The vision of the circular economy, which inspires businesses, consumers, and environmentalists - is standing on the principle of the 3-R approach, namely:
Reduce – minimize the use of raw materials. By reducing the quantity of raw materials needed, the world economy can save billions of dollars in a year.
Reuse – maximizing the reuse of the products in different shapes and forms. Each year in the US, more than 100 million dollars’ worth of medicine is destroyed, while more than 32 million Americans are not able to pay for the medicines they need.
Recycle – a series of steps that takes used or reused materials, remanufactures them to sell as a new product. A study by the World Economic Forum says, more than 66% of consumers would pay more for sustainable products.
Eliminating waste in the value chain and reversing the flow of materials into the ecosystem are the potential areas of interest that can be instrumental in moving from a linear to a circular economy. To move towards the circular economy, we need to be cognizant of not only the possibilities that the latest technologies bring to the table, but also the challenges that need to be solved.
Circular Economy and Blockchain
The core principle of circular economy is to keep products and materials in use. This is only achievable by designing a strong reusable asset management system that transforms waste into a new resource for an upstream or downstream process.
A supply-chain system that caters to the following requirements acts as an enabler to resolve the core issues of the circular economy, namely:
- bringing transparency in reusable asset management.
- bringing together the different system of records on the same platform.
- enabling industry bodies to join a consortium for better collaboration.
- speeding up local or cross-border transactions.
- being economically viable.
Our finding suggests that technologies introduced by Industry 4.0 and powered by blockchain can serve a pivotal role in building a system of trust which thrives on collaboration, fundamentally in distributed industries. Greater transparency in asset flow gives more comfort to the consumer and positively motivates the consumption pattern. For example, tracking the tea planter of the Darjeeling tea from your cup to the store to the tea garden, authenticated by digital identity, verifies the social sustainability claims. blockchain’s fundamental principle of immutability of records provides safety and security to the transaction and it serves as an assurance of truth, removes the need for middlemen in the business, and, hence, reduces the overhead.
One of the major barriers to the adoption of circular economy principles are cultural barriers, like:
- Lack of knowledge and interest, leading to a hesitant consumer base.
- Ease of operating in the current model of the linear economy.
- Lack of collaboration between various industries and business functions creating siloed working conditions.
To tackle such issues, systems thinking at the legislative level is needed. Various incentivizing mechanisms are to be launched to overhaul the value-chain engagement at the consumer and producer level. Governments can provide targeted price incentives. This can encourage manufacturers to opt for recycled materials and consumers to choose sustainable products.
A Blockchain-based supply-chain system can be a boon as it provides endless capabilities on the incentivizing mechanism. A few of the possibilities are discussed below:
- Incentivize the consumer: Consumers can be incentivized with a token that can be bartered across the product manufacturers’ ecosystem - a reimagined financial system. For example, Plastic bank has developed a solution that intends to minimize ocean plastic while improving the lives of those who help to collect it by providing a token that can be used in the ecosystem.
- Incentivize the producer: Consumers can be empowered to incentivize the producer, who may be somewhere across the globe. Suppose, on a cold wintry morning when you wrap yourself up in a warm pashmina, you may wish to acknowledge the craftsmanship of the weaver by donating a digital token that can be utilized as a means of trading in a defined ecosystem.
Another classic and noble example of incentivization is envisioned at Remedichain.org – a blockchain based platform, uses surplus medicine as a resource that is harvested to create medication access to vulnerable patients. The platform incentivizes the donation and also makes sure disposal of surplus medication.
Applying Blockchain as a Technology Enabler in a Real-Life Scenario
As a case in point, if we take Tokyo Olympics Medal projects as an example of a circular economy, it can be designed to serve in an effective manner using Blockchain as an underlying technology platform. Under the theme of “be better, together – for the planet and the people”, the Tokyo Olympics have set the standards of sustainability and eco-friendly games. It was a two-year national effort to collect the recycled material. Up to 90% of the Japanese cities, towns, and villages participated by setting up the donation pick-up points where old cell phones were collected.
After the collection of used phones, the process involved dismantling, extracting, smelting, and refining. Finally, the material was molded to give the shape of the medal.
The following key areas determine the effectiveness of such a business-critical process:
- Transparency of the materials that move across various storage and warehouses for the disassembly and reassembly of operations.
- Transparency about the physical condition of the raw materials that move across facilities.
- Timely involvement of governmental and various industry bodies to ascertain that the regulatory requirements of hazardous waste management are met.
All these participants potentially create a network, or networks, to create the minimum viable ecosystem, which is responsible, agile, and trustworthy. A depiction of such an ecosystem is envisioned below.