The exponential growth of digital technology has presented us with a unique opportunity to address the increasing demands that come with our growing global population. By leveraging innovative solutions such as artificial intelligence (AI), blockchain, and the Internet of Things (IoT), we can create an economically viable and environmentally sustainable circular economy

It is critical for companies aiming to apply digital solutions to circular models in European markets to understand the current barriers and opportunities associated with this endeavor. Based on real-world experiences of start-ups and innovation projects supported by EIT Climate-KIC, four key drivers in this space: technology, policy, market structures, and skills are explored. Each driver is examined individually, highlighting relevant issues while proposing potential solutions to overcome them.  

The UN Sustainable Development Goals and the Paris Agreement are testaments to the importance of sustainability on a global agenda. Decoupling economic growth from further unsustainable resource use and increased CO2 emissions are essential for preserving our planet, and digitalization can help us achieve this goal on a larger scale than ever before. By making effective use of new technologies, we have the opportunity to create viable, profitable business models with a lasting positive impact on society and our environment.  

The circular economy and digitalization – a new economic model  

Man in Black Suit Standing in Front of Black Monitor

The circular economy offers a promising alternative to the traditional linear economic model of ‘take, make, dispose of’. By focusing on keeping resources in use for as long as possible and by maximizing asset utilization, it is estimated that EU industry CO2 emissions can be reduced by 56 percent. The key to unlocking the many opportunities offered by this new approach is digitalization – obtaining real-time data about an item’s location, condition, and availability; tracking materials along the value chain, and making processes more convenient and efficient.  

Digital solutions are fundamental when it comes to achieving a truly circular economy. They provide information about resource usage throughout the entire product lifecycle – from design through manufacturing to consumer decision-making, thus enhancing value retention. Furthermore, digitalization enables us to increase the traceability of materials and access to products and services.  

The circular economy and digitalization offer a new economic model which has the potential to revolutionize how we produce, consume, and live. By leveraging their combined power, it is possible to create multiple value loops in supply chains that deliver both economic and environmental benefits. Ultimately these solutions will contribute significantly to our sustainable future.  

Opportunities and barriers at the circular/digital interface  

However, in order to realize the potential of digital solutions for circular economies, we need to understand the opportunities and barriers associated with them. For example, there are challenges related to technological interoperability and data protection, as well as the need for integrated policy frameworks that bridge the gap between the public and private sectors. Additionally, many stakeholders – from producers to consumers – lack the necessary skills and incentives to make circular business models viable on a larger scale.  

To overcome these obstacles, it is important for companies to have a clear understanding of the current barriers and opportunities in order to apply digital solutions effectively. The following sections will examine each key driver of success in more detail: technology; policy; market structures; and skills.  


Digital solutions have revolutionized service and flexibility, allowing for the swift flow of products and services between producers and consumers in any location at any time. This has enabled a number of start-ups to capitalize on these digital tools as they provide two key benefits: access to a larger customer base which allows for rapid expansion within an existing circular model; and improved productivity alongside energy efficiency.  

Through interviews with industry experts, several important points about the technological aspects of digitalization were highlighted in the context of the circular economy. These include its ability to reduce costs associated with product waste, enhance sustainable production practices, and streamline value chain operations.  

Data is the main technological aspect of digitalization 

Data is a key factor in creating value at the digital/circular interface. By collecting, interpreting, and utilizing data points such as user habits and product lifecycle stages, companies can optimize their operations and products to create circular models that maximize their use and lifespan. However, there is an inherent challenge when it comes to accessing this valuable data due to disparities in ownership rights and incentives for sharing. Additionally, many digital solutions are developed in closed innovation processes which limits their potential for circular applications due to the lack of interoperability with other platforms.  

To address these issues, companies need to focus on streamlining data across public institutions so that it is easier to access and utilize. Interoperability between datasets and protocols also needs to be improved in order to enable easier integration of web-based platforms and reduce the risks and costs associated with integrating new software. Only by addressing these considerations can businesses unlock the true potential for value creation in many circular models.

Key takeaway: For businesses to maximize their use of data at the digital/circular interface, they must ensure that data can be efficiently collected and shared, and that interoperability between systems is improved. Doing so will provide greater access to valuable insights which are necessary for optimizing operations and products within a circular model.  



The shift towards a circular economy is gathering momentum and consumers are starting to take notice. With the focus increasingly on resource optimization, as well as sharing goods rather than buying them outright, people are slowly adapting to this new way of thinking when it comes to their purchasing habits.  

This change in behavior isn’t always easy – circularity requires customers to put back materials into circulation after they have consumed them – but there is an increasing demand for both products and services that lend themselves to this model. As such, the marketplace for these innovative offerings is rapidly expanding, offering more options for those who wish to embrace this new way of living and shopping.  

Are Consumers Ready to Go Circular?  

The idea of transitioning to a more circular business model is an attractive one, but it may be difficult for consumers to make the changes needed in order to fully realize its potential. This is why digital solutions can be so beneficial; they make it easier and more convenient for customers to buy into the concept of the circular economy. Start-ups must also bear in mind that there may be some resistance from customers when it comes to adopting new products or services. Therefore, these digital solutions should be intuitive and accessible if they are going to be successful in convincing people to change their behavior.  

Additionally, sustainable products and services need to be competitive on price, quality and convenience in order for the circular economy to truly take off. But achieving this goal can prove challenging, and without this incentive, customers lack enough motivation to switch. However, if they are able to offer competitive prices, quality, and convenience that match those of linear models, customers will be more drawn to them. Digital solutions can play a big role here too; by applying these tools, circular models may be able to provide the price competitiveness and convenience required to entice customers away from their traditional purchasing habits.  


Key Takeaway: Digital solutions can help improve the customer experience for sustainable products by optimizing convenience, scalability, and affordability. This makes a successful transition into a circular lifestyle easier for customers and encourages them to adopt sustainable consumption habits.  


The environment of political, institutional and regulatory influence is a crucial factor which can either make or break the success of any start-up and innovation project. If such an atmosphere is supportive and conducive towards circular models, this could result in higher capital flows as well as public understanding. On the other hand, too rigid regulations might leave organizations without the latitude to create better circular models. It is therefore essential that these aspects be given due consideration when devising strategies related to newly established projects. 

With suitable policies in place, entrepreneurs have a greater chance of achieving their objectives successfully. Such measures also help ensure that resources are allocated optimally so that these initiatives are beneficial to all stakeholders concerned in the long run. This will provide an impetus for further growth and innovation in the sector. In addition, fair regulations can help create a level playing field that encourages competition and furthers progress in this space.  


Key takeaway: adequate policy changes are necessary to ensure that start-ups and innovative projects have a better chance of success. Such measures will not only help create an enabling environment for these organizations but also stimulate the ongoing work toward circular models. This would benefit all concerned parties, thus ushering in new opportunities for growth and prosperity.  

Skills & Knowledge  

Finding the right combination of knowledge and skills to support digital/circular businesses can be a challenge, as there are often high barriers to accessing the expertise required. Many businesses have extensive networks and access to skilled employees; however, it is not always easy to find the cross-disciplinary mix needed for success. 

Financial resources also limit access to key employees, with highly qualified digital talents being costly commodities in the labor market. This makes it difficult for startups on tight budgets to benefit from their expertise. Furthermore, lawyers who are able to navigate complex regulations are expensive too. 

Key takeaway: In order for innovative companies to overcome these obstacles, an institutional support system that provides them with affordable access to highly qualified skills is essential. This would ensure that start-ups are able to succeed despite often limited resources.  Ultimately, the right technology, market structures, and policies can be implemented, but it is just as essential to ensure that startups have access to the necessary skills and resources in order for them to thrive.    

Empower Customers, Communities, and Beyond with Digitalization  

Digitalization presents a unique opportunity for us to transition towards a circular economy. This transition can be enabled by the connectivity afforded through digital technologies such as the Internet of Things (IoT), blockchain, and Artificial Intelligence (AI).  

The IoT allows for heightened connectivity between units, collecting data that can aid in making better decisions around resource efficiency and productivity. Blockchain offers improved transparency, security, and traceability while AI offers analytical power with higher detail and accuracy. All of these technologies have the potential to scale up existing circular models and make them more accessible to consumers.  

However, there are still major challenges associated with implementing these digital solutions. Start-ups in particular face difficulty when it comes to achieving both business growth and technical development simultaneously. Additionally, customers often struggle to adjust to new forms of consumption as well as the institutional framework is slow to address the changes that come with a circular economy enabled by digital technology.  

It is important to remember that although there are obstacles, they also present great opportunities for progress. With this in mind, now is the time for bold action and change that will benefit not only our planet, but humanity at large.