SDVs have a major role to play in helping fleet operators overcome the international shortage of truck drivers, explain Fredrik Almhöjd and Jean-Marie Lapeyre, Chief Technology & Innovation Officer, Global Automotive Industry at Capgemini. That’s because SDVs can transform the driver experience, potentially attracting younger people and women who currently don’t see truck-driving as a career option.

“Without action to make the driver profession more accessible and attractive, Europe could lack over two million drivers by 2026, impacting half of all freight movements and millions of passenger journeys.” That is the stark prediction of the International Road Transport Union (IRU), commenting on a study it conducted in 2022. The outlook isn’t any more reassuring in other regions.

So what are transportation companies to do, and how can truck OEMs help? In this article, we’ll argue that software-defined vehicles (SDVs) could be a big part of the answer. We’ll be building on ideas from earlier blogs.

In the passenger car market, the concept of SDVs is often promoted on the basis that it will create a better customer experience for the driver. For commercial vehicle fleet operators, by contrast, the main focus has always been, and will continue to be, on TCO. Until recently, efforts to improve life for the driver, while important, have received less attention.

However, with driver shortages becoming critical, truck-driving needs to be made more attractive to jobseekers. The IRU suggests that attracting more women and young people is an important part of the solution – but current working conditions make that difficult.

SDVs can help with the challenge of recruiting and retaining staff.

SDV features can make drivers’ lives better

So what SDV features might improve driver experience? Truck drivers will enjoy many of the same benefits as car drivers, such as customized infotainment – though obviously, this must not distract them from the job.

Consumer-oriented SDV features can be tailored for trucks. For example, a framework for companion apps on smartphones could be adapted to support the needs of HGV drivers in finding places to stop, eat, and sleep, avoiding illegal and dangerous use of phones while driving. In addition, although software can’t improve the quality of facilities available to drivers, it can help direct them to the most satisfactory ones based on a driver’s personal preferences and ratings by other users.

With all the functionality they need integrated and automated (and configured for personal habits and preferences that they have already stored), the job can be done safely, easily, and legally. Similar technology could be used to help last-mile delivery drivers navigate between stops.

Integrate drivers’ digital lives

Many people, especially younger ones, now expect their digital lives to be streamlined and integrated across work and leisure. To appeal to these individuals, SDVs could be equipped to remember drivers’ preferences regarding infotainment modes and transfer them across trucks. Their preferred smartphone apps, or similar ones, could also be made available via the truck’s console.

By integrating various aspects of working life, we can make the driver’s job easier, as well as more pleasant. A common complaint from truck drivers is that they have to unload cargo themselves because there is nobody else to do it. An SDV can contact the destination to communicate the arrival time and nature of the cargo, increasing the chances of the relevant staff being on hand with the right equipment.

When a truck is an SDV, ADAS features can easily be added. Some of these features can help to make truck-driving more attractive to younger people and women by allowing multiple tasks to be performed simultaneously. Stress levels for the driver are reduced significantly if they can organize their working day – including route optimization and scheduling of pickups and deliveries – while they’re on the road. This can be achieved through partial automation of driving tasks, whether via assistant systems or fully autonomous driving (say up to level 4), paired with services that help with routing and scheduling.

Overcome negative perceptions of truck-driving careers

For women in particular, personal safety issues can be a deterrent to working as a truck driver. Connected vehicle software can help here too. For example, AI-enabled services can monitor sensor data and warn when someone is approaching a stationary truck, and biometrics can control who has access to the cabin. Predictive maintenance can reduce or eliminate the risk of breaking down in a lonely spot. (And with SDVs, we can go beyond preventive maintenance via telematics and alerts to their natural successor, self-diagnosis by the vehicle.)

Thanks to SDV connectedness, despatchers can more easily monitor drivers’ safety and send help if needed. The same communications facilities could streamline interaction between communities of drivers who can look out for one another, reducing any sense of isolation.

Long hours away from home are another turn-off for many potential drivers. SDVs’ communications technologies can improve their work-life balance, with social media style software, in-vehicle display screens, and cameras keeping the driver in touch with family or friends during stops.

Work-life balance can be further improved by advanced route optimization techniques. An SDV route can be automatically optimized to accommodate a driver’s personal preferences and constraints, as well as requirements such as refueling and rest stops. It can then be continuously adjusted to reflect the current circumstances such as weather and traffic conditions, helping drivers to finish work on schedule.

Deliver better driver experience and financial benefits for fleet operators

Despite their urgent need to recruit more drivers, at the end of the day truck buyers are still likely to focus on the more tangible benefits of SDVs. The good news is that many of the features that give drivers a better experience simultaneously increase productivity, uptime, or fuel efficiency – for example, predictive maintenance and real-time route optimization, both mentioned above.

The same is true of services that address electric vehicles’ range limitations and shortages of charging stations (as discussed in our recent e-mobility blog). Suppose the truck’s battery is getting flat, and the nearest charging station has a long wait time. An SDV can save energy in various ways: for example by modifying engine parameters or environmental settings such as aircon, or by advising changes in driving behavior. With these adjustments, the driver can continue to a charging station with an acceptable wait time, improving productivity and likely reducing frustration too.

Safer driving is yet another example of an SDV capability that benefits both employer and driver. Examples here include the use of sensors to detect when vehicles get too close to one another, or when drivers are tired and need a break. For example, a truck could raise an alert when its driver is blinking more frequently than is normal for them, indicating exhaustion.

Make driver appeal part of the business case for SDVs

For truck OEMs and tier 1s, the case for SDVs is clear. They can enhance revenue flows via a shift from one-off purchases to full lifecycle engagement, and improve automotive sustainability performance, for example by reducing waste in R&D processes. Ultimately, SDVs can help to make the brand central to customers’ businesses. In addition, selling SDVs makes sense as part of the journey to autonomous driving and in the context of companies’ overall digital transformation.

Software-defined vehicles as passenger cars

SDVs are already proving their worth in the passenger car market, where improved driver experience is a more obvious selling point. (Read our “point of view” report on software-driven transformation for more.)

The question is how to demonstrate the value of SDVs to truck customers such as fleet operators. Industry concepts such as software-driven transformation are not always much help here. Instead, OEMs can point to the business benefits that result from SDV adoption. And right now, improved driver experience could be among the most important of those benefits because of its ability to help overcome driver shortages.

For more information, visit the commercial vehicles area of Capgemini’s website, and read the earlier articles in this blog series.

The faster-than-expected transition to electric mobility and the ongoing digitalization of our daily lives has caused massive disruption in the automotive industry.

In many ways, the playing field has been levelled and new doors have been opened. Tesla has emerged as a market leader, relative newcomers like Kia and Hyundai have strengthened their position against ‘higher-shelf’ brands, and a whole wave of digital-first Chinese newcomers are winning market share at home and gearing up to take on the European automotive market and potentially others. How can legacy automotive brands respond to this disruption?

Against this backdrop of change and disruption, brand heritage, local presence, and familiarity still count. But arguably, for less than before. Amid the pandemic and subsequent supply chain squeeze, long wait times pushed many consumers toward brands they might not have considered before. But with the pandemic (hopefully) behind us and the supply chain situation easing, the deciding factor for many car buyers today is customer experience.

What do we mean by customer experience in automotive?

Customer experience is the sum of all interactions a customer has with a brand over time.

Capgemini Invent: Time to level up

In the automotive industry, this means everything from the moment you start thinking about buying or leasing a car, through your test drive and selection process, delivery or collection, driving time, and service visits, right up to the moment you return the car or decide to sell it.

Our understanding of the automotive customer experience is very different to what it was just a few years ago and the opportunities to influence it are growing dramatically as several trends converge:

• The transition to electric mobility and software-defined vehicles
• The rise of new sales and business models, and ways to own or enjoy a car
• Increased comfort with e-commerce, even with ‘big ticket’ purchases
• Digitalization or ‘apple-ization’ and its growing role in our personal lives and in business

With more opportunities and touchpoints than ever before and with the car being the third-most-frequented place by most people (after home and work), it is imperative that carmakers invest in and improve their approach to customer-centric mobility experiences.

This isn’t just about getting the sale – it’s about becoming an integral part of the customer’s digital universe and building the type of trust and loyalty that people today have toward the Apple ecosystem. We need to look no further than Tesla for an example of a brand that has led with tech and reaped the benefits in terms of customer loyalty. And then there’s NIO, which proactively invites prospective customers into the NIO ecosystem and seeks feedback, even before they become NIO owners. The result so far? Seventeen times as many NIO app users as NIO car owners – proof that digital creates huge opportunities to attract and engage customers earlier in the sales process than ever before.

So how can automotive brands use digital to transform their customer experiences and reap the benefits?

The digital transformation of the automotive customer experience

Let’s look at some of the key touchpoints that could be transformed or enabled with the power of digital and how they could contribute to longer and stronger relationships with customers.

From dealer networks to agency sales and e-commerce

A current focus topic in the automotive industry is the transition to Direct-to-Consumer sales (D2C) with many carmakers transforming their sales model towards agency or direct sales to drive omnichannel experiences with seamless channel integration – online and offline. Although many prestige brands still rely heavily on the showroom experience (the human touch should not be underestimated), consumers are increasingly comfortable with online channels, even for big-ticket items like cars.

In a not-too-distant future, where dealers become agents, carmakers will have direct access to customers via their online channels. This should result in more-sophisticated and connected online experiences. Many brands have already invested in slick 3D configurators but these rarely allow for more than one-off configurations and perhaps an option to ‘request a call’, which often leads to fragmented or inconsistent experiences.

Brands like Skoda are dipping their toes into the metaverse, and – while it all feels a little experimental for now – it will be interesting to see what role this emerging space plays in the consideration phase of the sales process and beyond. 

Look out for more simplification and integration, and less friction when buying or leasing a car in the future – leading brands are working towards enabling car purchases in just a few clicks with financing options available with just a few more.

Carmakers looking to keep lead times short and inventory levels lean should be able to provide real-time access to available cars – new or used – that match or closely match customer configurations. This will give each customer the choice of ordering their perfect car and waiting for its production, or picking up a close match immediately. The technology already exists to make this vision a reality – a well-configured CRM and real-time access to a database of available cars – so we should see this become standard for most brands in the near future.

Apps that add value

Customers today aren’t just looking at the car – its performance, comfort, features, and price. More than ever, they’re also considering the mobile application that accompanies it and evaluating if and how it fits and complements their personal digital ecosystem. Compatibility with Apple CarPlay and Android Auto have become table stakes but it’s with carmakers’ own apps where they can really make a difference.

Will the app enable you to unlock a car so you can leave your keys at home? Does it serve as an integrated way to pay for fuel or charge? Does it allow you to remotely check the status of your car and prepare it for use? And, perhaps most importantly, is the app reliable and enjoyable to use? This is one of the areas where Tesla has led the way and it’s clear that the Tesla mobile app is an important contributor to the brand’s loyal following.

The car and smartphone are key companions in daily life. If they work together well, customers are happy.

Continuous evolution with ‘over the air’ updates

Not many car owners enjoy visiting dealers for service and maintenance visits. If a dealer manages this experience well, they might call or notify a car owner of the need for a visit and proactively suggest available slots. But this doesn’t change the fact that such visits are generally a hassle – one that takes precious time out of an already-packed schedule and delivers little tangible value beyond peace of mind.

With electric and software-defined cars, such visits can be reduced and many checks, updates, and enhancements can be executed ‘over the air’ using software and an internet connection. This is what we expect with our smartphones and it’s increasingly what customers expect with their cars. Yes, this might result in fewer physical touchpoints between customers and car brands (or dealers), but the potential to improve customer satisfaction with convenience and by making a car better and more useful over time outweighs any potential drawbacks.

In this regard, software is a true game changer – one that can help strengthen and extend the relationship between brand and customer.

Simplified and satisfying charging experiences

The filling station experience has never been much of a concern for automotive brands. After all, with abundant infrastructure, experiences lasting just a few minutes, and customers free to make their own choices, there was little carmakers could do to influence the experience.

With electric mobility, the situation is altogether different. Today, carmakers have much to consider – what charging speeds to enable, whether to enable vehicle-to-appliance/home/grid charging, which infrastructure to enable compatibility with, whether to partner up or build proprietary infrastructure, and whether to get involved in providing payment solutions or not (e.g., via the car’s mobile app). These are questions that require deep consideration and, in some cases, the acquisition of new capabilities and assets.

Today, we see a variety of approaches to charging. Ionity is a European example of a joint-venture approach to providing charging infrastructure, VW Group has the Electrify America company for the US market and Tesla has its proprietary global network, which – having established itself as best in class for reliability and availability – is now opening up to partners like GM and Ford in the US. In line with its premium-brand credentials, Audi has piloted charging hubs as convenient stops within an aspirational lifestyle.

One thing is clear – providing access to seamless and convenient charging experiences is a key success factor for excellent customer experience with electric mobility.

Autonomous driving and ways to pass the time

Among the glittering array of new products and technologies on show at this year’s CES event in January, autonomous vehicles attracted far less attention than in previous years. The hype machine may have cooled, but assisted and autonomous driving remain firmly on the agenda of every major car company. Of course, the need for proven safety means there is no room for error. Yet the prize for being among the first to reach the recognized autonomous driving levels is potentially huge – an unprecedented level of customer trust and the opportunity to engage passengers and drivers with new services while the car looks after the task of driving.

Indeed Audi, in designing its ‘sphere’ concept cars, talks about them being “a third living space”, alluding to the amount of time customers will spend there and the opportunity to fill it with revenue-generating options. CARIAD already announced its intention to bring an app store to VW Group vehicles, hinting at the development of a proprietary ecosystem as an alternative to the Apple and Android offerings.

Gaming, a popular pastime for much of today’s car-buying demographic, could be an area to watch. With Audi investing in the mixed-reality Holoride solution, BMW partnering with AirConsole, and the latest-generation higher-end Teslas offering Steam integration, is it possible that gaming options will play a part in buyers’ decisions? Could we see carmakers seek to differentiate through user experience or exclusivity on titles in the way Nintendo and Sega did in the 90s?

With gaming platforms these days typically requiring connectivity and subscriptions, this could soon be a highly valuable source of revenue and data for carmakers. The decision by Honda and Sony to team up and form the Afeela brand certainly suggests that combining mobility and top-class in-car entertainment could be a huge opportunity to stand out in a crowded market.

Personalized in-car experiences (and companionship?)

Today, we expect to be able to personalize many of the products and services we buy, and the in-car experience is going in the same direction. Most automakers have been offering driver profiles (saved seating and steering-wheel positions) and changeable ambient lighting in their cars for years now, but some of the new electric offerings – particularly those from China – are taking personalization to a new level.

We’re increasingly seeing cameras inside cars, and these are used for a variety of functions – to recognize the driver and adjust to their preferences (seating and temperature), to detect tiredness, driver mood, and then tailor services (e.g., playlists) and actions accordingly. What could the future hold in this area?

BMW showed us its vision of the car as a digital companion with its bold DEE concept, with the promise of deeply immersive experiences and an AI assistant that learns from you, and to be more in tune with your tastes. What’s presented as a vision by BMW is already on offer elsewhere. NIO’s Nomi assistant brings in a remarkable and fast learning experience that feels lightyears ahead of what many people are accustomed to today.

And while for some, it might feel a bit much, it’s easy to imagine car ownership turning into companionship and a subsequent increase in customer loyalty. Think about it … would you find it easy to say ‘goodbye’ to a companion that had learned about your preferences and who had helped and accompanied you on thousands of daily commutes and road trips? The presence and role of the digital assistant is a whole new dimension that will be fascinating to observe in the future.

Reaching our destination: an ecosystem that we can trust

With all the excitement around how to enhance the car buying/leasing and ownership experience and the current pace of change in the industry, it’s easy to lose focus on what needs to happen at the end of the ownership or lease period.

If you’re an iPhone user, you know how much of a wrench it would be to leave the Apple ecosystem. This is at least partly because we’ve become heavily accustomed (reliant even) on a specific UX and we’re generally happy to keep our data stored in an ecosystem that we trust in exchange for the many conveniences we enjoy every day.

As the provider of the ‘third living space’ and being at least somewhat responsible for ensuring safe and satisfying transport in our daily lives, automotive companies are in enviable positions. They can truly make their cars and brands integral parts of their customers’ lives in ways that few other companies can. By embracing the challenge and using the power of digital to transform existing touch points and create new ones, there is no limit to how long the customer experience can last.

Data as the key to unlocking value

When we consider all the touchpoints above, the common denominator is the presence of and reliance on data. With a Direct to Consumer (D2C) model, automotive companies understand who their customers are from day one and can start building the relationship.

By using the data generated by every interaction with an app, every journey, every acceleration, every service accessed and every charge, brands can propose additional services, create new services, subtly adjust existing functions to better suit driver needs and preferences, and much more. In short, they can get closer to customers than ever before and continuously improve the relationship.

But are incumbent automotive brands set up to work like this today? In most cases, the answer is ‘no’. Data often sits in siloes, owned by specific areas of the business that perhaps don’t see how it can add richness to the big picture of the carmaker-customer relationship. Organizationally, the area of customer experience is typically limited to sales and service visits.

There is a strong argument for the creation of a dedicated customer experience domain that has access to data from right across the car-and-customer relationship (CRM, telematics, subscriptions, Finance, Insurance), and has the goal of bringing it all together to understand, strengthen, and extend the experience, wherever possible.

This is no small step and it goes against the way many players in the industry have operated for decades. It requires organizational and technological transformation. However, the benefits – increased revenue, greater loyalty, and the potential for stronger and longer relationships and an integral place within the customer’s digital universe – are worth the effort.

To learn more about how automotive brands can enhance the automotive customer experience, I encourage you to check out Capgemini Invent’s Point of View “Time to Level Up – How to Win the Race for Customers with Superior Experiences.”

“Software defect.” “False upstream alarms.” “Firmware error.” “Login error.” “Software bug.” “Sensor failure.” “Cybersecurity vulnerability.” The FDA list of software-related recalls is sobering reading. We see the story behind each event – the teams that worked overtime designing and building a new device, quality assurance professionals checking each and every vulnerability, last-minute adjustments, the elation of a seemingly successful release… And all the while a tiny flaw lay hidden from sight, with the power to derail everything compromising safety and exposing liabilities. ​

As a legal manufacturer, we specialize in safety and compliance for Software as a Medical Device (SaMD). It’s a fast-growing field, with risks hiding in every nook and cranny. How do we make sure we catch and neutralize every risk? How do we ensure safety and compliance, without sacrificing speed? Let’s dive in. ​

Compliance and agility by design​

There’s a common fear that safety and compliance slow down go to market. A justified concern? Yes and no. Of course, extra steps take extra time. That’s why, wherever possible, we work to engrain safety and compliance considerations into every process. For example, a remote patient monitoring system that records patient data needs to do many things, some are basic functions; others cross over into the “safety” category. Safety and compliance are mandatory and are integrated into the development process. Pharma and MedTech companies will speed development and improve quality if they adopt two changes: agile processes combined with modularity by design. To see how modularity adds value, let’s look closer at the challenges SaMD teams face.​

Challenges of connected systems ​

With today’s more connected and complex systems, the boundaries of what constitutes “Software as a Medical Device” are often blurred. For example, when the system is distributed, with parts of an application running on a wearable, mobile phone, or in the cloud, and  a combination of medical and non-medical functions, is the whole system SaMD? How do we manage a combination of safety and non-safety, administrative and other functions that all need to work together to fulfill a medical purpose? If the system is developed as monolithic, this increases effort to get regulatory approval and places additional compliance effort to modify, improve or add functions after the system has received initial market authorization. What’s the solution?​

The benefits of modularization for connected health ​

A pragmatic approach to accelerate SaMD development, manage safety and regulatory complexity, and maintain flexibility, is modularization. We segregate SaMD products by function and by risk category (high, medium and low risk). This makes it possible to apply the appropriate level of risk control and testing measures in each case. Using pre-built, ready-to-use SaMD modules developed under certified processes and qualified tools, assures reliable, fast and compliant software. ​

Modularization reduces regulatory complexity and – together with agile development models – speeds up the time to market, while providing the flexibility we need to continuously adapt functions. Most critically, it reduces risk. The “hidden flaw” we talked about earlier – in a modular system there’s no place to hide, and agile development makes it possible to and correct flaws early in the development cycles.​

Reducing risk and regulatory complexity​

We believe that risk is best managed when technical and regulatory responsibility go hand-in-hand. The closer a development team is to the consequences of success or failure – the more skin they have in the game – the more we count on them to scrupulously manage risk. We’d been working in the SaMD field from the start, at the intersection of software, life sciences and regulatory, so taking regulatory responsibility for our work was a natural step. How to manage regulatory compliance is an important question for every innovator – a far-reaching question with many dimensions. For us, most crucial is the link between technical and regulatory responsibility.​
​You can find more about our offer and our Legal Manufacturer capabilities on our webpage, and we’re also available to consult on any aspect of risk and compliance.

When your innovations hit the market, dozens of factors affect their success. Avoidable mistakes should not be one of them. Let’s make your products flawless.  

Welcome to the third part of this initial blog series on the future of commerce and the role of data and technology. In the earlier parts, we discussed the impact of channel-less commerce, the need for connected capabilities, the significance of data-driven competencies and value, and the importance of managing data foundations, data collaboration and composable technology architectures. In this final part, we will focus more on data cultures and business-transformational data journeys at scale.

Data-driven competencies: From data adhocracy to data democracy

Data and technology are critical for executing end-to-end connected commerce capabilities and navigating the evolving consumer goods and retail landscapes. Companies need to develop next-level data and technology competencies, ensuring that (real-time) intelligence is embedded in every business decision, operational action, and consumer touchpoint. From experiences with our clients, I know that most companies have made progress in this area through omnichannel initiatives, and often have some strong ‘pockets of excellence’, but there is still a need to further democratize data capabilities across the whole organization. Successful data masters have both the foundational data infrastructure to make data and insights accessible and the right data behaviors to leverage data for business impact at scale.

Data culture: The hearts and minds

Ultimately, while data and technology professionals play a crucial role, I clearly see that the responsibility of data ownership and value creation should be more prominently extended to business users. A data-driven culture shift is necessary for success in a data-driven era. This requires addressing the hearts and minds of employees across various functions, such as category managers, supply chain operators, store staff, and B2B sales teams. Integration of data within business processes, breaking down silos, transparency in efficiency and effectiveness measures, and fostering open innovation are all essential elements of a data culture. Investing in new skills, both technical and soft, is crucial for driving business outcomes and working in multidisciplinary teams.

The transformational data journey: Towards the end-to-end game

To embark on a successful data-driven connected commerce journey, I see three pillars to be most critical: intelligence activation within the business, orchestration for scale across the organisation, and appropriate data and technology enablement. Intelligence activation involves embedding data, AI, and analytics at the heart of business operations and decision-making, demonstrating concrete business value. Orchestration for scale requires a balanced approach that combines centralized and local capabilities, as well as skilled talent and automation. Data enablement ensures the proper management of data platforms, data quality, governance, and collaboration.

The approach: Think big, start small, scale fast

Achieving maturity on these three dimensions simultaneously is essential for unlocking the full potential of data-driven commerce. We have good experiences by integrating all 3 dimensions in so-called ‘hothouses’, bringing together the data and tech capability with business processes and cultural change to help embed analytics into core processes and your people’s work. Multi-disciplinary teams (with T-shaped profiles) are focused on demonstrating real business value (with rapid learning cycles from proven benefits) while building the blue-print for accelerated scaling and enabling the fit-for-purpose data and technology tooling.

Where is your company on this journey? A few questions to ask yourself:

1. Do you see measurable value from data across your end-to-end business?
2. Are you managing your underlying data foundations accordingly?
3. Are you effectively scaling up, taking advantage of new innovations – and do you run your data and analytics engine efficiently?

The future of commerce belongs to those who can harness the power of data and technology. Embracing channel-less commerce, leveraging connected capabilities, and cultivating a data-driven culture are crucial steps for success.

By tapping into various data sources, collaborating within ecosystems, and leveraging advanced analytics, companies can gain valuable insights and deliver personalized experiences to consumers. Investing in data foundations, adopting composable tech architectures, and focusing on the hearts and minds of employees will further accelerate the transformation towards a data-driven era of commerce. It’s time for companies to embrace the opportunities presented by data and technology and position themselves at the forefront of the evolving consumer goods and retail landscape.

This was the last part of this blog series. We will further elaborate on the various topics mentioned in subsequent blog series – stay tuned for those.

The bottom line: The future of commerce is connected, and it’s essential for companies to embrace it!

Beyond the trend, why is the circular economy gaining more traction?

Several factors are at a play in accelerating the adoption of circular economy principles and initiatives by some companies, and even in a few organizations a more holistic transformation. On one hand, several risks are prompting organizations to adopt circular economies – to remain competitive in the long term.

These include environmental risks (eg increased GHG emissions, scarcity of resources), but also systemic risks linked to geopolitical and economic events disrupting supply chains and the sourcing of materials (eg war in Ukraine, Covid-19 crisis, Suez Canal blockage) Circular business models can therefore help organizations become more resilient and better address such risks.

Social pressures are also at play: more than 65% of buyers consider sustainability when making a purchase. In addition, regulation on the matter is tightening, in particular in Europe (Circular Economy Action Plan, AGEC law). These environmental, social, and legal factors are pressuring organizations to change.

While companies need to respond to these external factors, the circular economy can, at the same time, bring a lot of benefits. As an alternative to traditional business models, it could yield up to $4.5 trillion by 2030. Beyond the economic value, deploying circularity at scale could help reduce GHG emissions by 39% and ease pressure on virgin materials by 28%. A circular economy also brings social value by creating employment opportunities in the field, attracting new clients, and improving brand image. A circular economy therefore brings long-term value to businesses by helping them become more resilient and competitive, as well as making their offerings more desirable to their consumers.

How to move towards a circular economy?

Given these challenges and opportunities, the transition to a circular economy would seem to be an inevitable path. But having the right components is key for businesses to drive their circularity transformation successfully across all stages of their value chains (from sourcing to end-of-life). To do so, companies need to deploy a holistic approach across these five main factors:

• Economic scarcity is essential in defining a company’s strategy. Businesses must rethink their strategy to bridge the gap between increasing customer demand on one hand and limited supply in a world with finite resources on the other hand. Business performance is no longer a matter of being competitive in the short term, but of being resilient in the long term – to face potential supply risks, while being mindful of planetary boundaries. For example, Northvolt launched a joint venture with Volkswagen to create a gigafactory of electrical batteries, the first one to be established in Europe. In 2021, the Group produced its first fully recycled battery cell with an ambition to equip 3 million electric cars by 2030. This well illustrates the importance of integrating a circular economy early on at the strategic level, with the objective of supporting an economy of value rather than volume.
• Product design is the cornerstone of the circular economy. We tend to consider economic circularity at the end of the value chain, synonymous with recycling or repairing (think about mobile phones as an example). But did you know that over 70% of a product’s lifecycle impact is determined during its design phase? Design is a critical stage for businesses to define their circular models. For instance, IKEA designs furniture to be easy to assemble and disassemble, taking into account the diverse lifecycles of its furniture. This can include not only purchasing but also rental, buying back old products that the brand will resell in “second life spaces,” and donating to associations. Product design is key to developing feedback loops between the different stages of a lifecycle and to adapting with agility to an increased variety of consumer behaviors by leveraging product functionality, modularity, and connectivity.
• The greatest source of value lies between a product’s end of use and recycling. There are many unexplored upcycling opportunities involving reusing, repairing, and “remanufacturing” products. Depending on a product’s level of complexity, recovering components or certain parts can represent sources of supply delivered upstream within the production chain. In a circular economy, the product is analyzed as a whole: some parts may be sufficient to upgrade a product that will no longer be considered as waste. This involves in-depth reflection on reverse logistics, mobilizing supply chains dedicated to the reverse flow of products and materials; this can involve maintenance, repair, remanufacturing, etc. The “Re-Factory”, Renault’s circular economy factory, located in Flins in France, is part of this approach. The manufacturer extends the life of its vehicles and components (such as gearboxes or turbochargers) by offering advanced remanufacturing services based on a unique ecosystem of partners.
• Achieving scalability requires the transformation of the entire ecosystem. Deploying a circular economy marks the transition from the concept of the extended enterprise, based on the exchange of information between a company and its partners (suppliers, service providers, etc.), to the establishment of something bigger – ecosystems. To enable this step change, new value chains need to be created by partnering with:
  • Competitors (horizontal partnerships): Illycaffè has, for instance, proposed to its competitors to agree on a unified recycling standard for all their coffee capsules. The idea is to pool all the capsules and, by extension, the recycling process.
  • Actors from other sectors (vertical partnership): Citeo is financed by companies to support the end-of-life of household packaging and paper, including their recycling. Citeo has developed eco-design, collection, sorting, and recycling services, thanks to the pooled action of its customers behind the creation of these solutions, and in partnership with local authorities and professionals.
    
    These examples demonstrate how collective sharing of information with an ecosystem of diverse actors is key to driving systemic change and defining innovative models. Collective sharing of data will be another important enabler in accelerating the circular economy transition.
• Technological innovation is the transformation catalyst. Two major innovations will fuel further disruptions:
  • The emergence of biomaterials and synthetic biology will provide economically viable alternatives to the scarcity of certain key resources (eg bio-based materials, insect-based proteins), and high planet-impact processes (eg chemical recycling, precious metal recovery). For example, Ynsect and Innovafeed have developed innovative protein flours made of insects that are much less energy intensive and produce less water than traditional proteins.
  • The development of reusability solutions in product design and operations (eg product digital passports, materials traceability, exchange platforms, decision-making tools, or design and simulation capabilities) will become increasingly important. For instance, digital twins can help develop next-gen supply chains by creating virtual replicas of physical products, systems, or processes. These replicas monitor, control, and optimize all aspects of a physical twin. This is a technological breakthrough that can accelerate implementation of the circular economy at the scale of an entire sector.

What should be done next?

The five factors outlined above are we believe good entry points for businesses to build their own solutions to achieve circularity, identifying and developing the interdependencies existing between the different stages of their value chains. Businesses will have to be creative and agile, relying on their human, physical, and technological assets to shift towards circular models and deliver economic and environmental value.

Just reducing carbon emissions is insufficient for achieving net-zero trajectories. Organizations need to start thinking in terms of planetary boundaries and resource scarcity when developing their business models. By doing so, they will become more economically resilient in the long term and will better protect our planet.

Achieving a circular economy requires complex and iterative transformation initiatives, but the ambition is worth pursuing. Organizations following this path will be more profitable in the long term by capturing new market shares, delivering tangible value, and setting new industry standards. Our next articles will deep-dive into some of the tools organizations should start implementing to start transitioning.  

Thanks to additional contributions from Alice Blanchard and Stanislas Ancel

For further information, we have a wealth of Capgemini Research Institute Reports and research:

• Circular economy for a sustainable future (CRI)
• Sustainability in Automotive (CRI)
• Sustainable product design (CRI)
• SNBC under resource constraints

And other reports and points of views:

• RACES: Resources Awareness and Circular Economy Strategy report
• Intelligent industry: the rise of circularity
• Driving the future with Sustainable Mobility  
• The “No-Excuse” Framework to Accelerate the Path to Net-Zero Manufacturing and Value Chains – World Economic Forum
• Removing the finish line: Circular Economy in Automotive
• Expert interview report  Expert insights on how to navigate the challenges and opportunities on the road to sustainability in the automotive sector

[i] https://www.circularity-gap.world/2023

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