Sustainable Product Lifecycle Management and the Circular Economy

If Not Now, When?

Awareness of sustainability and the need to build a circular economy is growing. According to a study by management consultants Ernst and Young (EY), seven out of ten consumers are already specifically buying products whose suppliers produce in an environmentally friendly way, who operate sustainably, recycle, and use natural ingredients.

Many companies have already picked up on this trend: one tire producer is experimenting with rubber made from the latex-like sap of dandelions, a manufacturer of tissue paper is using pulp made from wheat straw, and a supplier of city backpacks is taking used products and turning them into new ones. And a new start-up is turning many tons of construction waste into designer tiles.

This development represents a shift in social awareness that puts pressure on every company. On top of this, there are strict regulations: The European Union (EU) Corporate Sustainability Directive will make sustainability reporting mandatory in 2024 for listed and large companies. One year later, the regulation will be extended to all companies with 250 or more employees, 40 million euros in sales, or 20 million euros in total assets. It is estimated that around 50,000 companies are affected across the EU.

Companies should take the new rules seriously, as there are severe penalties for violations. In addition, it could be that such companies are also be shunned by future investors. Many institutional investors have already taken sustainability into account in their due diligence and have publicly demand compliance at various corporate annual meetings.

The current Aras study “From Sustainability to Digitalization: Challenges 2022” shows that seven out of ten companies have already identified sustainability as a top issue. It is clear to them that they will have to take action in many areas in the near future. The most important fields of action are the avoidance of rejects, the selection of environmentally friendly or recycled materials, and product design based on ecological criteria.

But how can companies and their products become more sustainable? How can they manage their entry into the circular economy? We will focus on this over the next few pages.

Building a Circular Economy: Designing and Monitoring with Sustainable PLM

Complete product cycles are currently still the exception in business. However, there are numerous elements of such cycles in many industries and at some pioneering companies. An example is the German deposit system for returnable bottles. It is supported by many manufacturers thanks to standardization. According to the Federal Environment Agency (UBA), a glass bottle can be filled up to 50 times, a PET bottle 25 times. Afterwards, these bottles must also be disposed of, as they are no longer suitable for resale.

There are also reusable systems in the commercial sector. The best-known instance has been in existence since 1961: the standardized, stable wooden Euro pallet (EPAL). There is an exchange system for these: when an industrial company receives ten pallets of goods from a supplier, it returns ten empty pallets (usually in the same truck). The environmental impact is low: each pallet relieves the planet’s CO₂ budget of almost 30 kilograms.

But the system is not perfect. Time and again, Euro pallets disappear from the cycle. This is because it is not a true closed-loop system. Such a system has much higher requirements, especially if it is to be established for complex products made from several raw materials and components. Here, recycling is only the last step in a sequence of multiple cycles.

Sustainable product design

For a circular economy to actually emerge, products must meet many requirements, including:

• The raw material being obtained is in compliance with environmental and social criteria.
• In the supply chain, all involved parties take care to keep distances as short as possible and only organize absolutely necessary transport.
• The products are designed to have a maximum service life.
• Their design also guarantees easy repair (“refurbishing”) and reusability in secondary markets.
• They are repairable and expandable, for example by replacing components, such as processors in smartphones.

These requirements ultimately lead to the sustainable design of products, in which the end of the product lifetime is already taken into consideration in the design phase—unlike in most cases in the past.

Involving suppliers and customers

Sustainable product design requires manufacturers to involve stakeholders from the entire value chain. Suppliers must also use sustainable product design and obtain their raw materials sustainably.

At the same time, however, the buyers (customers) of the products are also involved, as they must also meet sustainable criteria when using these products. For example, they must actually repair the products or return them to the manufacturer at the end of the use phase. For this purpose, the manufacturer must establish a take-back system. Part of sustainable product design is to design the return together with the product.

Traceability: the secret ingredient of the circular economy

Ultimately, a sustainable circular economy only comes into being when all the players are networked with each other. They must work hand in hand to be sustainable in the respective use phase of products. This requires information at each stage of a product’s life (cradle to cradle). This digital thread is created, among other things, by tracking changes in the product configuration during its useful life and by linking it to operating and performance data obtained with the help of IoT technologies.

In a circular economy, data is already recorded during the extraction of raw materials. The data recording only ends at the end of the product life cycle, for example, when it is finally disposed of or sent for recycling.

Numerous data flow together in the process: characteristics and properties of starting materials, transport data along the entire value chain, the processing data of preliminary products and the final product, usage data from users, and finally data from reprocessing, recycling or disposal.

Maintaining an overview with PLM and digital twin

The wealth of data involved in designing, manufacturing, and disposing of sustainable products for the circular economy cannot be managed with a conventional ERP system. They are too strongly focused on the planning of manufacturing processes. Entering the circular economy, on the other hand, requires companies to use two important digital tools:

• A sustainable product lifecycle management (PLM) solution that maintains traceability of product data to ensure that companies know exactly which materials and parts are involved at each point in the product lifecycle, and how they affect the sustainability of the product.
• A digital twin configuration, which is an exact representation of a product after it is manufactured and is updated as it changes throughout the remainder of the products lifecycle, as well as connects to relevant data using the digital thread.

Aras’ PLM platform supports the creation of a circular economy in both ways:

• In the design phase of a product, from the design proposal to the actual build instructions, all the individual data is linked together to generate end-to-end information. The data for this so-called digital thread usually comes from materials databases and CAD software or other systems for designing products. The product model created in this way shows the current development status as well as the development process.
• After the manufacturing and use phase of a product, the digital twin is connected to the relevant product data from its design and manufacturing stages. This digital twin configuration can be the foundation for monitoring its status throughout its product lifecycle.

Another use case for the individual digital twin configuration of a product is simulation within a virtual environment so that it can be tested and analyzed using realistic parameters. For example, a large car manufacturer may use a digital twin configuration of its intralogistics to record all stock levels as well as incoming and outgoing stock. It is used to determine the current situation in the warehouse and also for simulation analyses in which the effects of different supply bottlenecks can be calculated in advance.

The digital twin in a circular economy can easily capture and display different sustainability aspects as well. The simplest case is using predictive maintenance to increase the lifetime of a product. With suitable analysis methods, it is also possible to calculate the remaining life of products or the wear of components in order to replace them in time.