A framework of digital technologies for the circular economy: Digital functions and mechanisms

Abstract Digital technology is regarded as providing a promising means of moving production and consumption towards the circular economy. However, it is still unclear which functions of digital technologies are most useful to improving circularity, and how these functions could be used to enhance different circular economy strategies. This paper aims to address this knowledge gap by conducting a systematic literature review. After examining 174 papers, creating 782 original codes and 259 second‐round codes, the study identifies 13 critical functions of digital technologies which are most relevant to circular economy strategies. The paper then proposes a framework which reveals seven mechanisms of how these digital functions can enhance different circular economy strategies. The framework also reveals which combinations of the digital functions and circular economy strategies have already been studied extensively as well as where there may be gaps. This indicates which digital functions are more mature in terms of possible implementation for circular economy as well as what missing links there are in the empirical and theoretical research. The study advances the synergies between digital technologies and the circular economy paradigm through the lens of digital functions. The proposed framework and mechanisms build a theoretical foundation for future research, and we highlight five research areas for further studies. This study also provides a structured way for managers to explore the appropriate digital functions for their CE strategies, so as to identify required digital technologies and new value creation through digital functions.