How Technology Unlocks New Value from the Circular Economy

Written by Jim Sullivan and Batool Hussain

Ten years from now there will be no tolerance for waste in the value chain. Innovative technology can help companies lead the transition to an inclusive, circular economy faster and more efficiently. Many companies, such as Danone, H&M Group, and DS Smith are already leveraging these newer technologies to design waste and pollution out of their value chains while keeping products and materials in use to create positive economic, environmental, and societal impact. The recent COVID-19 crisis has only further exposed companies’ and countries’ risk of supply disruptions, leading to a ‘new normal’ where global supply chains with local execution is needed to boost resilience and reduce dependency by shortening and diversifying supply chains.

The dizzying pace of innovation in the IT industry, now the world’s fastest growing sector, affects the global community in countless ways with each new milestone. Global software company SAP is shepherding technological approaches that both guide and accelerate circular solutions. By redesigning global value networks toward a circular economy paradigm, companies, social enterprises, governments, and communities can unlock an additional $4.5 trillion in economic output.

By redesigning global value networks toward a circular economy paradigm, companies, social enterprises, governments, and communities can unlock an additional $4.5 trillion in economic output.

Deep understanding of the challenge is key

While SAP has a 40+ year history of helping companies manage limited resources productively, the concept of embedding circular economy principles throughout all core business processes began in earnest in 2018 with a design competition called the Plastics Challenge, which launched to encourage employees, customers, and citizens to use innovative technology to eliminate single-use plastic waste. The project kicked off with consumer research tracking the plastics use of a few dozen UK citizens who volunteered to share data around their daily engagements with plastics for one month. This data was used as a basis for a multi-day design thinking workshop with 25 large companies, including Coca-Cola, Visa, and Unilever to develop solutions based on the reality facing consumers. One resulting smart phone app uses machine learning technology to help people identify types of packaging materials and then, with the phone’s geo-location service, determines where to best recycle the materials based on local programs. Another prototype embedded a chip in a reusable coffee cup to function as both a payment and loyalty rewards system, incentivizing cup reuse.

This quest to truly understand the global plastics challenge led SAP to partner with SoulBuffalo to help to co-convene the Ocean Plastic Leadership Summit, which brought together a group of senior executives from companies such as HP, GE, Colgate-Palmolive, Nestlé, Procter and Gamble, and leaders from NGOs including Greenpeace, PYXERA Global, and World Wildlife Fund on a boat in the North Atlantic Gyre to perform research and design solutions while literally floating in the midst of the micro-plastics problem. The innovation labs and discussions on the ship helped frame and clearly define four strategic system enablers—described below—needed to address the plastics pollution crisis.

In the lead-up to this year’s World Economic Forum meeting in Davos, SAP partnered with the WEF on a global study of public opinion that included insight into plastics and single-use packaging for the first time. The data set consists of more than 10,000 people from every major geographical region. A key concern among respondents is a lack of recycling programs and not knowing how to participate in local programs. Concerns about plastics also varied by region with Middle East & North Africa and South Asian respondents most worried about human health effects, while North Americans and Western Europeans most worried about effects on the ocean.

Solutions start with transparent, trusted data

Tuna brand Anova created an app based on blockchain technology that allows consumers to use their mobile device to scan a QR code on a package of tuna fish for instant information about the fish’s journey to the point of sale as well as insights to verify authenticity, freshness, safety, fair trade fishing certification, and sustainability. The app’s blockchain traceability system gives consumers confidence in understanding where a particular fish was caught, and then ties associated attributes, such as a day in the life of that fisherman, with that fish to tell a more complete product story to customers.

In the fashion industry, EON Group developed a radio-frequency identification (RFID) tagging mechanism to track the entire lifecycle of a garment. Recycling of clothing is especially difficult unless labels with constituent materials data is intact to enable recycling of cotton and fiber. The lack of transparent, trusted data results in nearly 80 percent of clothes ending in the landfill. Tracking tech is currently being tested with leading fashion apparel companies to incorporate these tags and extend garment lifecycles to both increase revenue opportunities and reduce landfill and ocean waste.

In agriculture, the Asociacion de Cooperativas Argentinas (ACA), a farming organization in Argentina supporting over 140 cooperatives and more than 50,000 farmers over seven provinces, developed an open digital platform for their farmers and suppliers to help produce more with less cost and environmental impact. The technology challenge was to create a system that could analyze multiple sources of data in real time, gain visibility into each stage of farming, and deliver automatic recommendations to farmers. With geospatial data from satellites and drones, ACA can monitor ambient soil conditions, which indicate potential productivity of arable land. This data can then be combined with other sources, such as weather and business data, to understand real-time conditions for farmers and make smart recommendations.

Systems change requires an ecosystem approach

Last year SAP partnered with Google Cloud to pose a Circular Economy 2030 challenge to social entrepreneurs, in which participants were asked to propose a revenue-generating idea that used both the Google Cloud Platform and SAP solutions to advance a circular economy. The winner, Topolytics, created an app for real-time tracking of waste flows in the UK economy, which it has since expanded to India and several other locations. This support helped Topolytics win the Phase 2 contract to build the UK’s first digital waste tracking system, which uses RFID labels to track the movement of waste via item-level digital identities. The system will track all inert and hazardous waste from households, local authorities, businesses, and the construction sector. The data is analyzed together with other sources including invoicing records, weighbridge and bin weighing systems, vehicle telematics, ‘internet of bins’ sensors, and smart labeling systems for an informed and holistic waste management strategy. The approach validates the use of machine learning, mapping sensor systems, and cutting edge software to enable the waste industry to maximize the utility of materials and advance the transition to a circular economy.

The ecosystem approach also implies working closely with leading organizations that convene platforms and programs around the circular economy. Technology companies including SAP are closely involved with several initiatives under the World Economic Forum’s Platform for Accelerating the Circular Economy (PACE), such as the Global Battery Alliance, the Global Plastic Action Partnership, and the Ellen MacArthur Foundation’s Circular Economy 100 network.

Focal areas to accelerate solutions

These initiatives and areas of focus have helped frame and define four strategic system enablers where technology can accelerate solutions to the waste crisis and serve as a model for broader circular economy initiatives:

  • Responsible Sourcing and Marketplace: Expanding the trade of  secondary and alternative materials by incorporating existing marketplaces in specific geographic regions helps drive responsible sourcing and multi-supply strategies. The business problem here is that brands need new sources of steady and assured supply to replace materials such as virgin plastic with recycled or alternatives and suppliers need visibility into demand. Technology can help aggregate these local marketplaces and formalize informal sector waste pickers while ensuring they are not exploited and are paid fair wages. It also assures corporates and consumers that all sourcing is done ethically. By streamlining the processes, buyers and sellers have full transparency into the lifecycle of materials.
  • Responsible Production: Recycling and reuse is a massive and growing issue. For example, the EU has set targets of 50 percent recycled consumer waste by 2020. In addition, hundreds of consumer packaged goods (CPG) companies have made public statements about their goals of 100 percent recyclable or reusable materials by 2025, however one of the challenges faced by companies is that their data exists in silos, making it hard to generate a comprehensive map of what they make, where they sell it, and whether component materials get recycled post-consumer. Technology—such as intelligent product design—enables close cooperation between chemical, packaging, and consumer product companies while blockchain provides a means of traceability of both upstream suppliers and the product once it leaves the factory. Some real-time tracking technologies make it possible to see precisely where a product ends up and how it will be reused or recycled. Technology also helps track, calculate, and optimize for material bans—such as plastic bags or straws—and tax liabilities from increasing costs of Extended Producer Responsibility schemes worldwide.
  • Responsible Consumption: Business-to-business customers and consumers are critical partners in the effort to close the economy’s material loop. They have the ability to buy ‘more sustainable’ products and a responsibility to understand how disposable materials and packaging can be best avoided—for instance, through product reuse models—or recycled back into productive use. Technology can help enable this through traceability apps and by providing deep insights into citizen sentiment or ‘product experience’ to help brands better engage with their customers and provide insights based on product needs and shared values back into product design.
  • Resource Recovery and Reuse: Many companies and their stakeholders not only want to know whether products are designed for recyclability, but also whether they are actually being recycled across regions and waste schemes. For their part, recyclers want granular, high quality data on sources of these recyclable materials in order to support investment decisions around new collection and processing capacity. Geospatial technology, data science, and real-time analytics—as in the Topolytics example—enable investors, waste managers, consumer industries, and startups to invest in and build physical infrastructure where it is most needed to increase cycling of material flows at their highest value.

These strategic system enablers are necessary to create new business value from the circular economy, but a true ecosystem approach also requires harmonization and balancing of financial factors—forward-thinking CFOs are needed—as well as environmental and societal factors for a positive impact across all dimensions. SAP customers across multiple industries are already innovating in the areas just described. TemperPack’s plant-based, curbside recyclable cold-chain packaging is able to use technology with real-time data across the business to respond to customer orders much more quickly with full material tracking capabilities to calculate carbon-footprint and provide customers with accurate sustainability data on their finished products. Companies like Danone are able to understand the impact of every capital expenditure decision on their planetary stewardship goals, such as reducing CO2 emissions by 50 percent or using 100 percent recyclable, reusable, or compostable packaging.

Technology will not “fix” our ecological crisis. Moreover, it can’t. There is no equal substitute for the ecosystem functions that filter our air and water, nourish our soils, and regulate our climate. However, technology has incalculable potential to enable humanity to be the best stewards of the biosphere, and usher into existence a truly inclusive, circular economy faster, more effectively, and more efficiently to create positive economic, environmental, and societal impact.


Co-Author Batool Hussain

Batool leads client delivery and execution for the sustainability venture at SAP where she works with clients to address their sustainability challenges, aligning these to the overall client strategy. She has worked on circular economy transition initiatives with clients across different industries, including consumer goods & packaging, fashion retail, and chemical.

Batool holds and Executive MBA for City University of New York and a Master’s in International Relations from Harvard. She has worked with refugees in Greece and supports programs in the NY community toward rebuilding and empowering survivors of domestic violence.

This article is part of the Paradigm Shift publication series on solutions from the leaders of the transition to a circular economy. See the full collection of stories and upcoming webinars with the authors here.

 

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