One part of making the Circular Economy successful is incentivising new behaviours, like sustainable resource production and consumption, product repurposing and recycling. Another part is assuring that the repurposed or recycled goods people and organisations buy aren’t made from virgin materials. Without that trust and transparency, we’re likely to revert to our current linear economy.
Blockchain has the potential to build that trust.
Shaping the Circular Economy with blockchain
Blockchain isn’t as complex as it may seem. Put simply, blockchain is a distributed ledger that removes the need for a trusted third-party to audit transactions. The technology stores information on transactions in real time in ‘blocks’ which are cryptographically linked to produce an immutable record of activity.
Blockchain’s design supports two main uses for the Circular Economy – proving product origins and incentivising positive behavioural change.
Proving product origins with blockchain
The Circular Economy promotes sustainable resource management, waste reduction and the repurposing and recycling of resources. To install these practices and behaviours, there must be transparency to drive trust in the products we buy and who we buy them from. Greater transparency of product origins will help drive positive consumption and force companies to change what and how they procure resources.
Blockchain is a foundational technology for the development of transparent digital supply chains, offering an immutable record of transactions that verifies the origin of products. Provenance, a blockchain start-up, has already tested the technology within the fishing industry, using it to track tuna from line to store and authenticating the fisherman with verified social sustainability claims.
Incentivising positive behaviour with blockchain
Encouraging behaviour change without a clear and immediate incentive can be difficult. That’s no different when making the cultural changes needed to turn society and business towards a Circular Economy. Rewarding circular purchases, consumption or disposal will add motivation beyond the somewhat abstract need to protect our planet.
Blockchain can tokenise natural resources, giving them a unique digital identity (similar to a digital coin) that people can trade. This makes the value of resources more apparent, facilitating a new system of pricing and trading natural resources, and incentivising people to adopt Circular behaviours. The recycling industry is already trialling this – Plastic Bank has developed a solution that gives people digital tokens for plastics, which they can then use in partner stores.
The limits of blockchain
Blockchain stores data, for example information from IoT devices or RFID tags. This link to the physical world creates challenges, particularly around data quality, that organisations must address – garbage in, garbage out. Meanwhile, poor scalability and interoperability with existing systems have raised questions of its viability, meaning many of the examples above are in the pilot phase. But things are changing.
Maersk and IBM have co-developed TradeLens, a Global Supply Chain solution built on blockchain, which already touts 10 million supply chain events a week. Alongside this, several start-ups are developing the next generation of scalable and interoperable public blockchains, creating the opportunity for more open-source solutions and driving further advancements in the space.
Now is the time to experiment with blockchain
Blockchain could turn the Circular Economy into a developed ecosystem by offering product assurance and active incentivisation. The immaturity of the technology means we’re currently in the testing phase, but once large-scale pilots prove the value of blockchain, mass adoption will follow.
Organisations have an opportunity to explore and test the technology through proof of concepts and pilots today. With the enormous potential of blockchain, and the technology now advancing quickly, there has never been a better time to start experimenting with it.
