Digital transformation as the key enabler of circular economy: Role of BFSI sector

We all know that our global economy is growing, reaching an unprecedented $94 trillion in 2021 – with rising population, urbanization and living standards. Our challenge is to keep up this momentum in a way that works for people and the planet. The damage caused by the rampant and mindless proliferation of businesses is well known by now. Responsible as well as progressive stakeholders, particularly those from the corporate sector, are addressing this problem statement on priority as part of sustainability focus. Under this context, the concept of circular economy is further picking pace.

Creating a circular economy is the business opportunity of our time. It strengthens local economies in a socially-inclusive way, creating far more jobs than taking the traditional linear approach to waste. Enhancing circularity is an efficient lever to help society reach net-zero and by bringing our economy more into line with the Earth’s boundaries circularity is also clearly nature-positive. Adopting circular economy is estimated to unlock about $4.5 trillion of value by 2030.

The general prevailing perception is that circular economy is mainly relevant to conventional industries such as manufacturing and chemicals. However services sectors such as BFSI too have a significant role to contribute and the role of digital transformation enabling technologies comes into prominence on this backdrop.

The fundamental and critical enablement provided by digital technologies is that they help transform the age-old physical processes and elements into digital models or avatars. The most imminent benefit arising out of it is by way of reduced carbon emissions by outdoing as many physical touchpoints as possible while enhancing the end-user experience. From a BFSI industry perspective, this acts as a savior as otherwise the industry will continue to reel from ongoing climate change risks aspects.

In line with this, The United Nations Environment Programme has laid out guidelines under the ambit of Six Principles for Responsible Banking 2019. The Charter calls for outlining circular economy in the BFSI sector by way of diligently pursuing six aspects namely aligning business objectives to sustainability, impact and target setting on people as well as environment, including clients and customers in sustainability endeavours, involving stakeholders to achieve immediate communities served, committing to sustainability through a strong organizational level culture & governance and lastly adhering to highest order of transparency & accountability while disclosing impact to environment due to respective business.

All of the above can be comprehensively addressed by embracing digital transformation across the business value chain spectrum. For instance, digital technologies can help integrate all value chain partners involved in final delivery of services to end-user and thereby enable a standard as well as uniform adherence to laid-out sustainability objectives. Furthermore, digital technologies

can also help derive deep business intelligence through use of data analytics which in turn can help stakeholders proactively plan and prepare to take appropriate business decisions.

Coming back to the aspect of digital technologies enabling BFSI players to do away with as many physical touch points as possible, the eventual benefit is in form of course correcting the impact to environment. With BFSI services literally being accessible directly on the handheld or computing device of any end-user, the new-age operational model does away with the need to have physical branches and corresponding natural resources, thereby helping the cause of carbon emission reduction. Moreover migration to a digital ecosystem also does way with the need to maintain physical hard copies of transaction records, Related to this is the proliferation of cloud services that helps to optimize and channelize the right use of IT infrastructure.

The recent times have also witnessed uptake in use of advanced concepts such as digital engineering and quality engineering that help enhance the business excellence quotients and overall dynamics involved in delivery of BFSI services.

Overall, these are early days for BFSI players to leverage digital transformation to the fullest in- order to be relevant for a circular economy ecosystem. However it will be these proactive steps that can help BFSI sector play its part towards a meaningful contribution to the sustainability cause of the world.

The article has been written by Saifudeen Khan, Delivery Manager - Digital Engineering, Zuci Systems