Sustainable Digital Market Design: A Data-Based Approach to the Circular Economy

Abstract

Markets must be designed properly to serve the common good. This is particularly evident in the digital economy, where platform companies have profoundly restructured value chains over the past 20 years. The European Union is currently undertaking a major regulatory effort to better shape digital platform markets. Yet, despite unprecedented existential pressures from environmental crises, sustainability goals are barely addressed. In this paper, we argue that the design of digital markets and information flows holds great potential for an ecological transformation of the economy. Based on a theoretical integration of the digital market design approach and the circular economy paradigm, we highlight the need for new market rules for the generation, storage, access, and use of product-related information that can help connect stakeholders and create new models for collaborative ecosystems. Based on a literature review of the potential of data-driven sustainability measures in the circular economy, we present a policy framework that includes the specific selection criteria needed to identify relevant data as well as recommendations for data sharing obligations. We find that, rather than a data economy that focuses on tracking human behavior, more product transparency and a systematic digital tracking of goods and materials is needed in order to change production and consumption systems towards economic activity that respects planetary boundaries.