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Reuters Events Sustainable BusinessTowards a circular economy
for industrial electronics

The design challenge
June 2023

Sponsored by

June 2023

ALKIS KONSTANTINIDIS/REUTERS

Towards a circular economy for industrial electronics

INTRODUCTION

Mountains of waste, decline in biodiversity and scarcity
of resources: there are many good reasons for a circular
economy. But how do you get there? This white paper shows
why it makes sense to start with product design. Using
Siemens as an example, it explains which aspects havethe greatest impact, where the challenges lie, and why
digitalization will boost the circular economy.

By 2050, it is projected that theworld will need three Earth’s
worth of natural resources tosatisfy demand

THE PROBLEM: WE ONLY HAVE ONE PLANETA SOLUTION: THE CIRCULAR ECONOMY

Pollution, ecosystem collapse, declining biodiversity, climatechange: there is no doubt that our planet is in a dire state,
and the way our economy has thus far functioned is partly
to blame. In a linear economy, which has hitherto been theprevailing model, a pattern of extraction, production anddisposal of finite resources has dominated – and still does.
By 2050, it is projected that the world will need three Earth’s
worth of natural resources to satisfy demand. Rates ofconsumption of biomass, fossil fuels, minerals and (metal)
ores, for instance, are expected to double in the next 40 years,
and waste generation could increase by 70%. Moreover,resource extraction and processing accounts for half oftotal greenhouse gas (GHG) emissions and more than 90%
of biodiversity loss and water stress. According to the UN,
humans have transformed more than 70% of the Earth’s landarea from its natural state, causing significant environmental
degradation with far-reaching socio-economic effects.
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Based on the realization that “business as usual” will
inevitably lead to a planetary disaster, a counter-modelhas developed: The concept of the circular economy. In
contrast to the “take, make, waste” of the linear economy, thegoal of a circular economy is to use resources for as long as
possible, avoid waste and pollution, and regenerate natural
systems. This concept can only succeed if economic activity
and resource consumption are decoupled, i.e. material cycles
are created that are ideally infinite or nearly infinite.
In order to implement the concept of circularity, afundamental restructuring of the economic system isessential. “Designing products that meet the demandsof a circular economy requires a completely new way of
thinking”, says Caroline Cassignol, a materials scientist who
works in Research and Development for Siemens. “This ischallenging, but a unique opportunity to re-think products,
processes and services to create a more sustainable future.”2

Towards a circular economy for industrial electronics

June 2023

B. RENTSENDOR/REUTERS

Today, the economy is still far from circularity. However,more and more companies are looking into creatingproducts that are long-lasting, upgradable, and repairable,
reusable, recyclable or compostable. They are trying to findways to incorporate secondary materials into production
and powering such production with renewable energy.
Where services are concerned, business models centeredaround subscription, sharing and leasing are prioritized. The
intention behind this is to minimize the number of products
required, e.g. cars in car-sharing, and keep them in use foras long as possible.

FROM OBLIGATION TO OPPORTUNITY:
WHY CIRCULARITY IS THE NEW BUSINESSIMPERATIVE

Realising a true circular economy won’t just take the pressure
off overstretched natural resources, it also presents a uniquemarket opportunity – one worth $4.5 trillion, according to
Accenture. Businesses, therefore, have the chance not only to
be planetary stewards, but market leaders.
There are myriad reasons for companies across sectors tomove towards circularity:•	Resource scarcity and supply chain problems are driving
up prices for raw materials. A shortfall of copper is
projected, for example. The metal is commonly used inelectronics and in products such as circuit boards andelectrical equipment. By 2026, average copper prices are
expected to reach $9,750/tonne, exceeding the $9,317/
tonne annual average of 2021. It is thus a competitive
advantage to innovate around substitution, take-backsystems, higher rates of recycling and more efficient useof the metal.
•	Customers are increasingly looking for sustainableproducts and are more open to new business models
such as products-as-a-service.
•	On the investor side, more emphasis is being placed onsustainability. In interviews conducted by the Harvard
Business Review, ESG (environmental, social andgovernance criteria) was “almost universally top of mind”
for the 70 senior executives from 43 global institutional
investing firms they spoke to.
•	Other outside pressures are also growing. The regulatoryenvironment, for instance: in 2015 the EU introduced the
Circular Economy Action Plan, a comprehensive bodyof 54 legislative and non-legislative actions that wereadopted or implemented by 2019. It was updated in 2020
and aims to make sustainable products the norm in the
EU. It also focuses on sectors where the potential for
circularity is high, such as electronics and informationand communication technology (ICT), plastics, andconstruction and buildings.

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For companies that operate in industrial sectors –manufacturing, automation, building and energy services,and the like – the processes to determine how to mostefficiently and effectively implement circularity may beparticularly complex, but this does not mean that theseindustries are being left behind. One 2021 study publishedby the Journal of Environmental Management found thatthe utilities, consumer goods and industrial sectors arein fact leading the circular transformation. Firms in theseindustries, as well as those that make basic materials, “havethe potential to play a critical role in the development of
the CE because many of the technological developmentsthat could accelerate circularity are within their sphere ofoperations,” the authors state.
With outside pressures mounting, including from NGOs
and civil society, the direction of travel is clear. “There's
a big shift coming from the market itself, which is also
driven by investors and regulations,” says Marlon Hassel,
Sustainability Manager at Siemens Smart Infrastructure.
Rather than simply responding to outside pressures,
however, forward-thinking businesses recognize that acompetitive advantage lies in investing in sustainability
and circular strategies. A study by Accenture demonstrated
that companies that focus not only on innovation but also
on sustainability and trust, outperform their industry peers,with 3.1% higher operating profits and greater returns toshareholders.

DESIGN: THE KEY TO MORE SUSTAINABLE
PRODUCTS

In theory, the concept of a circular economy sounds
plausible, but how can it be implemented? Of particularimportance in creating a foundation of circularity, is design.
It has been estimated that 80% of a product’s environmental
impact can be influenced at the design phase. While this3

Towards a circular economy for industrial electronics

figure may vary across product type, decisions made bydesigners with regards to material type, variety and volume,
as well as their ability to be disassembled, refurbished, or
recycled, among other factors, are critical. Indeed, ecodesign that is informed by careful lifecycle analysis – where
impacts are evaluated in relation to a wealth of of input andoutput parameters – is a key lever in integrating circularity.
While designing for circularity is always going to be
a complex process, within electronics industries, it isparticularly multi-faceted. A smartphone, for example,
contains around 60 different materials, including around30 different metals and various types of plastic. The task ofseparating out these materials alone is a major challenge;
while the metals could in principle be reused, this is notalways possible for plastics.
Furthermore, a 2022 report by McKinsey found that as
products become more sustainable, production usuallyaccounts for proportionately more of their emissions.
This is partly due to an increased demand from users
for enhanced features and capabilities as well as moreenergy efficiency – such integrations tend to require morematerials to produce. Domestic heat pumps, for example,
require more materials than gas or oil boilers. The highly
efficient electric motors they contain may be made from
more carbon-heavy materials such as copper and rare earthmagnets. “The variable-frequency drives that are used to
optimize the control of these advanced motors need theirown circuitry and semiconductor components,” states thereport. Eco-design thus necessitates a full lifecycle analysis,
from production to the use phase, so that circularity isn’t
cancelled out by competing sustainability priorities.

Figure 1

June 2023

CREATING SUSTAINABLE PRODUCTS AT
SIEMENS THROUGH ROBUST ECO DESIGN

So how does a technology company like Siemens, which offers
hundreds of thousands of different hardware products, go
about realising this circular vision? “The basic prerequisite isthat you have clear objectives that set the direction in which
you want to improve your products,” says Marlon Hassel.
Siemens has defined guiding principles for product design
as part of its comprehensive sustainability strategy, the socalled DEGREE framework. By 2030, the company wants
to apply Robust Eco Design (RED) to all relevant productfamilies. “With RED, we have created a system by which we
can improve our products in all areas of sustainability,” says
Hassel. Siemens RED principles were developed based on
the international ISO standard IEC 62430 (Environmentally
Conscious Design for Electrical and Electronic Products),
as well as the company’s own internal design principles.
“The goal is to empower product managers to understandand improve their products’ environmental footprints in themost appropriate way to their target application and market
context,” says Marlon Hassel, who has a background in
product portfolio management. “There is no one-size-fitsall-solution,” he adds.
At the heart of RED are life cycle assessments (LCAs),
which measure a variety of impact indicators (Figure 2)
based on product and operational data. LCAs ensure thatevery ecodesign measure is based on facts. However,
because it can still be complicated for product managers tounderstand the direct link between their design decision andthe product's environmental impact, Siemens has selected
three leading indicators – climate change, resource use

ROBUST ECO DESIGN
Minimize negative environmental impacts
of products and associated processes

Minimize impact on
climate change

Minimize impact on
resource depletion

Minimize impact onhuman health and biodiversity

Climate Neutrality
Global warming potential

Circular Economy
Resource depletion

Zero pollution
Substances of concern

RED principles and strategic action fields for product optimization at Siemens.

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Towards a circular economy for industrial electronics

June 2023

and ecotoxicity – from which specific design strategies havebeen derived (Figure 1). “It is important to understand that
improving the environmental impact of a product requires
reducing input factors such as resources and energy, as wellas output factors such as waste, emissions, or wastewater,”says Hassel.
While carbon neutrality is mainly the result of efficient,flexible and clean energy consumption and lower emissions,the circular economy has a significant impact on climatechange and resource depletion, both by reducing the need to

Figure 2

extract and process new materials and by reducing the amountof waste. However, it is important to note that the eliminationof harmful substances is a prerequisite for dismantling andtherefore an important factor in the circular economy.
Already in the first year after the introduction of RED,
26% of the relevant Siemens product families wereanalyzed using this approach and teams are busy atwork identifying and analyzing ways that it can besystematically, efficiently and cost-effectively applied
across the company by 2030.

Categories for Lifecycle Assessment (LCA)

Impact Category

Description

Climate change

Potential global warming due to emissions of greenhousegases into the air

Ozone depletion

Aerial emissions that destroy the stratospheric atmosphere

Acidification

Potential acidification of soils and bodies of water due togaseous emissions of nitrogen and phosphorus compounds

Eutrophication – Fresh water

Enrichment of the freshwater ecosystem with nutritional
components due to emissions of nitrogen compounds

Eutrophication – Oceans

Enrichment of the oceanic ecosystem with nutritional
components due to emissions of nitrogen compounds

Eutrophication – Terrestrial

Enrichment of the terrestrial ecosystem with nutritional
components due to emissions of nitrogen compounds

Photochemical ozone formation

Emissions of gases that affect photochemical ozone formationin the lower atmosphere catalyzed by sunlight (smog)

Abiotic resource depletion –Minerals and metals

Depletion of non-fossil resources

Abiotic resource depletion –Fossil fuels

Depletion of natural fossil resources

Human toxicity – Cancer

Effects of toxic substances released into the environment on
humansHuman toxicity – Non-cancer

Effects of toxic substances released into the environment on
humansEcotoxicity – Fresh water

Effects of toxic substances released into the environment on
freshwater organisms

Water use

Relative amount of water used, based on regionalized scarcity
factors

Land use

Change in soil quality (biotic production, erosion resistance,mechanical filtration)

Ionizing radiation – Human health

Damage to human health and ecosystems due to emissions ofradionuclides

Fine particulate emissions

Potential incidence off illness due to particulate emissions

The dimensions of a product's environmental footprint (PEF): Categories for Lifecycle Assessment (LCA).

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Towards a circular economy for industrial electronics

June 2023

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THE CHALLENGE OF CONFLICTING GOALS

A major challenge in implementing eco-design is to makedecisions in the context of competitiveness. In addition
to the transformation to more sustainability, a productmust also be attractive in terms of performance and cost.
Consequently, there are conflicting goals that need to beresolved. Conflicts can occur, for example, between•	different environmental aspects, e.g., better recyclability
can lead to more CO2 emissions (e.g. if thermosets are
replaced by thermoplastics).
•	different lifecycle stages of products, systems, solutions
or services with respect to an environmental aspect.
For example, a better carbon footprint in the use phase
may come at the cost of a worse carbon footprint in
manufacturing.
•	environmental and economic benefits, e.g. when aproduct is manufactured in a more environmentallycompatible way to extend its lifetime. This results inan environmental benefit because fewer resources are
consumed and less waste is generated in the long term,
but at the same time the acquisition cost may increasesignificantly.
•	environmental, technical, and/or quality considerations.
For example, design decisions can have a negative
impact on the reliability and durability of a product, even
if this generates environmental benefits.
These conflicting goals illustrate which challenges haveto be tackled in order to design a product sustainably in acomprehensive way.

ROBUST ECO DESIGN IN ACTION

A central aspect in the reduction of environmental impact
is, of course, the greenhouse gas emissions that a productcauses. The example of electrical switchgear shows howchanges in product design can massively reduce theecological footprint.
Electrical switchgear is necessary in the transport ofelectricity. It is composed of electrical disconnect switches,fuses or circuit breakers used to control, protect and isolate
electrical equipment. Switchgear is used both to de-energize
equipment to allow work to be done and to clear faults
downstream. For a long time, sulfur hexafluoride (SF6) wasused as an insulating gas in these products, as SF6 hasdielectric properties, which means it is difficult for electric
current to flow through it. The global warming potential of
SF6, however, is hugely significant: more than 22,000 times
that of CO2.
Siemens has developed switchgear that uses ‘naturalcomponents of ambient air’ instead of SF6 – its ‘blue GIS’
range. This clean alternative has a global warming potentialof less than one and can be released into the atmosphereonce the switchgear reaches end of life. “The use of blue
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GIS significantly reduces the environmental footprint of
the product,” says Thomas Dürr, standards and regulations
manager at Siemens. With the absence of greenhousegases that need to be contained and responsibly stored,dismantling and eventual recycling of the switchgear at endof life is also made more seamless. Although the reductionof greenhouse gases was the main focus in the developmentof the blue GIS portfolio, the absence of SF6 also has apositive effect on the circularity of the product by simplifying
recycling.
Another area where RED principles are being applied is in
the OpenAir damper actuator portfolio. Damper actuators
are small motor-controlled devices that help to regulate
and stop airflow and can commonly be found inside ducts or
heating, ventilation, and air conditioning (HVAC) equipment,
and systems.
In terms of energy efficiency, actuators have always playeda key role – they can be controlled so that air conditioning,for example, is not on in an empty room or at night, withresultant energy savings in the range of 20%-60%, says
Emmanuelle Billard, director of sustainability for Building
Products at Siemens. This energy saving potential wastherefore a key point of consideration when analyzing which
field of action to concentrate on.
“In the lifecycle impact assessment, we identified thatthe most impact was in the use phase,” she says. “After a
product is installed, it will often run for 20 years or longer.
During those 20 years, it will be consuming energy, so we
immediately saw that we need to focus on this use phase –on power consumption.”In this way, the optimized OpenAir damper actuator
portfolio will contribute to more sustainable building
operation, and thus also has an indirect impact on the
consumption of resources.
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CHRISTIAN HARTMANN/REUTERS

Towards a circular economy for industrial electronics

THE JOURNEY TOWARDS CIRCULARITY

The OpenAir damper actuator portfolio and blue GIS
examples show that product design is highly relevant to
reducing a product's carbon footprint. However, this does
not yet meet the requirements of a circular economy.
“Circularity requires a symbiosis between product design,operations and innovative business models,” emphasizes
René Bauer, Electrical Products portfolio manager at
Siemens. “Our goal is to keep products, components,and materials in the highest value loop according to
the circularity hierarchy. This requires a comprehensive
shift in how we are doing business today,” he adds. The
more complex the product, the more challenging it is toimplement circularity. Siemens is guided by a circularity
hierarchy, which shows which criteria have the greatest
impact on a product’s environmental impact.
1 PRODUCT LIFETIME EXTENSION
The production of new materials and products always causes
a greater environmental impact than the continued use ofan existing product. Therefore, the highest sustainability
potential is realized through high quality, reliable,
maintainable, upgradeable and updatable products.
From a hardware perspective, modular design makes
it easier to replace parts and conduct repairs, thereby
extending product lifetimes. Siemens has applied thismodular approach in the development of the new 3WA
Air Circuit Breaker. In the new 3WA model, the application
processor and the protective processor have been separated

Figure 3

High

Zero waste hierarchy

1

Quality and maintainance
Lifetime (Extension)

Sustainability
Potential

2

Upgrades and repair

4

Reuse and refurbish
Product Cycles

4

Remanufacture

5

RecycleMaterial Cycles

6

Energy recovery

Low

Figure 3: Which criteria have the biggest impact on product sustainability? This question is guiding Siemens in optimizing its products.

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Towards a circular economy for industrial electronics

to improve the product’s upgradability. “The new circuit
breaker shows that even proven, high-quality products can befurther optimized in terms of their service life,” says Hassel.
2 ESTABLISHING PRODUCT CYCLES
Circular economy necessitates closed loop material flows.
Ideally, product components and materials are kept at theirhighest utility and value, so they can go through several
consumption circles. This means that products should bedesigned with refurbishment or remanufacturing in mind,
but also appropriate logistics for return and redistribution,
as well as refurbishment centers are required.
Siemens Healthineers has implemented this approachwith their ecoline product portfolio: medical equipmentused for magnetic resonance imaging, computed
tomography or molecular imaging, for instance, arethoroughly refurbished to a level as good as new andresold. “With ecoline, we make our innovative technologies
available at affordable prices by giving imaging systems andcomponents a second life. This is also a strong contribution
to a circular economy in healthcare, with currently over
6,000 ecoline systems already installed,” explains Anne
Liebenberg, Head of Marketing & Sales for Asset Lifecycle
Development. To ensure high quality and a performanceand look and feel like a new system, ecoline systems are
manufactured and tested in the same production lines as
new systems by the same team of employees. In addition,
the same service options as available for new systems
are offered. Also, the supply of original service parts isguaranteed for at least five years.
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June 2023

All sides benefit from this concept: the initial owners of theequipment receive attractive buy-back values; the second
owners benefit from an affordable price. And by closing theloop, all sides contribute to the transformation toward a
circular economy in healthcare.
3 ESTABLISHING MATERIAL CYCLES
When a product has reached the end of its lifecycle
and can no longer be repaired or remanufactured, fullor partial recycling is often the next port of call. Siemens,for example, has formed an association with othermanufacturers to collect and recycle fuses. While copperand silver are recovered and sold to generate revenue forsocial initiatives, the waste left over from the ceramic bodyof the fuses is later used in road construction.
There are challenges, however. Plastics, for example,
change their properties when reprocessed, with quality
often suffering as a result. Availability and viability
not only of reprocessing facilities but also supply of
reprocessed material to incorporate into new products
is also a factor.
Nevertheless, there are still significant potential
environmental savings to be had. A test-case analysis ona Siemens circuit breaker, for example, showed that anincrease of up to 37% recycled resins reduced the CO2
footprint of the product by 5.3%.
However, there are limits to reuse. Emphasis, therefore,
must be on developing products that maximize the useof highly recyclable materials and minimize the use ofmaterials for which recycling is more challenging.
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June 2023

SIEMENSA DIGITAL BOOST FOR CIRCULARAPPROACHESAn important driver of the circular economy is digitalization.
A Sitra report that looked at industries with high emissions
footprints, including buildings, found that transitioning toa circular economy with digitalization at its heart could
mean as much as 296 million tons of CO2 cut per year in
the EU by 2050.
Digitalization is an enabler in various ways:•	It facilitates the creation of new, circular business models
in which products are offered as part of broader services(servitization, pay-per-use). An example are “X-asservice” models that are based on smart equipment anduse big data, operational data and sensing to facilitate
linking tangible and intangible elements while satisfying
consumer needs. 1•	Digital sharing platforms help to connect collaborative
and temporary users of products and services andfacilitate the mobility of unused products. In a similarway, cloud data and communication technologies allow
companies to establish product, material, or waste
exchange platforms.2 Such platforms are already inplace, e.g. for construction materials. Siemens Real
Estate for example has worked with startup Concular
to resell some of the building products inventory froma building slated for demolition through its digitalexchange platform.
•	Digitalization enables the complete documentation ofmaterial and product properties, from the origin of raw
materials, transport routes, or the materials used in the
product. This makes it possible to check how sustainablea product is. On the other hand, tags and/or digitally
stored information can facilitate re-manufacturing,
repair, and refurbishment processes as well as proper
recycling at end-of-life.
One way of implementing this approach is throughdigital twins of products and infrastructure assets:
Siemens Real Estate, for example, develops all newbuilding projects using a digital twin, which is an exact
digital image of the physical building. These digitalmodels are increasingly filled with material and productdata, which at the end of the building’s life will provide
information about which components are still functional,
what their reuse potential is, or how they can be recycled.
•	Smart devices can be controlled remotely and are easier
to update or upgrade, this can extend their service life.

1
2

Digital models are filled with data,
which at the end of a building’s life
will provide information such ascomponents’ functionality, reuse
and recyclability
THE OUTLOOK

A circular future is a sustainable future, that much is clear.
And all industries, be they consumer-facing or business-tobusiness, within fashion, food or electronics – can adapt.
For some sectors, the process will be intuitive. For others,
it will be highly complex – sophisticated methodologies
will need to be developed to navigate the push-pull ofcompeting sustainability priorities, and products will need
to be reimagined and redesigned. Business processes andbusiness models, meanwhile, will continue to adapt andevolve along not only a more circular – but increasingly moredigital – path.
For Siemens, the way forward is clear. Targets that areaccompanied by guiding principles and frameworks inform its
circular vision and all business units are engaged. Emphasis
is placed on lifecycle analysis and extension, closed loop
material flows that precipitate new business models, as wellas the use of secondary materials and recycling.
A circular economy will help to tackle rising GHG
emissions, pollution and resource extraction, and ultimately
will be the foundation of a new business paradigm. To getcloser to this goal, an integral consideration of sustainability
criteria in product design will play a key role.

Source: Industry 4.0 as an enabler in transitioning to circular business models: A systematic literature review. In: Journal of Cleaner Production 393 (2023)
Source: Industry 4.0 as an enabler in transitioning to circular business models: A systematic literature review. In: Journal of Cleaner Production 393 (2023)

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