Half of all greenhouse gas emissions and 90 per cent of biodiversity loss are caused by how resources are extracted and processed in our economy. The linear economy, in which resources go straight from the factory to the landfill, is a dead end. In order to address climate change and resource scarcity in the long term, we need a circular economy based on the cradle-to-cradle principle, in which products, production and business models are designed in such a way that materials and resources can circulate almost endlessly.

Digitalisation is an important and powerful lever for setting this transformation in motion. In order to enable circular value creation, complex management of material and substance flows along the entire life cycle of a product is required. The key to this is data. The more information about the composition, use and environmental and health effects of products is digitally recorded, shared, analysed and processed, the easier it will be to manage raw materials and products in a circular way and to scale circular business models and ecosystems.

This study "The Digital Circular Economy" is the result of the project Digitalisation and Circular Economy, which the Friedrich-Ebert-Stiftung and the Cradle to Cradle NGO carried out together in 2023. Using different industries and specific use cases as examples, the study analyses how the potential of digitalisation for circular value creation can be leveraged in Germany and Europe.

The authors identify the disclosure and sharing of product data across company boundaries as a key success factor. The Digital Product Passport (DPP) envisaged by the EU is a key instrument for this. However, in order for the DPP to realise its potential, binding rules based on the goal of circularity are needed to determine which data must be collected by whom and shared with whom, and which standards must be taken into account - in short, circular data governance. The authors summarise the findings of the project in nine recommendations for action and show what policymakers need to do to ensure that data policy paves the way for a sustainable circular economy.