Circular value creation: how Industry 4.0 helps

Circular value creation is considered a key topic for the future for industrial companies that want to gradually transform their previously predominantly linear value creation processes into closed loops. Scarcer resources and rising sustainability requirements are increasing the pressure to make products, components, and materials usable for longer and to organize return processes more efficiently.

As the Industry 4.0 Research Advisory Board states in the new report “Industry 4.0 for circular value creation,” digital technologies can play a key role in this. The report was prepared by the Institute for Production Management, Technology and Machine Tools (PTW) at the Technical University of Darmstadt. The focus is on the question of how Industry 4.0 technologies can support companies in implementing the circular economy.

The study examines the current use of digital technologies, their added value for circular value creation processes, as well as existing obstacles and needs for action. Industry 4.0 technologies are regarded here as enablers because they make it possible to capture, evaluate, and exchange data along the product life cycle.

“Circular value creation is the North Star for me,” explains Gisela Lanza (Karlsruhe Institute of Technology and wbk Institute of Production Science), member of the Industry 4.0 Research Advisory Board. “We will only reach it when our dominant economic model is truly circular and does not function only in a niche as it does today.”

Digital transparency as a key to the circular economy

The report shows that large companies use Industry 4.0 technologies significantly more often than small and medium-sized enterprises. Regardless of company size, traceability technologies as well as sensors in machines or products are used above all. As a result, data on the origin, use, quality and condition of products are moving more strongly into the focus of industrial value creation.

The surveyed companies rate digital technologies in production control, quality inspection and product use as particularly valuable. Condition and usage data can help to analyze returned products more precisely and prepare them more quickly for further value creation processes. This transparency is crucial, especially in circular models, because it provides reliable information about the actual condition of products and components.

It is also striking that companies will attach high importance to applications with Artificial Intelligence in the future. AI and data analyses can help make complex data sets usable and support decisions in circular processes. According to the report, the administration shell has so far played only a subordinate role.

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Where circular value creation still reaches its limits

Despite the recognizable potential, the study shows clear challenges. Companies cite in particular the limited availability of data from the supply chain, unclear legal framework conditions, as well as complex approval and certification requirements as central obstacles.

Small and medium-sized companies in particular also face additional practical hurdles. Limited human resources, lack of specialist knowledge, and high bureaucratic requirements make it more difficult to get started with digital technologies for circular value creation. This makes it clear: the technological benefit exists, but its implementation depends heavily on data access, know-how, and reliable framework conditions.

Another result concerns remanufacturing. Although there is considerable potential for digital technologies here, this area is currently only rarely supported on a data-based basis. However, a better data foundation could be crucial precisely for the industrial reconditioning of returned products.

What recommendations for action the report provides

For companies, the report recommends a gradual entry into the use of Industry 4.0 technologies for circular value creation processes. Particular potential is seen in the development of data ecosystems as well as in the use of artificial intelligence and data analytics.

A practice-oriented guide is intended to provide concrete recommendations for action on how these technologies can be made usable step by step. In doing so, the report addresses SMEs in particular, which often lack the necessary know-how for implementation. Low-threshold support services and operational guidance aids can help make entry into Industry 4.0 technologies easier.

According to the report, policymakers are also called upon to create the prerequisites for the transformation. Funding initiatives are intended to provide additional support to companies and enable reliable conditions for circular, digitally supported value creation.

“Companies need reliable and practical framework conditions in order to be able to plan investments in circular value creation and digital technologies over the long term,” emphasizes Prof. Joachim Metternich, institute director at PTW and head of the report.

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What Industry 4.0 can do for circular value creation

The report makes it clear: Industry 4.0 technologies cannot implement circular value creation on their own, but they create an important foundation. Data from machines, products and supply chains enables greater transparency over the product life cycle. This makes it possible to better support the return, analysis, quality assessment and reprocessing of products.

For industry, the benefit lies above all in making circular processes more plannable and operationally manageable. At the same time, building the corresponding data structures remains demanding. Without available supply chain data, practicable regulation and sufficient expertise, many potentials remain unused.

The report thus classifies digital technologies as an important lever for advancing the circular economy in industrial practice. What is decisive, however, is that companies, academia and policymakers jointly drive implementation forward.

With material from acatech