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Procedia CIRP 63 (2017) 721 – 726

The 50th CIRP Conference on Manufacturing Systems

An Industry 4.0 research agenda for sustainable business models

Johannes Cornelis de Man*, Jan Ola Strandhagen
Department of Production and Quality Engineering, Norwegian University of Science and Technology, S. P. Andersens veg 5, 7031 Trondheim

* Corresponding author. Tel.: +4740141004 .E-mail address: hans.deman@ntnu.no

Abstract

In the Industry 4.0 world that is digitalizing and automating, sustainable business models exist but have not become mainstream. Opportunities
for sustainable offerings exist by designing products for longevity, repair and recycling, such that sustainability is not only focusing on being
more efficient, but also on using less raw materials and recycling more products. This changes the value proposition, supply chain, relation with
the customer and financial justification of a business model. This paper discusses potential sustainable business scenarios, and proposes an
agenda for research into how Industry 4.0 can be used to create sustainable business models.
©
© 2017
2017TheTheAuthors. Published
Authors. by by
Published Elsevier B.V.B.V.
Elsevier This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the scientific committee of The 50th CIRP Conference on Manufacturing Systems.
Peer-review under responsibility of the scientific committee of The 50th CIRP Conference on Manufacturing Systems
Keywords: Sustainability; business model; Industry 4.0; research agenda

1. Introduction has neglected the 4 main elements of a business models: value

Challenges for business models do not only come forward
from business and customer needs. While business has
experienced unprecedented growth after the world-war era, it
now faces major challenges in which there is a misbalance
between available supply and expected demand; with a
growth from 3 billion to over 7 billion people from 1960 to
2015, the purchasing power of each individual tripled [1-3].
This has led to an enormous pressure on natural resources and
our climate, and has and will result in social instability [4].
Since the club of Rome did its ground breaking research
during the seventies [5], environmental sustainability studies
has been present in the discourse of science.
A viewpoint on sustainable business models is that
sustainability cannot support neoclassical business models,
but that the business models need to be transformed to include
social and environmental factors [6]. This is supported by
Guiltinan [7], demonstrating how product obsolescence
design practices foster the replacement of products by
consumers, who often neglect repair and recycling options
during disposal. The first link between sustainable innovation
and business models comes forth from Boons and Lüdeke-
Freund [8] in which they describe that sustainable innovation
proposition, supply chain, customer interface and the financial
model. Both being profitable while tackling sustainability
issues, however, can be considered impossible in some
industries where industries are “locked-in” into their
unsustainable but financially successful business model. [8]
The world does not only face sustainability challenges, but
also faces technological advancements in digitalization and
automation. This is called the 4th Industrial revolution, i.e.
industry 4.0 [3, 9, 10]. It is the horizontal integration of “the
products, the different stakeholders such as customers,
workers or suppliers, and the manufacturing equipment that
are embedded in a virtual network and are interchanging data
in and between the different phases of a product life cycle”
[3]. Furthermore it is seen as “networks of manufacturing
resources that are autonomous, capable of controlling
themselves in response to different situations, self-
configuring, knowledge-based, sensor-equipped and spatially
dispersed and that also incorporate the relevant planning and
management systems” [10].
In this paper we will address the influence of Industry 4.0
on sustainable business models. Section 2 addresses the
modeling of business models by incorporating Industry 4.0
and sustainability. Section 3 works out several scenarios

2212-8271 © 2017 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the scientific committee of The 50th CIRP Conference on Manufacturing Systems
doi:10.1016/j.procir.2017.03.315
722 Johannes Cornelis de Man and Jan Ola Strandhagen / Procedia CIRP 63 (2017) 721 – 726
based on this model and section 4 comes up with a research
agenda, before the paper is concluded in section 5.
2. Changing the business model
We address the application of sustainability and
application of Industry 4.0 to the existing elements of the
business model, before reflecting on the business model as a
whole.
2.1. Applying sustainability to the supply chain
To deliver value proposed in a business model, a supply
chain is needed, transforming input into output with a higher
value. This paper therefore uses the process model by Holweg
[in 11] connecting input via transformation to output. We also
consider a feedback loop for various “Rs”, such as recycling,
repair, refurbishing, reclaim, and reverse logistics [12]. To
relate sustainability to the process, the three basic
sustainability production strategies are linked to this process
model, i.e. efficiency, sufficiency and consistency [2].
Furthermore, to “integrate environmental thinking into supply
chain management” [12] we connect the process model to the
natural environment by connecting the extraction of raw
materials, the created waste by the process model, the input of
energy and water, and regenerative processes to restore the
natural environment. Reducing input relates to sufficiency,
making better use of resources during the extraction,
transformation and transport of materials leads to efficiency,
and being able to feedback, i.e. recycle, output materials back
into the supply chain relates to consistency.
To measure the effect of sustainability strategies, the
environmental impact of products is measured through life-
cycle-assessments (LCA) by assessing material and energy
flows through life-cycle inventory analysis (LCI) and
measuring its impact through life-cycle impact analysis
(LCIA). [5] In this way, we can connect supply chain
management with sustainability strategies and measure the
environmental impact products have through LCA.
2.2. The application of Industry 4.0
Stock and Seliger [3] identified opportunities for
sustainable manufacturing, such as exploiting smart data use
for sustainable business models, new opportunities for closed-
loop product life-cycles, but did not translate these into a
research agenda or quantified benefits. [3] So while it is
believed that Industry 4.0 can result in sustainable
manufacturing and business models, it is not explicitly
explained how this is achieved.
With the ubiquitous data collection from raw-material to
the end-customer, value-creation does not only come forward
from selling the product itself, but also from exploiting the
available data [3].
The translation to a devoted sustainable strategy, however,
is often missing. The use of available data gathered
throughout a smart product’s lifecycle has not yet led to a
significant change in the offering of more sustainable
products. While the service that is offered continues to be
better, e.g. richer in content, faster, higher quality,
customized, more efficient and more accurate, Industry 4.0
does not explicitly tackle sustainability issues that
manufacturers face. Sustainability is often only implicitly
tackled when sustainable benefits also have an economical
benefit. For example, Apple’s turnover from product sales
remains similar while their turnover from services increased
from $3.5 billion to $6.3 billion quarterly in the period 2012
to 2016, but this does not explicitly mean that they have
become more sustainable [13].
2.3. Reflection on the business model
The sustainable business model is not finished. i.e. there is
no definitive design on how to run a company sustainable (see
e.g. the developments at Interface in [6, 8] where multiple
programs to become more sustainable are employed). And
while there are examples of sustainable businesses (e.g.
fairphone [14], tony chocolonely chocolate [15]) they only
have a very small market share of the market in which they
operate, serving a niche customer base that is prepared to pay
a premium for the product because they see value in the
products offered. Osterwalder [16] describes the value
proposition as “the reason why customers turn to one
company over another. It solves a customer problem or
satisfies a customer need” [16]. Most customers, however,
often do not see product durability as an environmental
concern and it is not expected that the small part of the
population that buys green will grow drastically in the
oncoming years [17, 18]. Therefore, creating a sustainable
value proposition that ensures a larger market share is
challenging.
In addition, despite the promising idea of extending the
product life cycle of products through offering better services
for the product, the average product life-cycle for consumer
goods has decayed drastically over the last century.
Innovation in combination with planned obsolescence has
drastically decreased development time of subsequent
products [7], e.g. in the United States an average smartphone
is now in use for 21 months [19].
Furthermore, while efforts are made to create circular
economies or implement cradle-to-cradle concepts in which
products are recycled and re-used such that no new materials
are needed in subsequent new products, it is argued that the
realization of so-called circular economies or cradle to cradle
thinking face immense theoretical and practical problems. [2]
Therefore, most business models do not offer a sustainable
value proposition with a supply chain operation that
effectively addresses the customer needs and that is
financially justifiable.
The strategy for the supply chain is clear: The most
straightforward way to reduce the need for new raw materials
and make them recoverable is through offering a durable
product that is designed for “recyclability, disassembly,
maintainability, refurbishability, and reusability” [20]. What
changes under Industry 4.0 is that products “know the
parameters within which they can function optimally and are
able to recognize signs of wear and tear throughout their life
cycle” [10].
 Johannes Cornelis de Man and Jan Ola Strandhagen / Procedia CIRP 63 (2017) 721 – 726 723

Supporting through industry 4.0 Customer interface

Optimizing Customer
supply chain data/support

Supply chain Value proposition

Energy/
Recovery
Water input

Raw
Transformati Customer
material Input Output
on use
extraction

Regenerative
Sufficiency Efficiency Consistency Waste
processes

Addressing sustainability

Financial justification of business model

Transport of materials, Application of

Information flows
goods or energy sustainability strategies

Fig. 1: Connecting sustainability and industry 4.0 to the business model, based on [2,8,10,16]

Products that will sustaining longer in time than substitute
products, however, pose challenges in relation to current
profitable business models:
x How are long-term relations between company, customer,
and product end-of-life managed? Companies do not only
have a short-term focus, but also have the possibility to
go bankrupt, unable to retain relationships with the
customer any further.
x Can a sustainable business model offer a value
proposition to compete with neoclassical business models
on a large scale? Is it just a change of mindset, is it a
possibility in the free market or does it need to be
regulated?
2.4. Adding industry 4.0 and sustainability to the business
model
financial justification remains a crucial element of the
business model.
The next sections discuss scenarios and a research agenda
to see how sustainability strategies can be incorporated by
using Industry 4.0 concepts.
3. Potential scenarios
This section contains three scenarios that counter strategies
for obsolescence: Design for limited repair, design for
functional enhancement through adding or upgrading product
futures, design for fashion, design aesthetics that lead to
reduced satisfaction, and limited functional life design. [7]
The first scenario draws upon the laptop business, the second
scenario discusses a business model for a serviced wardrobe
and the final scenario looks at kitchen appliances.

In figure 1 we add Industry 4.0 and sustainability to the
four elements in the business model: Sustainability strategies
are applied to the supply chain, sufficiency and consistency to
a specific step in the supply chain, while efficiency can be
used throughout the supply chain. The customer is both
connected digitally and physically by using the product.
Industry 4.0 connects the customer and supply chain digitally.
The value proposition remains central in which “a balance of
economic, ecological and social needs as such, values are
temporally and spatially determined” [8]. As in [16], the
3.1. The smart laptop
The current life-span of a laptop is around 3-5 years [21,
22] mainly due to planned obsolescence with limited repair
options and the need for upgrades only found in new product
versions, e.g. larger memory or storage capacity. Customers
constantly requalify their products, due to de-stabilization of
the laptop qualities and its specifications when related to new
products [23].
While the technological improvements over the last 25
years have been noticeable, the main use and features have
724 Johannes Cornelis de Man and Jan Ola Strandhagen / Procedia CIRP 63 (2017) 721 – 726
not changed drastically. Current laptops are often difficult to
repair due to a non-modular setup and it is questionable that
all current features of a laptop are necessary. With more
software products in the cloud, a screen and keyboard with an
internet connection and processor are enough for most tasks
undertaken on laptops: Writing, e-mail and internet.
A value proposition that offers a laptop with an internet
connection, cloud access and possibilities for upgrading
would greatly reduce the need to replace the whole laptop
every other year. Such laptops already partly exist in the form
of thin-clients. They, however, are not necessarily built as
sustainable products that are designed for recycling or
remanufacturing. Providing these thin-clients on a lease basis
could be a good example of providing a minimal physical
product with extensive services. It also provides an incentive
to not design the laptop for obsolescence
By collecting data from the laptop about the processor
temperature, functionality of the screen and performance of
the Wi-Fi system, failures can be predicted and prevented by
replacing and upgrading modules of the product, making the
laptop smart. In this way the consumer is digitally connected
to the supply chain, providing information about its use and
status of different modules, being able to provide more
accurate customer support.
Providing a smart laptop on a lease basis in the long-term
can lead to less need for raw materials (sufficiency), a more
efficiently run supply chain, and a situation in which the
customer is actively encouraged to return his product for
recycling or upgrading (consistency).
3.2. The serviced wardrobe
Clothes have become a consumer good with a decreasing
life cycle, both due to design for fashion and limited
functional life design. While the pressure to improve working
conditions in cheap-labor countries are rising [24] and the
environmental effects of global textile chains are well known
[25], clothing prices are still very low and it is fairly easy to
change your entire wardrobe season after season. A
sustainable model could be as such:
The value proposition would be to deliver the service of
clothing that have been produced environmentally friendly
and in social acceptable situation. To integrate the end-user
into the overall supply chain, he must be linked through an
online portal that collects information about the usage, wear
and tear of his clothes.
Financially this can be justified by a customer that pays a
fixed amount on a monthly basis and does not own the
clothes. The customer has both the right and the obligation to
send back his clothes once they are worn out and receives a
similar item based on current collections. Customers can also
exchange their clothes against a fee if they are not worn out
yet. If a product is worn out the customer is asked to identify
where the clothes have worn out and how often he/she used it.
Based on this feedback durability can be increased by
improving the life span of the clothes. Furthermore, a penalty
is incurred if a customer fails to send back his/her used
clothes after use, such that recycling is encouraged.
By charging monthly for high quality clothing, the idea is
that less needs to be produced (sufficiency). Through
penalizing the wasting of clothes, recycling (consistency) is
encouraged. A digital portal in which customer needs,
behavior and clothes life cycles are tracked helps with
improving design of clothes and efficiencies in the supply
chain.
3.3. The smart kitchen
Kitchens and kitchen equipment are still renovated and
renewed very much based on individual purchase,
maintenance and repair of each item. These are based on
inspections and repairs, maintenance visits and on the spot
identification of failures and needs for repair. Products
become obsolete due to a limited functional life, design for
limited repair and design aesthetics that lead to reduced
satisfaction with the customer.
A value proposition could be to offer modularized
products, interlinked through Internet of Things solutions,
surveilled by sensors and remote supervision to instigate more
efficient use, planned maintenance and longer lifetime
expectancy. For more than a decade Miele, among others, is
already exploring the possibilities of smart products, life
expectancy of 20 years and the design for easy repair. [26, 27]
Current maintenance procedures for seek and identification
of problems followed by bringing right components for repair
can be avoided and be replaced by smart maintenance and
repair solutions. Modularized items with interchangeable and
upgradable controlling units allows renovations with reduced
removal and disposal of material. The smart product also
generates the possibility for the customer to see the status and
energy efficiency of the product they are using.
Such solutions require more long term commitments and
wider range products, moving from products only to product
with services or even pure service business models in which
kitchen appliances are leased.
A financial justification could be done through service
contracting in which the customer pays for the monitoring,
required maintenance services and recycling of items that
break down.
An appliance that is a result of a more long term
relationship will contribute to sufficiency. Furthermore,
through monitoring of the system, the appliance could be run
more efficiently through remote updating of the firmware.
Preventive maintenance and end-of-life monitoring enables
for efficient and consistent repair and recycling planning.
4. A research agenda
The sustainable business model does exist, but is not yet
able to offer a value proposition to larger customer segments.
What is present is an increase in services offered concurrently
with sold physical products, which can be supported by the
promises of Industry 4.0. This research agenda proposes
research topics for the four elements of the business model,
i.e. value proposition, supply chain, customer and financial
justification. Each section will reflect on the current state,
relate this to Industry 4.0 and then propose research topics.
 Johannes Cornelis de Man and Jan Ola Strandhagen / Procedia CIRP 63 (2017) 721 – 726
4.1. Delivering a value proposition
The value proposition that sustainable products offer must
be more than just being green in a market were substitutes are
easily available [28]. Bocken et al. [29] address that value
propositions need to address more stakeholders than the
customer only. In addition, a value proposition not only must
address the value captured, but also the value destroyed, value
missed and value opportunities. [29]
On the other hand, Industry 4.0 will further support the
mass customization of products and will create value through
new services that can be offered through algorithms that
process big data collected from products [10].
In this paper we discussed the possibilities of products with
a long life span in which the customer and manufacturer have
a long-term relationship and the manufacturer services the
product. In current market conditions, these offered products
need to stand the test of time while competitors are free to
innovate and introduce new products at will. The freedom as a
customer to choose for a substitute is easily made, so a
product that is designed for environment faces competitive
forces. This holds even more in an Industry 4.0 world. If
customized smart products can be delivered with customized
services within a short lead time, product substitution could
become even more attractive.
Under Industry 4.0, optimized decision-taking is key [10].
The focus of this optimization can have very different
outcomes under various value propositions. Depending on the
value proposition focus, i.e. included stakeholders and
inclusion of value destroyed, the design choices may differ
between design for environment and design for obsolescence.
Two research topics are of interest:
x Incorporating the elements of Industry 4.0 into theory
(e.g. [8, 28, 29]) about developing sustainable value
propositions.
x Research on how Industry 4.0 will change the
competition between non-sustainable and sustainable
products.
4.2. Managing the supply chain
It is the design of the supply chain that incorporates
efficiency, sufficiency and consistency strategies that need to
lead to:
x Products which are less harmful to the environment than
current alternatives.
x Account for the depletion of non-renewable resources.
x Reverse logistics of materials and products in the supply
chain.
This should lead to Industry 4.0 solutions that support
these developments. Green design and operations have been
thoroughly researched, addressing design for environment,
remanufacturing, reverse logistics, network design and waste
management. [12] The smart component of Industry 4.0
makes products “uniquely identifiable” and “makes the
increasing complexity of manufacturing processes
manageable” [10]. The information collected from products,
logistic operations and manufacturing machines becomes
readily available, integrating the physical and digital world.
725
This is combined with autonomous acting products,
production cells and transport. [3, 10]
Both empirical research as mathematical models have been
developed for all sustainability strategies [12]. The impact of
the smart product has not been determined. A proposition for
research is as follows:
x The impact of smart factories and products on supply
chain network design to facilitate reverse logistics.
x The application of smart factories to facilitate
remanufacturing and recycling practices and a reduction
in need for non-renewable resources.
x The use of smart products for production planning and
control in a reverse logistics based supply chain.
4.3. The customer
Customer loyalty is a basis to create a sustainable
competitive advantage [30]. Customers are, however, not
expected to become much more environmentally focused and
environmental attributes do not play a major role in product
selection now [7], with psychological obsolescence playing a
large role in new product purchasing [23].
The channels through which the customer is reached and
the way customer relations are managed change under
Industry 4.0. The value proposition is not only offered
physically. The customer is constantly in contact with the
manufacturer through data collection and connectivity of its
device and this gives the opportunity for tailored services.
[10] This could mean that the customer could become part of
the value creation or could become a co-producer, in which
the customer might take over responsibilities [8]
Proposed research topics:
x The creation of sustainable awareness of customers
through Industry 4.0 horizontal supply chain integration.
x Achieving customer loyalty and satisfaction for
sustainable Industry 4.0 products.
x Overcoming psychological obsolescence through
Industry 4.0
x Addressing the impact of smart products on managing
customer channels and relationships.
4.4. Financial justification
The benefit of Industry 4.0 listed is “the reduction of
internal operating costs through digital end-to-end
integration” [10]. Whether these costs weigh against the
benefits must be researched. The costs of Industry 4.0
solutions to support customer services, supply chain
optimization and the facilitation of sustainable practices of
remanufacturing and recycling are currently not mapped.
Furthermore, the financial model that is now proposed
throughout the paper is based on a product as a service. This
means that subscription fees for products instead of or next to
fixed prices will be the revenue source. Other revenue streams
might be considered, shifting from “price-per-unit” to pricing
the “job-to-be-done” [8].
We propose the following research topics:
x Cost-benefit analysis of Industry 4.0 solutions that
support a sustainable supply chain.
726 Johannes Cornelis de Man and Jan Ola Strandhagen / Procedia CIRP 63 (2017) 721 – 726
x Research into the potential revenue models for Industry
4.0 supported sustainable products.
5. Conclusion
In this paper, we started by describing the development of
sustainable business models. Through describing scenarios in
which service-based business models start to co-exist next to
traditional business models, we introduced a sustainable
business model in the Industry 4.0 world. We demonstrated
the potential of Industry 4.0 sustainable business models with
several scenarios. This resulted in a research agenda of topics
to develop sustainable business models further.
The challenges of sustainable business models in a design
for obsolescence world have been discussed through the
paper, but the potential of enabling sustainable products exists
in the Industry 4.0 world. The question whether this will lead
to a market shift to sustainable products depends on how well
Industry 4.0 can support sustainable value propositions that
lead to more sustainable supply chains. This can be assessed
through methods such as LCA which must be performed
before introducing a product as sustainable.
We must not forget that Industry 4.0 has been introduced
to enable high-tech competitive advantage. It is not the pivotal
turning point that embraces sustainable business development.
Industry 4.0 could be an enabler to sustainable business
models, but it can also be an inhibiter by further exploiting the
possibilities of neo-classical business models.
This paper also addressed that responsibilities for
companies could change, making them responsible for their
whole supply chain on which they collect data. These
responsibilities are now voluntary and especially in markets
with high competition on costs, these processes might be too
expensive. The governmental influence has not been
discussed in this paper, but the laws that regulate business do
affect how business is performed, making it hard to compete
as a sustainable producer on a large scale.
Acknowledgements
This research has been carried out as part of the
Manufacturing Network 4.0 project, as funded by the
Norwegian Research Council’s BIA program. The authors
wish to thank the project partners for facilitating this work.
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