How the digital circular economy can help us achieve carbon neutrality

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by dr. Long Chen

The climate crisis requires economies to achieve net zero carbon emissions by 2050. However, according to the United Nations Intergovernmental Panel on Climate Change, average annual greenhouse gas emissions have continued to rise in the 2010s.

Most climate policies have focused on accelerating the transition of energy from the supply side of fossil fuels, reducing carbon emissions from manufacturing, and decarbonising investment and financial markets.

Unfortunately, relatively little emphasis has been placed in these policies on decarbonising consumption by using the combined potential of digitization and the circular economy to create a digital circular economy (DCE). According to a new research report from Luohan Academy, the global think tank of Alibaba Group, the DCE framework has strong potential to support decarbonization efforts.

The framework for the digital circular economy

In the past, the lifespan of a product was well established: make, use, throw away. Today, millions of consumers are embracing the circular economy, reusing products — clothing, electronics, furniture — instead of throwing them away, and trade on dozens of online marketplaces like Alibaba’s Idle Fish for previously owned valuable goods.

These resale platforms enable consumers and businesses to turn unwanted products into revenue and extend the life of millions of items, reducing production and waste. And digital technology and platform economy are expanding the markets for these goods into the world beyond neighborhood garage sales and local charity shops.

Linking digitization and the circular economy is an important strategy for countries to develop their economies while decoupling gross domestic product (GDP) and fossil energy consumption, according to the Luohan Academy report. This approach supports a more sustainable model that can bring us closer to reaching the net-zero target.

Digital platforms: sustainability at scale

The world needs more studies and research on the critical question of how to reduce greenhouse gases while maintaining GDP growth. The only way to make technological and economic progress while reducing our impact on the environment is to increase efficiency, use less energy and reduce carbon emissions for our day-to-day operations.

Digital technologies can increase efficiencies through virtualization, data monitoring, collection, optimization, and connecting buyers and sellers who otherwise wouldn’t be able to connect. The efficiency and scalability of digital platforms can make circular economies sustainable, expanding options for buyers and sellers worldwide, and can expand current circular economies to unprecedented heights. We are already seeing the potential power of this approach through resource sharing platforms such as transportation apps and home sharing services.

Idle Fish, the second-hand digital marketplace that Alibaba founded in 2014, has more than 20 million daily active users and trades more than one million products. Only digital platforms can grow so fast and reach so many users in so little time, while having low emissions, high efficiency, high recycling and high carbon sinks. In addition to commerce, digital platforms can also integrate data showing the potential carbon footprint of a transaction for manufacturing and shipping, to help consumers make informed decisions.

Cloud computing and the climate

The foundation of all growing digital sharing platforms – and decoupling carbon emissions growth – is cloud computing. Products and services built on these cloud infrastructures help more and more customers find sustainable solutions to their problems.

Clouds all leverage leading technologies in power management, cooling, and hardware and computing efficiency; adopt high levels of renewable energy sources; and keep improving hardware circularity. While global data centers grew more than sixfold in the 2010s, cloud computing helped limit the annual increase in energy consumption to just 6%.

But maximizing the climate benefits of digitization and the circular economy is only possible with a well-designed governance system involving all stakeholders, according to the Luohan Academy report. To transform those systems to take full advantage of DCE to decarbonize, reduce air pollution and support conservation, technologies need to be viewed as part of socio-economic systems.

The importance of systems thinking is evident from recent studies by the Union of Concerned Scientists showing that ride-sharing platforms may not reduce carbon emissions. These findings demonstrate the importance of changing lifestyles and habits to DCE’s business models to make a significant contribution to the net-zero goal.

Socio-economic systems should provide more people with better information and incentives to participate in DCE. Personal Carbon Accounting (PCA) is an incentive-based economic program designed to promote environmental awareness and provide individuals with the opportunity and motivation to participate directly in carbon reduction.

The power of good governance

While the growing willingness of consumers to adopt new technological tools shows that individuals are pursuing or open to changing social conventions and norms of behavior, DCE’s huge promise to help achieve net zero can only happen with the right regulations and economic systems.

To overcome old norms and succeed in the transition to DCE, society must implement three sustainable governance agendas.

Privacy protection. Data is the key to digitization. To ensure that more people and institutions feel safe providing their data for optimization, it is essential that organizations have a reliable protocol that protects privacy when collecting and using data. A stakeholder economy. DCE requires the entire society to participate in the net-zero movement, not just specific organizations or sectors. Our shareholder economy must change into a stakeholder economy. Doing that requires a greater proactive effort, and participants need the right guidance and tools to make that effort a reality. Alibaba’s carbon neutrality initiatives and programs are designed to influence and transform socio-economic governance to encourage a wider range of organizations and customers to adopt business models and lifestyles that reduce carbon emissions at scale. Deep global trust and cooperation between nations. Climate change is a global threat. The net-zero movement must coordinate initiatives from all over the world. Reaching the net-zero target depends on all countries establishing a deeper level of trust and cooperation and overcoming any conflicts.

Read more about fighting the climate crisis in the Alibaba Group Digital Circular Economy Report.

dr. Long Chen is Vice President of Alibaba Group and Chairman of Alibaba’s Sustainability Steering Committee.


This post How the digital circular economy can help us achieve carbon neutrality was original published at “https://hbr.org/sponsored/2022/04/how-the-digital-circular-economy-can-help-us-get-to-carbon-neutrality”

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