Role of Digital Technology in Manufacturers’ Transition to Circular Economy Through Outcome-as-a-Service Model: A Sustainability Transition Perspective

The manufacturing sector is under increasing pressure to adopt sustainable practices, particularly by transitioning to circular economy (CE) models. Digital technologies are widely recognized as critical enablers of this transition, yet their role in facilitating outcome-as-a-service (OaaS) models and embedding CE principles remains underexplored. This study investigates how digital technologies drive CE transitions through OaaS models, drawing on the Multi-Level Perspective (MLP) from Sustainability Transition Theory. Using three illustrative cases—Rolls-Royce engines, Signify lighting systems and Siemens Insights Hub—we identify three core mechanisms: Digital Enablement (dynamic technological capabilities), Service Transformation (outcome-based business models), and Circular Value Creation (systematic CE implementation). These mechanisms follow a sequential pathway for establishing digital capabilities, transforming business models, and embedding circular practices. Originating at the niche level, where innovations emerge, these mechanisms interact with landscape (regulatory and market pressures) and regime (established practices) levels, creating reinforcing dynamics that collectively drive systemic change by linking niche-level innovations with regime-level adaptations under landscape pressures. The study contributes an integrated framework that outlines transition pathways from digital foundations through service transformation to CE implementation. By advancing theoretical insights into digitally enabled sustainability transitions and addressing practical challenges, this research provides actionable guidance for manufacturers navigating the complexities of CE transformation.