How do IoT solutions enable circular economy business models?

The transition from linear economy to circular economy (CE) business models represents a paradigm shift towards sustainability, including resource and material efficiency, reduced negative environmental impacts and minimised leakages from a circular system. The current twin transition refers to green transition (sustainability) and digital transition (digitalisation). In the manufacturing industry, the Internet of Things (IoT) emerges as a catalyst in this transformation, offering connectivity and real-time data and enabling improved monitoring, optimisation and management of operations. Utilisation of IoT promotes implementation of circularity actions, that is, optimises resource use, extends product lifecycles and facilitates recovery and reuse of materials. This paper explores the relation between IoT and CE business models and addresses IoT’s role in enabling them. The topic is limited to the manufacturing context, excluding the business models associated with the use phase but including the earlier lifecycle phases of a product, as well as possible remanufacturing steps. The area of study is tackled by reviewing the relevant literature and mapping the connections and possibilities compatible with IoT solutions and CE business models. This research also considers practical benefits from a circularity and sustainability perspective. Based on the findings, the paper concludes that IoT technologies support different CE actions and help implement them in a smart manufacturing ecosystem. IoT solutions enable certain CE business models, especially related to material control and efficiency, while improving the overall transparency and sustainability of the value chain processes.