Digitalisation for the transition to a resource efficient and circular economy

Digital transformation is increasingly recognised as a means to help unlocking the benefits of more
inclusive and sustainable growth and enhanced social well-being. In the environmental context,
digitalisation can contribute to decoupling economic activity from natural resource use and their
environmental impacts. Digital technologies, such as artificial intelligence, blockchain, the internet of things
and cloud computing, facilitate the transition to a more resource-efficient and circular economy, by helping
to overcome obstacles that stand in the way of the large-scale deployment of greener business models,
as well as a more effective delivery of circular economy policies. Besides the positive transformations,
there are also risks of potentially negative consequences that could result from a broader uptake of digital
circular economy.
This paper takes stock of the implications of digitalisation for the transition to a resource efficient and
circular economy. Particularly, the paper provides insights into how digitalisation may fuel circular business
models in the private sector, and discusses the role of digital technologies in addressing some important
market failures that stand in the way to scaling up circular activities (such as imperfect information and
transaction costs). It also offers a public sector perspective, by exploring how digital technologies support
effective delivery of circular economy policies, enabling better policy design, reshaping government-citizen
interaction and improving implementation of policies. Additionally, the paper maps potential unintended
consequences of the digital circular transition, including general risks related to data, security, privacy and
transparency, as well as rebound effects and unexpected regulatory interventions. To accelerate the
uptake of digitalisation for transitioning towards a resource efficient and circular economy, an enabling
policy framework that promotes digitally enabled circular activities while mitigating the risks that these bring
with them, will need to be established.