward data-driven initiatives, businesses are becoming both environmentally and commercially sustainable, across the entire supply chain, in ways previously unimagined. As a true testament to this, global automation and machine learning have moved into 26% of industrial production and manufacturing processes¹¹.

 

The immense potential and promise of IoT will lead to even greater corporate innovation that can help create a better, more sustainable world.

 


At NBT, we are always on the lookout for IoT innovators looking to scale their business sustainably and successfully. If you would like to find out more about how NBT can help transform your IoT idea into a real-world application, reach out to us.


¹ Worldometer, https://www.worldometers.info/world-population/

² Waylay.io, https://blog.waylay.io/how-to-achieve-energy-efficiency-with-iot-enabled-solutions-for-hvacr-in-building-management/?utm_source=drip&utm_medium=email&utm_campaign=AHR+EXPO+2020+Blast

³ European Parliament, https://www.europarl.europa.eu/news/en/headlines/society/20180328STO00751/eu-waste-management-infographic-with-facts-and-figures

⁴ Government of the Netherlands, https://www.government.nl/topics/circular-economy/from-a-linear-to-a-circular-economy

⁵ McKinsey, https://www.mckinsey.com/business-functions/sustainability/our-insights/starting-at-the-source-sustainability-in-supply-chains

⁶ Fast Company, https://www.fastcompany.com/90165365/smartphones-are-wrecking-the-planet-faster-than-anyone-expected

⁷ World Economic Forum, https://www.weforum.org/agenda/2018/01/effect-technology-sustainability-sdgs-internet-things-iot/

⁸ World Economic Forum, http://www3.weforum.org/docs/Unlocking_Technology_for_the_Global_Goals.pdf

⁹ World Economic Forum, http://www3.weforum.org/docs/Unlocking_Technology_for_the_Global_Goals.pdf

¹ European Parliament, https://www.europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-benefits

¹¹ Statista, https://www.statista.com/statistics/1049833/worldwide-automation-adoption-status-organization/