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IoT Will Usher in 'Transformational Paradigm of Growth' for Circular Economy

With up to 50 billion connected devices predicted by 2020, a pervasive digital transformation is reshaping the economy. Will this ‘fourth industrial revolution’ lead to an acceleration of the extractive, ‘linear’ economy of today, or will it enable the transition towards a society in which value creation is increasingly decoupled from finite resource consumption?

Intelligent Assets: Unlocking the circular economy potential, released today by the World Economic Forum and the Ellen MacArthur Foundation, finds that pairing circular economic principles with the information generated by intelligent devices creates fertile ground for innovation that could enable this decoupling and lead to broad social benefits. The report was produced as part of Project MainStream, a global, multi-industry initiative that aims to accelerate business-driven innovations to help scale the circular economy.

The report asserts that the interplay between the value drivers of a circular economy, which aims to keep products and materials at their highest value at all times, and those generated by a network of intelligent assets (or the Internet of Things), presents significant opportunities for almost every part of society. Intelligent devices provide an abundance of information about the location, condition and availability of assets, all critical factors enabling the maximization of use rates and the looping of materials back into the system, both of which are core principles of a circular economy. Intelligent Assets: Unlocking the circular economy potential shows that opportunities emerge from pairing almost any of the value drivers from the two sets.

Complemented by independent views from leading thinkers in the field such as Kenneth Cukier (The Economist), Bernard Meyerson (IBM) and Nicolas Cary (Blockchain), the report presents early-stage applications in manufacturing, energy and utilities, built environment and infrastructure, logistics and waste management, and agriculture and fishing. Together, they illustrate a compelling opportunity with a clear focal point in cities. For example, the potential for access to a distributed, grid-free energy infrastructure is greatly enhanced, as is the potential to increase the sharing of mobility solutions within cities. Trends highlighted in the study have the power to help emerging economies bypass heavy upfront investments and material- intensive solutions. Large incumbents and disruptive innovators alike are rethinking their business models and value chains, indicating that the digital revolution underpins an emerging new economy.

Capturing the full potential of these systemic transformations requires new collaborative mechanisms that connect innovation and regulation, in order to manage complex questions around data generation and circulation - such as ensuring security and privacy, the compatibility of systems, and intellectual property. The report outlines a set of enabling actions for both businesses and public stakeholders, who are encouraged to work together to find solutions and remove roadblocks.

The report’s findings are timely: Knowledge and understanding of the circular economy among business leaders and policymakers is growing, as demonstrated by the European Commission’s recent circular economy package and €24 billion investment in helping businesses make the transition; companies are increasingly asking what role they should play in the emerging digital transformation, and governments are increasingly looking for new pockets of economic development without increasing the national resource footprint. Intelligent Assets provides the first vision for how a digitally enhanced, prosperous circular economy could look.

“Digital technologies are driving a profound transformation of our economy. Guiding this wave of change by applying circular economy principles could create value, and generate wider benefits for society, as this report shows,” said Dame Ellen MacArthur. “Intelligent assets are a key building block of a system capable of ushering in a new era of growth and development, increasingly decoupled from resource constraints.”

This is the latest in an explosion of recent research pointing to the undeniable economic opportunities presented by a large-scale shift to a circular economy: Broad estimates include a net benefit of €1.8 trillion for Europe by 2030, with studies also showing remanufacturing could represent up to €90B annually and 600,000 jobs by 2030; recovery of precious metals from electronics could increase financial and natural capital benefits by $10 billion; and circular models for plastic packaging could save $80-120 billion annually.