Environmental sustainability and resource efficiency are of enormous importance in today’s world. Industries are tasked to adopt more sustainable practices that have a lower environmental impact as the world confronts increasing environmental challenges and resource scarcity. Industrial systems are being redefined in the context of sustainability as the constraints of the traditional linear model of take-make-waste become evident. In this chapter, the authors demonstrate the potential to apply modular design principles to Product Lifecycle Management (PLM) systems to enhance circular-economy practices and improve environmental performance. Although the concept of sustainability is increasingly gaining interest, the majority of current industrial approaches remain resource-based, highlighting a significant gap in implementing modularity to achieve a circular production process and a longer product life cycle. The key point of the chapter is to examine how modular product systems can improve resource efficiency, reusability, and digital traceability across production and post-use stages, using a non-empirical, qualitative methodology centred on theoretical synthesis. The discussion indicates that modular circular PLM, enabled by IoT and AI-based monitoring, promotes product longevity, repair, and remanufacturing, as well as a smaller environmental footprint. The chapter concludes that modularity is a viable enabling factor of circular transformation because it connects design flexibility to sustainable lifecycle management. It suggests closer cooperation among industry, policymakers, and research institutions to develop standards, digital infrastructure, and incentive systems to accelerate the shift to modular circular manufacturing systems.