Digitization for circular advantage: Enabling sustainable manufacturers to thrive
What you’ll learn:
- Like other major economic shifts, such as electrification, globalization, and digitalization, the move to a circular economy will lead to clear winners and losers.
- Circular business models require closer and ongoing direct engagement with end-users throughout the entire product lifecycle.
- Manufacturers who invest in product connectivity ensure their assets remain under their control.
By 2030, the “circular” economy will no longer be just an aspirational sustainability goal—it will become a fundamental requirement for competitiveness. Governments are quickly enacting regulations that penalize linear production methods and promote circular practices, reflecting consumers’ increasing rejection of wasteful and unsustainable supply chains.
More importantly, the circular economy—a system based on the reuse and regeneration of materials or products, especially as a means of continuing production in a sustainable or environmentally friendly way—isn’t merely about compliance; it presents an opportunity for manufacturers to drastically cut costs, boost profits, create steady revenue streams, and strongly achieve their sustainability goals.
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Like other major economic shifts, such as electrification, globalization, and digitalization, the move to a circular economy will lead to clear winners and losers. Manufacturers that adapt quickly and adopt circular strategies will unlock significant opportunities, while those hesitant to change risk losing relevance in tomorrow’s marketplace.
However, transitioning from linear to circular business models requires comprehensive changes across the entire organization and its broader ecosystem. Companies must shift away from traditional “sell-and-forget” models and actively monitor and control their products throughout their entire lifecycle.
Upstream and downstream actors throughout the value chain must identify their new business opportunities within an evolving circular marketplace, and manufacturers must proactively redesign their value chains to reflect and support their chosen circular business models.
Internally, new performance metrics and KPIs are essential to reward behaviors that extend product life, enhance durability, and encourage resource recovery. Importantly, embracing digital technologies is crucial to enable and simplify these complex processes.
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This article presents the Sustainable Manufacturing Intelligence Framework (SMIF). This structured model concentrates on digitization and outlines the essential digital capabilities manufacturers need to develop for a successful transition into profitable circular economy business models.
Understanding SMIF: A roadmap to circular digitalization
The Sustainable Manufacturing Intelligence Framework identifies five interdependent digital capabilities essential for manufacturers to scale circularity:
- Digital customer touchpoints
- Digital business ecosystem
- Connected products
- Internal IT infrastructure
- Data-driven circularity
Together, these capabilities form a robust digital backbone, enabling seamless circular workflows, real-time decision-making, and new revenue opportunities. But what are the capabilities and their relevance for manufacturers? Let’s explore more:
Digital customer touchpoints: From distributors to end-user relationships
Traditionally, manufacturers have mainly interacted digitally only with immediate distribution partners, such as distributors or resellers.
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Circular business models require closer and ongoing direct engagement with end-users throughout the entire product lifecycle. Digital platforms—like customer portals, repair apps, and circular marketplaces—make it simple and appealing for customers to select sustainable options such as repair, refurbishment, or product-as-a-service (PaaS) offerings.
Digital business ecosystem: Collaboration and coordination
The success of a circular economy heavily relies on collaboration among a wide range of stakeholders—suppliers, logistics providers, repair centers, recyclers, and even competitors.
This increased complexity requires digital ecosystems designed to facilitate multiparty collaboration, data sharing, and workflow management.
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To scale effectively, manufacturers must engage in digital platforms and develop systems and processes that are interoperable, ensuring transparency, traceability, and trust throughout their circular ecosystem.
Connected products: Keeping assets in continuous view
The circular economy relies on maintaining product visibility and control throughout a product’s lifecycle.
Connected products equipped with IoT sensors provide continuous real-time data on usage, location, condition, and performance. This information enables predictive maintenance, automated service management, and smart decisions about refurbishment or recycling.
Manufacturers who invest in product connectivity ensure their assets remain under their control, helping them maximize value retention and prevent unnecessary loss.
Internal IT infrastructure: Circularity's digital backbone
Linear IT systems—designed around one-way, transactional product flows—cannot effectively support circular economy processes.
Manufacturers need modern, circular-focused internal IT infrastructures to enable activities such as enhanced customer relationship management (CRM), reverse logistics supply chain management (SCM), lifecycle-aware procurement systems, and advanced inventory management that support refurbished goods and harvested parts.
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Upgrading internal IT infrastructure is essential for efficient and profitable circular business operations.
Data-driven circularity: The power of real-time intelligence
Circular business models are inherently more complex than linear ones, involving multiple decision points and stakeholders.
Real-time data intelligence, therefore, becomes indispensable. Leveraging advanced analytics, AI, and autonomous AI agents (agentic AI) allows manufacturers to automate complex circular decisions such as product returns, refurbishment routes, logistics coordination, and resource allocation.
For example, AI agents can autonomously determine the optimal next lifecycle stage for returned components, negotiate logistics via smart contracts, and manage payments—all without human intervention.
This level of automation and data intelligence significantly reduces coordination costs and makes circular models economically viable at scale.
The time to act is now
While the benefits of circularity—lower costs, higher margins, recurring revenue streams, and improved sustainability performance—are compelling, the journey toward becoming a competitive circular manufacturer cannot be delayed.
Shifts in consumer preferences, regulatory mandates, and competitive landscapes mean that taking incremental steps today will position a company ahead tomorrow.
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Manufacturers that actively invest in digitizing their circular strategies will be prepared for inevitable future requirements while also gaining immediate operational efficiencies and innovation opportunities. Early adopters who establish strong digital foundations today will lead the circular economy in the future.
By 2030, manufacturers lacking strong circular strategies supported by advanced digital capabilities will face competitive disadvantages.
Conversely, those who excel in SMIF’s five dimensions—digital customer touchpoints, digital ecosystems, connected products, internal IT infrastructure, and data-driven circularity—will gain a lasting competitive advantage, transforming circularity from a compliance burden into a strategic driver of growth.
The circular future is digital, profitable, and accessible—but only if manufacturers begin building it now.
