Digital Economy and Sustainability: History
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Albérico Travassos Rosário
,
Joana Carmo Dias

The digital economy is defined as the global network of economic activities, professional interactions, and commercial exchanges facilitated by information and communication technologies (ICT). It indicates the world’s transition to the fourth industrial revolution. Technologies such as big data and analytics, artificial intelligence, machine learning, cloud computing, and virtual reality are changing the business landscape. The technologies that characterize the digital economy contribute to sustainable development, providing innovations that help improve people’s standard of living and providing advanced techniques to protect the planet, ensuring organizational profitability.

  • digital economy
  • sustainability
  • digital technologies
  • environmental sustainability
  • natural resources

1. Introduction

In recent years, the rapid evolution of the digital economy has been facilitated by emerging disruptive technologies that have transformed business practices and consumption. These innovations changed technological, economic, and sociocultural phenomena, thus transforming conventional forms of commercial exchange. According to Pan et al. [1], the origin of the term “digital economy” dates back to the 1990s and refers to a form of economy originating from networked intelligence. However, the concept was officially recognized at the Hangzhou Summit of G20 leaders in 2016. Information technology is the core of the digital economy, while a modern network functions as the operator [1]. Thus, the digital economy is defined as the global network of economic activities, professional interactions, and commercial exchanges facilitated by information and communication technologies (ICT). It indicates the world’s transition to the fourth industrial revolution. Technologies such as big data and analytics, artificial intelligence, machine learning, cloud computing, and virtual reality are changing the business landscape [2]. For example, these technologies require companies to modify their business models to accommodate the innovations. As a result, many markets have been disrupted, traditional businesses are under enormous pressure, and consumer behaviors and expectations have changed. Companies in the digital economy are restructuring their marketing strategies and means of communication and consumer connection. Thus, digital technology creates opportunities for companies to improve efficiency and performance.

Conversations about the digital economy are often characterized by two main issues: the potential of ICTs and the impact on sustainability. Sustainable development is concerned with improving human well-being and is measured through crucial indicators such as satisfaction of needs, respect for human rights, security, social relations, and freedom of choice [3]. The technologies that characterize the digital economy contribute to sustainable development, providing innovations that help improve people’s standard of living and providing advanced techniques to protect the planet, ensuring organizational profitability. In this case, ICT is integrated into the three pillars of sustainability—environmental, social, and economic [4]. However, the positive results of the digital revolution taking hold of global economies are associated with multiple sustainability concerns. While technology and the internet are a huge boost to sustainable development, they raise issues related to consumer protection, invasion of privacy, and cybersecurity issues [5]. As a result, most companies struggle to balance exploiting opportunities in the digital economy to support sustainable development while mitigating potential challenges that can undermine efforts.

The intersection of the digital economy and sustainability creates challenges and opportunities for entrepreneurs, policymakers, and society. For example, the digital economy promotes sustainable development through innovations such as green technologies and circular economy models [6]. It also offers opportunities that expand digital inclusion and empowerment. However, the rapid growth of the digital economy also presents several challenges, including high energy consumption, e-waste, and pollution. In recent years, there has also been an increase in cybersecurity issues, including consumer concerns about data privacy and security and cyberattacks [7]. Therefore, a comprehensive literature review is needed to assess the relationship between the digital economy and sustainability to create appropriate strategies that address the challenges, while enabling companies to seize the opportunities.

2. Conceptualization of the Digital Economy

The term “digital economy” refers to economic activities and transactions using digital technologies such as smartphones, the internet, computers, and tablets. Although the concept has become increasingly popular in the 2010s, its origin dates back to the creation of the internet and the emergence of personal computers in the 1980s [8]. The invention of the world wide web and of smartphones in the late 1980s and 1990s were important milestones in developing the digital economy. These technologies have continuously digitized and transformed the environment and business practices, causing significant transformations [9][10][11].
Several distinctive features characterize the digital economy and differentiate it from traditional economies. First, the digital economy has high connectivity and interdependence through networks and digital platforms [12]. For example, businesses and consumers can connect in real time, regardless of geographic distance or time zone differences, through digital technologies such as the internet and social media platforms. According to Rappitsch [13], 95% of the global population live in areas covered by a mobile cellular network. Therefore, the Internet has a high reach, which allows people from different regions to have access to content published online [14]. Second, the digital economy is characterized by the effective use of data [15]. Data technologies such as big data, analytics, and artificial intelligence fuel the growth of the digital economy. These innovations help generate and collect unprecedented data, increasing companies’ access to insights into consumer behavior, market trends, and other business-critical information [16]. Third, the digital economy is characterized by disruptive technologies that facilitate rapid innovation and disruption. As a result, companies can produce and launch new products, services, and business models at a pace previously unimaginable.
The digital economy presents several benefits that can contribute to economic growth, innovation, and development. For example, it facilitates the creation and dissemination of knowledge [17]. As a result, it enabled new forms of collaboration and learning and new products and services, and expanded companies’ access to new markets and opportunities. The digital economy is also associated with greater efficiency and productivity [18][19]. Companies are leveraging digital technologies to streamline their operations, improve the accuracy and speed of decision making, and automate repetitive tasks. For example, advanced communication channels facilitate quick communication and collaboration between business leaders, thus ensuring easy task execution and timely decision making [20]. Finally, the digital economy has created new jobs and employment opportunities, especially in technology development, digital marketing, and e-commerce.

3. Conceptualization of the Sustainability

The concept of sustainability has become increasingly popular in recent decades due to increased awareness and concerns about environmental issues such as climate change, biodiversity loss and social inequality. It was further popularized by the United Nations 2030 Agenda for Sustainable Development, which indicates that achieving sustainable development requires consideration of three main dimensions: environmental, social, and economic [21]. Sustainable development is concerned with ensuring organizational financial performance while protecting people and the planet. In this case, sustainability can be defined as the capacity of a system to last a long time without degrading or depleting the resources on which it depends [21][22]. Thus, sustainability is concerned with meeting the needs of the current generation without compromising the ability of future generations to meet their own needs [23]. According to this concept, companies should adopt sustainable business models that exploit current resources using approaches that do not threaten the health and well-being of present and future generations [24]. As a result, global leaders and policymakers consider sustainability a fundamental principle underpinning a range of policies and governance structures at the local, national, and international levels.
Sustainability can be defined from three interrelated perspectives: environmental, social, and economic. Environmental sustainability concerns preserving and improving natural resources, including water, biodiversity, air, and soil [25]. Therefore, environmental sustainability includes strategies that help ensure that human activities do not exceed the Earth’s capacity to support life and protect the resilience and adaptability of ecosystems. This dimension of sustainability focuses on maintaining an ecological balance in the planet’s natural environment, conserving natural resources [26]. Social sustainability is about improving the well-being of people and communities, addressing issues such as equity, social justice, human rights, and cultural diversity [27]. As a result, it promotes equal access to basic needs such as food, water, shelter, and health care. In this case, the social dimension of sustainable development prioritizes building resilient infrastructure and promoting sustainable and inclusive economic growth that ensures equity.
Furthermore, social sustainability ensures that all people can fully participate in decisions that affect their lives [28]. Finally, economic sustainability is concerned with wealth creation and resource allocation, focusing on long-term viability and stability. This dimension promotes sustainable economic activities that help companies achieve goals without depleting natural resources or harming social welfare [29]. These dimensions of sustainability are crucial to promoting and achieving sustainable development and eradicating poverty. However, achieving sustainability requires collaboration across all sectors of society, including government, business, civil society, and individuals [30]. It requires shifting towards more sustainable practices and behaviors and adopting innovative technologies and governance models that support sustainability.

4. The Relationship between Digital Economy and Sustainability

The concepts of digital economy and sustainability are closely linked. The digital economy is characterized by technologies that can help reduce carbon emissions and promote circular economies, thus supporting sustainability. Esses et al. [31] explain that strategies and solutions based on digital technology increase environmental sustainability through areas such as pollution control and sustainable urban development, transport, and production systems. Advanced technologies in the digital economy empower business leaders and policymakers to assess and monitor business activities and regulations to promote sustainable development [32][33]. For example, companies can use these technologies to monitor their carbon footprint and employ measures to reduce emissions.
Similarly, policymakers can use data collected and analyzed using digital technologies to establish legal frameworks that encourage rapid transition to sustainable business practices [21]. These cases indicate that sustainability can be achieved by adopting digital technologies that improve the sustainable exploitation of resources and allow the generation of renewable energy. For example, energy companies can integrate advanced innovations to build smart grid technologies that can help optimize electricity distribution, promote renewable energy generation, and reduce waste [34]. These instances show that the digital economy and sustainability are increasingly intertwined.
There are many ways in which the digital economy can enable sustainability. For example, resource efficiency is an essential principle of the digital economy. Companies are taking advantage of new digital technologies to deliver more value with less input, resulting in the efficient use of resources [35][36]. For example, innovative solutions in the digital economy can help reduce the use of natural resources and waste. Companies using internet of things (IoT) technology can access the real-time monitoring of energy usage [37]. Another way the digital economy supports sustainability is by promoting the circular economy. The circular economy model emphasizes the reuse and regeneration of materials and products to sustainably continue production [38][39]. It contributes to sustainability by closing and narrowing resource loops through durable product design, reuse, remanufacturing, repair, renovation, and recycling [40]. This means that the circular economy can reduce waste and pollution by always keeping products, components and materials at their highest value and usefulness. Digitizing the circular economy through innovative solutions helps to improve resource efficiency, product lifespan, customer relationships, and resilience [41]. For example, leveraging digital platforms such as social media and e-commerce sites can enable the sharing and exchange of products and resources. In this case, customers can sell or exchange a product they are not using, thus reducing waste, and promoting resource efficiency [42]. Likewise, companies can leverage these platforms to collect these products or materials that can be used to remanufacture other products or be refurbished or repaired for resale.
The digital economy creates new opportunities for economic growth while minimizing environmental impacts, thereby supporting sustainable development. For example, the digital economy is characterized by an increased development and adoption of renewable energy technologies, consequently minimizing dependence on fossil fuels, and reducing greenhouse gas emissions [43]. Likewise, digital technologies can enable the development of smart cities characterized by sustainable development practices, thus improving the quality of life of urban residents and communities. Finally, the digital economy promotes sustainable consumption [44]. Modern consumers have easy access to information about the environmental impacts of products and services [45]. For example, smart packaging uses QR codes that allow customers to scan and access more product information, including sourcing and production. This practice helps them make informed consumption or purchase decisions, especially for customers who value sustainability and ethical business practices [46]. Furthermore, digital technologies such as blockchain improve transparency and accountability in supply chains, promoting sustainable production and consumption patterns [47]. Therefore, digital technologies that facilitate the growth of the digital economy present several innovative solutions and technologies that can help achieve sustainability.

This entry is adapted from the peer-reviewed paper 10.3390/su151410902

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