Analysis Across Three Material Flows

1. Electronics and Information and Communication Technology (ICT)

The material stream of end-of-life ICT equipment and small electrical appliances is characterized by a high degree of product and material complexity. Both manufacturers and the recycling infrastructure (particularly for critical raw materials such as rare earth elements) are largely located outside Europe. This complicates transparency and regulatory compliance across the value chain. Short innovation cycles result in significant variation in material composition and, consequently, in the downstream treatment required for recycling.

Circular Economy Challenges

• Non-circular product design that hinders long service life, repair, the removal of hazardous substances, and the separation of recyclable materials in the recycling process:
• Dispersion of critical raw materials, which must be scaled up and aggregated at great expense in order to be recycled.

Digitalization as a Solution

• A digital product passport benefits both repair and reuse. In conjunction with sorting and treatment processes adapted to this information technology, recycling can be improved by better separating hazardous substances (e.g., brominated plastics) and more easily identifying recyclable materials.
• Digital trading platforms for circular raw materials improve the exchange of data on quality requirements for recycled materials and access to such materials.

2. Construction Sector

The material flow in the construction sector is characterized by a wide variety of materials, such as sand, gravel, stone, natural stone, steel, roofing felt, gypsum, concrete, and other materials (ores, minerals). Some construction waste can be used to produce fill material, such as recycled material for paving driveways or patios.

Circular Economy Challenges

• There are various building codes, some of which create legal barriers.
• A lack of circular raw materials hinders the circular economy approach and thus represents an inherent path dependency that makes it difficult to introduce quotas (e.g., recycled content quotas).

Digitalization as a Solution

• Sharing real-time data could, above all, improve the situation for circular raw materials.
• Digital platforms enable a marketplace and data exchange for suppliers and buyers of circular raw materials.
• Online registries increase the transparency of materials and products in buildings.
• Structured data collection and the digitalization of planning and procurement can save costs.
• Product improvements and/or design adjustments are made through continuous data analysis of products throughout their entire life cycle.

3. Packaging

The main materials in the packaging stream are plastics, glass, metals, and paper, cardboard, and paperboard (PPK). Material combinations are frequently found in composite materials.

In the glass, paper, and metal industries, the use of recycled materials is already very high, as there are well-functioning market structures in these sectors. However, there is still room for improvement, particularly with plastics and technology metals. The packaging market is characterized by low margins and unit costs. In the EU, the largest share of packaging waste is generated by PPK, the largest share of packaging waste is generated by PPK(41 percent), followed by plastic (19 percent), glass (19 percent), wood (16 percent), and metal (5 percent).

Circular Economy Challenges

• The properties of circular raw materials are not sufficiently standardized to reliably guarantee the required qualities across the internal market.
• The demand for recycled material exceeds its availability—a disparity that will be exacerbated by new requirements under EU legislation.
• Reuse of certain types of packaging still has significant room for improvement.
• LCAs and holistic life-cycle assessments are sometimes difficult to implement because there is too little data.
• Distribution logistics costs play a significant role in the packaging cycle. Increased logistical expenses—such as those resulting from reusable systems—often lead to a relatively sharp rise in unit costs per package.
• To ensure a level playing field for market participants, regulatory enforcement is needed to monitor compliance with the new requirements of EU legislation (Packaging Directive quotas, etc.) across the single market. There is a lack of infrastructure and expertise in government agencies in this regard.

Digitalization as a Solution

• Various EU regulations will make Digital Product Passports (DPPs) mandatory starting in 2027. If implemented correctly, this will provide an important lever for new, secure, and—above all—standardized product-related data—across the entire EU.
• Intelligent software powered by machine and deep learning processes offers new possibilities for digital analysis. Complex predictive models can feed product design with real-time data—for example, on the availability and costs of specific raw materials—and support more precise “Design for Circularity.”
• IoT systems that combine software and hardware components improve the sorting efficiency of heterogeneous waste streams and facilitate material-preserving treatment in downstream chains. This is a plant design concept that is finding increasing application in the industry.
• Data rooms for the circular economy are important projects that enable interfaces for the cross-stakeholder transfer of (sensitive) corporate data. The projects under Gaia-X, such as Catena-X or Manufacturing-X, are flagship examples of consortia working on such data rooms. To accelerate implementation and make it more efficient, a Gaia-X-inspired project could be specifically designed to streamline enforcement processes within government agencies.
• The AvaL standard, developed by the waste management industry, creates a uniform data structure with standardized master data that enables the digital exchange of all contracted services and serves as a common interface.

Overall Conclusion

• Where there is insufficient exchange at the analog level, it becomes difficult to exchange digital data and develop standards—hence a call for more workshops like ours
• Greater support for building expertise on digitalization, including among SMEs—leading to more practical examples for everyday business operations
• There are specific challenges for individual material flows, but many digital solutions are definitely suitable for all flows

Standards and interfaces are lacking in all material flows examined. This circumstance stands in the way of efficient digital data exchange and thereby limits, for example, the seamless transmission of real-time data. Reasons for the insufficient availability of standardized data include competition-driven path dependencies, a general reluctance to share data, and the lack of a secure infrastructure capable of efficiently implementing these processes.

The Digital Product Passport is viewed—regardless of the material stream—as an important tool for increasing transparency and standardized data availability throughout the product life cycle and could provide the necessary standardized infrastructure. However, many companies do not yet meet the requirements for implementing the DPP, as they are not sufficiently digitalized and cannot manage data efficiently enough. SMEs, in particular, need supporting assistance in this area.

It is expected that digitalization will become even more relevant to the circular economy in the coming years—a trend accelerated by regulatory requirements at the national and European levels, as well as industry-driven projects.