The path towards a data-driven circular economy can be rocky – but it provides fascinating views

A Google search for the concept “twin transition” results in more than 86 million hits. It is a popular buzzword particularly in the European context and refers to the simultaneous quest towards sustainability and digitalization. When heading towards the green goals, the promotion of a circular economy is of utmost importance, and the EU is proceeding with it on several frontiers. However, major leaps in the availability and quality of data are needed before the potential of circularity can be fully exploited. 

But can we already imagine how a data-driven circular economy will work in the future? What will be the most important drivers and paths that will take us there? And last but not least, what kind of steps should policy makers and companies take in a country such as Finland already today? In this blog post, I want to share with you three insights that have emerged when seeking to find answers to these tricky but intriguing questions. The figure below summarises some key areas of action for a data-driven circular economy.

The first observation is that when promoting a data-driven circular economy, there are several areas that require simultaneous action. If we want to transform scattered data to knowledge and even systemic understanding, data should be enabled to travel across the value chain. It should be opened, gathered and exchanged. Further, it should be improved to meet the various quality requirements for e.g., traceability. 

When promoting circularity, important would be to ensure that data and knowledge lead to action. This means encouraging the re-thinking of needs, products and business models but also supporting the extending of product lifespans with applications such as product passports. In general, better data could spur wise use of resources and material recycling in various spheres of the economy and the society. 

The second notion is that from governance perspective, circular economy and digitalisation are major, versatile and turbulent fields for policy development.  Thus, if one seeks to understand the state of art of a data-driven circular economy, there is no one process to follow but a myriad of processes. As many of these initiatives and processes are broad, it is challenging to grasp in depth how they intertwine. In the below figure, we have sought to encapsulate the situation by mapping various green and circular as well as digital initiatives and by putting them into a picture. Clear, isn’t it? 

The third insight is that a national and sector-specific strategy creation is important in the field of a data-driven circular economy. But rather than sticking with a major mission, there should be networking, knowledge-exchange and frequent check points to reflect the feasibility of the paths chosen.  When setting development priorities, an idea could be to prioritise those initiatives that address e.g., the most material-intensive sectors such as construction, or sectors that use critical raw materials such as ICT.  It would also be important to take part in the cross-cutting international development efforts such as the Gaia-X. There is room for thinking big – but also to make small, local or sector-specific experiments.  
 
For policy makers, a feasible path to proceed would be to facilitate this joint learning, to keep up the spirit and ensure a fruitful regulatory environment by providing e.g., regulatory sandboxes if needed. At the same time, it would be important to get the economic incentives  work for a data-driven circular economy. When data on circularity becomes a key ingredient in attracting investments and selling goods, it pushes the actors in the field to solve the remaining challenges of data availability and quality. In this realm, initiatives such as the EU Taxonomy Regulation can provide an important tool, but also development work and policy reforms will be needed  on various other frontiers. 
 
Even though the route towards a data-driven circular economy can sometimes feel a bit rocky, it is still a path we should take. In many ways, the transition will be inevitable. But whoever dares to proceed now will get fascinating opportunities for rethinking not only governance and business concepts, but also the choices we make in our everyday lives in the future

Annukka Berg, Senior Researcher, Finnish Environment Institute SYKE

annukka.berg@syke.fi