Dematerialization refers to the shift from physical goods and processes toward digital or service-based equivalents, allowing economies to “do more with less” by reducing material and energy use. It is often linked with decoupling economic growth from resource consumption . In practice, dematerialization means replacing paper documents with online files, CDs with streaming, physical products with software/SaaS, and physical travel with virtual meetings – all reducing physical inputs. For example, a single smartphone has largely supplanted standalone devices like landlines, GPS units, cameras, and CDs . This shift can lower resource extraction, waste and emissions while enabling growth. The following sections examine dematerialization’s environmental, economic, technological, policy, and historical dimensions.
1. Environmental Impact
Dematerialization can significantly cut resource use and pollution by substituting virtual experiences for material products. Advanced economies show clear signs of “peak stuff,” where total consumption of materials has declined even as GDP grew. In the United States, use of timber, paper and many minerals peaked decades ago and has since fallen . For instance, U.S. paper and timber consumption peaked around 1990 and are now ~20–40% below those levels . This decline is largely due to digital replacements: e-mails and GPS maps have replaced printed memos and paper maps . Likewise, even cardboard packaging is about the same volume as 25 years ago, despite booming e-commerce; major firms are innovating lighter packaging to trim waste . Overall, McAfee et al. report that Americans today use “less of just about all the molecules that you build an economy out of” – less metals, fertilizer, water, and wood – than in the past .
Digital substitution also decarbonizes supply chains. UN analyses note that replacing physical goods and travel with digital alternatives (the “substitution effect”) enables GHG reductions in many industries . For example, streaming music and video avoids manufacturing CDs and DVDs, while teleconferencing cuts airplane trips. While streaming still consumes energy (data centers and networks), studies find its per-hour emissions are modest and falling rapidly due to efficiency gains . Remote working and online collaboration similarly eliminate commuting and business travel . As Ericsson researchers summarize, shifting to cloud services and digital products yields significant CO₂ reductions: “most enterprises are showing significant CO₂ reductions driven by dematerialization, such as selling digital products instead of physical ones, or moving applications to the cloud .”
In short, dematerialization can shrink humanity’s environmental footprint. By reducing demand for raw materials, transportation and energy, it conserves ecosystems and resources . (Rebound effects – e.g. increased consumption enabled by efficiency – remain a concern, but the net effect in advanced economies so far appears emissions-negative.) Even agricultural inputs have seen dematerialization: U.S. food production has increased while using less land, water and fertilizer than before . These trends suggest that digital economies can decouple growth from resource depletion, alleviating pressure on forests, mines and the climate .
2. Economic & Business Implications
Businesses are rapidly reaping the benefits of dematerialization. Digital offerings cost less to scale and often have higher margins, enabling new revenue models and efficiencies. For example, software formerly sold as boxed products is now delivered via subscriptions (SaaS) in the cloud, eliminating inventory and distribution costs. Media companies have likewise moved from selling CDs or DVDs to streaming services (Spotify, Netflix), gaining recurring revenue while cutting manufacturing overhead . The switch to digital products or services can significantly reduce material and logistics costs. As one analysis notes, replacing paper documents with online versions “consumes less resources but still increases value,” helping enterprises “create more with less” .
Surveys of industry leaders show that dematerialization correlates with stronger performance. In Ericsson’s “dematerialization front-runners,” companies reported higher profitability, greater agility and faster innovation than peers . Two-thirds of these companies expect to operate entirely remotely (no office) by 2030 – a radical form of dematerialization that slashes real-estate and commuting costs . Key business drivers of this trend are cloud computing and digital platforms: about 60% of decision-makers report that moving to cloud infrastructure, selling software-as-a-service, and using online training/documents are major contributors to dematerialization at their firms .
The economic upside is clear: companies save money and enter new markets. Digital goods have near-zero marginal cost and global reach. For instance, an e-book can serve millions of readers at essentially no extra print or shipping cost. Likewise, 3D printing and on-demand manufacturing can localize production, cutting inventory and transport expenses (Ericsson’s “BLISK” aerospace case showed 5G-enabled IoT cutting scrap in turbine blade production ). These cost savings often boost profits: nearly half of surveyed business leaders cite improved productivity and profitability as key benefits of dematerialization . In effect, “dematerialization is a target with concrete benefits” – it drives both growth and sustainability .
3. Technological Drivers
A suite of modern technologies is making dematerialization possible. Chief among them is cloud computing: by virtualizing servers and storage, companies can retire physical hardware and share digital infrastructure. This enables instant sharing of documents across devices, elastic scalability for businesses, and major savings in space and maintenance . Similarly, streaming platforms and high-speed internet have digitalized entertainment and publishing. Music, movies and books are now delivered as data streams, eliminating plastic media. Video conferencing software and VR/AR tools replace physical travel and in-person meetings, embedding interactions in bits instead of kilometers.
Other drivers include e-commerce and online services, which shift retail, banking and even education online. Buying a plane ticket or filing taxes via app removes paper forms and mail. Digital documentation – e-signatures, e-invoicing and electronic archives – vastly cut office paper: the EU, for example, mandates e-invoicing in public procurement, saving billions in processing costs. The earlier generation of information tech (smartphones) also bundled many devices into one, as noted, dissolving multiple product industries into software.
Looking ahead, additive manufacturing (3D printing) is poised to dematerialize production. On-demand printing of parts can reduce waste and avoid shipping components long distances. Internet of Things (IoT) sensors and AI analytics allow smart factories to optimize material use. In Ericsson’s research, new ICT tools like 5G networks already enable mining and manufacturing to slash scrap and rework . In short, every advance in digitization – from AI and blockchain to digital twins and automation – tends to replace a material process or product with a software-driven approach. These technologies collectively “enable enterprises to ‘create more with less’” by converting atoms into bits.
4. Policy & Sustainability Frameworks
Governments and international bodies are increasingly recognizing dematerialization as key to climate and sustainability goals. For example, the United Nations has launched initiatives emphasizing “digitalization for sustainability.” UN Environment Programme (UNEP) supports the Coalition for Digital Environmental Sustainability (CODES), founded in 2021, which mobilizes companies and policymakers to align digital innovation with environmental targets . UNEP notes that digital technologies can influence over 100 of the 169 SDG targets, but stresses that “setting the right enabling environment and incentives” is vital for green outcomes .
The European Union similarly embeds digital in its Green Deal. In 2021 the European Green Digital Coalition was formed (26 major tech CEOs) to harness the “emission-reducing potential of digital solutions” across industries . Its goal is to develop methodologies and recommendations so that ICT solutions (5G, AI, IoT) deliver net GHG savings in sectors like energy, transport, and manufacturing. Many national governments also pursue e-government and paperless policies to cut resource use: for instance, digital ID systems, electronic health records and online permitting have become standard in OECD countries, often driven by regulatory mandates.
In summary, dematerialization is now a policy focus within broader climate strategies. The link between digital and sustainable development is explicit in major platforms (UN SDGs, EU Digital Decade, national climate plans). Policymakers generally promote cloud/cloud-native tech, smart grids, telework incentives and circular-economy laws to support dematerialization. As UNEP concludes, we “cannot achieve the speed and scale of behavioural change needed for global sustainability without harnessing digital technologies” . These frameworks aim to ensure the twin green/digital transition proceeds in tandem.
5. Historical Trends & Future Outlook
Dematerialization has deep roots but has accelerated in the digital age. In the late 20th century, increased computerization and the internet began eroding the need for physical products. The mobile phone and personal computer fragmented roles of many single-use devices into software. In recent decades, as described above, OECD countries hit “peak stuff” for many commodities. For example, U.S. total energy consumption in 2018 was almost identical to 2007 levels, despite a much larger economy . This reflects a long trend: basic materials use and land clearing grew explosively in the Industrial Era, but have since plateaued or declined in rich nations .
Globally, dematerialization is still uneven. Developing countries continue to increase material consumption as they urbanize and industrialize . McAfee (2019) notes humanity has only recently “probably hit peak paper” worldwide around 2013 , and most non-US populations have not yet peaked their raw-material use. However, a key insight is that late-developing countries may leapfrog old technologies. They are installing fiber-optic networks instead of copper phone lines and adopting renewables instead of building new coal plants. This suggests they could follow a different, more digital-intensive growth path. As McAfee observes, countries like Nigeria will need new infrastructure for their growing cities, but won’t necessarily repeat the 20th-century model of mass automobile and coal use . In other words, future prosperity in the Global South could be less carbon- and resource-intensive than past patterns.
Looking ahead, dematerialization is expected to deepen. Emerging technologies (AI, robotics, advanced sensors, AR/VR) will virtualize more services and optimize material cycles. Telemedicine and online education will reduce healthcare and schooling’s physical footprint. Autonomous vehicles and smart logistics promise to reduce traffic and road miles. The circular economy concept, which emphasizes resource efficiency and reuse, will further reinforce dematerialization by designing products for longevity and recycling. Forecasts by industry leaders anticipate continuing declines in material intensity and carbon per unit of GDP. In a 2021 survey, 60–70% of executives believed moving to cloud, AI, and remote work will be essential for competitiveness by 2030 .
Case examples: The dematerialization of retail is striking: many storefronts have closed as online shopping and digital media rise. Entire industries have morphed – e.g. news media and encyclopedias became mostly online; photography went from film to digital cameras/smartphones. In manufacturing, pilots of digital twin technology allow firms to prototype products virtually before any physical materials are used. In agriculture, precision farming uses drones and AI to optimize inputs (see PrecisionAg), yielding more food on less land .
Outlook: Continued innovation is likely to push the frontier of dematerialization. By mid-21st century, one can imagine a largely virtualized economy: data-driven services replacing many commodities, energy derived increasingly from renewables, and most information exchange happening online. However, the transition will vary by region and sector. Sectors like fashion and construction still face material-heavy challenges (though 3D-printed clothes and buildings are emerging). Ultimately, the trend lines suggest that a “dematerialized future” – in which prosperity is based more on information and services than on mass-produced goods – is not only possible but already unfolding .
Sources: This overview synthesizes recent analyses (e.g. McAfee More from Less, UNCTAD digital economy reports, industry research) and industry case studies on dematerialization. It integrates data on material usage declines , business survey results , and policy initiatives to present a comprehensive picture. All quotes and data are cited from open sources as indicated.
