Auditable data fueling the circular economy

by | Jul 29, 2019 | Cross-company digital twin

The uprising debates about climate change and the necessity of sustainable growth shed again light on the circular economy approach as an alternative to the existing linear economy and should help reach the UN Sustainable Development Goals (SDG). We interpret circular economy as an approach for minimizing resource input, waste, emissions and energy use during product creation, product usage and recycling.

In the following blog post we want to address 2 approaches where our technology provides auditable data to support the circular economy:

  • Motivating customers to a long-lasting and sustainable use of products
  • Optimizing 2nd use by tracing product utilisation

Usage-linked warranties as an incentive for a more sustainable product usage

Companies are careful with their warranty promises as they want to avoid a high amount of claims and reduce moral hazard. Warranties play an important role within business relationships, as customers cannot observe product quality at the time of purchase so the warranty helps to underline the quality promise of the seller. But they can also be used to guide or influence customer’s product usage by rewarding or punishing specific behaviour.

Therefore, linking product warranty to actual product usage, based on auditable data, can be used to increase sustainable utilization of products. However, by following this approach several aspects have to be kept in mind:

  1. What characterizes a sustainable utilization of a product?
  2. Can sustainable product use be derived from analyzing sensor data?
  3. Are these sensor data an objective valuation basis for warranty terms?

Knowledge about influencing factors on product usage

Addressing these questions requires in-depth knowledge about the influencing factors on the wear of a product as well as ongoing access to selected sensor data at the customer’s site. Following that, it is possible to define specific product usage profiles and the relevant sensor data for the ongoing evaluation. With our technology customers have peer-to-peer access to these selected sensor data streams and therefore have auditable data as trusted basis for both parties which leads to the necessary trust for linking warranty terms to these sensor data.

Door opener for event-based data access at customer’ site

Additionally, for industries or customer segments where accessing customer sensor data is highly restrictive, linking the product warranty to the product usage can be a door opener for getting usage data at least in warranty cases. This helps companies getting the most relevant usage data available at a customer – the data that is documenting possible product failure or improvement possibilities.

Tracing product usage for optimising reuse and second life applications

An important part of optimizing circular economy is to reuse already produced machines or parts of them. But when addressing companies as buyers for 2nd hand machines, it is necessary to meet their specific quality and production needs. Therefore, it is necessary to take the production process and also the ongoing utilization into account when evaluating a further field of application. Additionally, if another company decides to buy a used machine, the residual value has also a strong correlation with the intensity of previous usage. For example, calculating the residual value of an electric vehicle or evaluating second use scenarios of the battery depends heavily on the usage of the battery pack.

Auditable data as basis for product valuation

Having auditable data from the production process and also from the ongoing utilization provides as trusted basis for the evaluation of the wear of a machine and can be used for finding the present value of a machine. Our technology enables the access to selected auditable data during production and also during usage and provides full auditability across companies and therefore across all previous owners.

This auditable data can in future be used for automated pricing of used machinery, offer pay-per-use business models or new financing and insurance solutions.

Our proposed approaches aim to incentivize a more sustainable product usage or help find suitable reuse or second life applications for products. We think these are necessary starting points for getting closer to a more circular economy and therefore help reach the sustainable development goals (SDG).

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