Chrysalix

Fred van Beuningen

October 29, 2019

The 4th Industrial Revolution and the Circular Economy

The 4th Industrial Revolution (4IR) is about connecting physical and cyber networks to allow real-time information flow and actionable insights. Its core components are the Internet of Things (IoT), big data, and a secure and reliable digital infrastructure. The 4IR is characterized by technological development in artificial intelligence (AI), robotics, advanced and additive manufacturing, autonomous vehicles, big data analytics, nanotechnology, biotechnology, materials, energy storage, and quantum computing. These advances are not only disruptive to many industries but pose economic and social challenges for society.

The primary challenge is resource use. Can these 4IR technologies serve humanity without increasing the burden on Earth’s overtaxed environment?

The Circular Economy may be the answer to this dilemma. It has emerged as an alternative industrial model to the prevailing linear model of production and consumption in which goods are manufactured from raw materials, sold, used, and then discarded or incinerated as waste. The linear approach has led to a massive overshooting of planetary boundaries. Currently, it would take 1.7 Earths to replenish the resources used by human society and absorb the consequent pollution. We only have one planet, however.

The Circular Model seeks to improve resource productivity and performance by keeping goods in use longer, reusing products or their components, and restoring more of their valuable materials, energy, and labor. The Circular Economy model is both restorative and regenerative by design. It promotes the efficient use of materials along with the reduction and, ultimately, elimination of waste. The 4IR could enable the Circular Economy, which, in turn, would foster new business models that protect Earth’s finite resources.

The innovation community must work to develop 4IR and Circular Economy in tandem. The opportunities and challenges are well defined. The required building blocks are well understood. And the zero-waste vision is much more achievable than entrepreneurs, financiers, and governments may realize.

Circular Opportunities and Challenges

Emerging businesses modeled on circular economics focus on inputs (renewable fuels, biological materials, and recyclable components), waste as a value (recycling and upcycling), lifecycle improvement (repair, second life, remarketing), platforms (sharing aimed at asset productivity), and product as a service. The question is, how much economy is there in the circular model, and how can we work from macro to micro?

The good news is that some investors and entrepreneurs have taken notice. Innovation oriented towards the UN’s Sustainable Development Goals increasing appeals to a new wave of passionate innovators and financiers who are becoming aware of circular principles.

More good news: 4IR technologies have already enabled these new business models and have attracted support from international bodies. The World Economic Forum (WEF) and its partners in the Platform for Accelerating the Circular Economy (PACE) have identified enabling conditions for the Circular Economy to take off. Most important are standards and regulations in materials and processes to allow solutions to scale, change drivers such as taxation and societal engagement, and investment in infrastructure and technology. Data-enabled infrastructure that is interoperable but tailored to local context will also be essential.

The PACE report also identifies the challenges to scaling circular business models. These include opaque value chains, where the material transparency essential to capture value from multiple lifecycles and embedded resources is lacking. In addition, linear product designs and business models currently provide too little incentive for a change and lead to linear lock in. Other challenges are inefficient collection and reversed logistics that lead to dumping or burning of waste as well as inefficient sorting and preprocessing infrastructure that lack economies of scale.

So, where do 4IR and the Circular Economy meet?

Building Blocks of The Circular Economy

Let’s start with the obvious area of bringing more transparency to material flows. Transparency requires linking up the digital data flow with the physical material flow. The resulting data flow must capture the product lifecycle journey, which includes the provenance of materials and components, how these were assembled into a product, and product condition and ownership during use.

How we would do this?

A digital product passport could travel with the product throughout the chain. This passport could be stored on a device itself, in the cloud, or on a blockchain solution. It would be accessed by scanning a unique cryptographic anchor to authenticate the product and establish a link between the product and the data flow. The anchor can be physical like a watermark, digital like a RFID tag, or biological like a DNA marker. For visibility on all materials, the product passport data should feed into an Internet of Materials (IoM), a decentralized system connecting data on products and materials through a standardized communication protocol. Data confidentiality and anonymity are key to avoid competitive challenges.

Companies are already developing the foundation for an IoM. For instance, Dutch startup Circularise develops a blockchain-based communication protocol to promote value chain transparency without public disclosure of the datasets of value chain partners. Decentralized solutions for food production are also developing IoMs. Direct Trade and Fair Trade promote sustainable sourcing of products like cotton and coffee beans. This helps to save important resources such as water and provide detailed insight into the value chain behind certified products. Similarly, London-based Everledger promotes transparency in the diamonds supply chain by applying a suite of technologies like blockchain, machine learning, and IoT.

Today, inefficient sorting and reversed logistics of waste are being addressed by innovative companies like AMP robotics, which use an intelligent robotics platform to improve the sorting of very heterogeneous waste streams. They’ve shown that sensor technology, robotics, and AI are key to developing applications that will revolutionize waste sorting.

AI also enables and accelerates the transition to a Circular Economy. Three key aspects of a circular economy demand AI solutions: designing circular products, components, and materials; operating circular business models; and optimising infrastructure to ensure circular flows of products and materials. For example, AI for dynamic pricing is used by Stuffstr to achieve good margins between the sellers of used goods and the secondhand market. Optoro uses AI and predictive analytics to help retailers and brands manage, process, and sell returns and excess inventory through the highest-value channel.

The No Waste Vision

The big question of the Circular Economy is how to realize the “no waste” vision. Municipal solid waste (MSW), the collected waste of municipalities, is a handful: 2 billion tons annually. One option, exemplified by companies like Enerkem in Canada, is to efficiently gasify waste into energy.

Food waste, however, the largest MSW component, now largely goes to waste. New biological technologies to convert food waste into higher value products than compost include aerobic digestion for fertilizer and feed, fermentation for polymers, mealworms and black soldier fly (BSF) larvae for feed and fertilizer, and (thermo)mechanical conversion to fibers.

Plastic waste, while representing only a small percentage of MSW, has arguably received the most interest with respect to the Circular Economy. Plastic waste is more prevalent in the environment due to its lack of biodegradability. But new plastic recycling technologies show immense promise. These include pyrolysis to convert mixed plastic waste to a synthetic crude oil, chemical recycling to convert plastic (primarily PET) to monomers, and solvent recycling to physically separate plastic from multi-material packaging.

Biological plastic recycling may offer a compelling alternative for scenarios that lack economic incentives or require high energy use. For instance, microbes can be used to selectively replace chemical compounds in products that are fossil-based today.

Mimicking Nature

In nature, there is no waste. One organism’s waste is another’s nutrients, so energy and materials circulate without creating pollution. The Circular Economy is modeled on this elegant system. It is biomimicry that applies principles of industrial ecology to society at a systems level. Its goal should be to restore the earth’s natural carbon, hydro, and heat cycles to sustainable functionality.

The Circular Economy, a merging of technological and natural synergies, is a transformational agenda. When 4IR companies integrate circular principles into their products and culture, the results can be impressive.

The Circulars, an award program hosted by the WEF, Forum of Young Global Leaders, and Accenture Strategy, show just how far circular innovation has come. 2019 winner Winnow, maker of a commercial kitchen smart meter, has helped thousands of kitchens cut food waste in half. Lehigh technologies, another Circulars winner, has turned end-of-life tires into micronized rubber powder (MRP), which replaces oil-based feedstocks. They’ve created 500 million new tires using this new circular model.

Moreover, banks like Rabo, ABN-AMRO, and ING have introduced financial models for the circular economy, while governmental bodies, including the European Commission, have developed frameworks to overcome market and cultural barriers to the Circular Economy. These are all encouraging signs.

In the hands of responsible and passionate entrepreneurs, the suite of 4IR technologies, from next-gen robots and IoT to biotech and additive manufacturing, can unlock the power of the Circular Economy and restore nature’s cycles. Once the Circular Economy is set in motion, it will develop a momentum of its own. As a wise man once said, “We make our tools, and then our tools make us.”

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