Closing the Supply Chain Circularity Gap with Blockchain

A circular economy, in the words of the European Parliament, is “a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling of products or materials as-long-as possible”.

Despite demonstrable proof that circular economies are the way forward, we are a long way off from realizing this goal. According to a recent study published by the International Institute for Sustainable Development, a mere 9.1 percent of our global economy is circular, resulting in an immense circularity gap.

Circular economies not only create a sustainable world, but also a more profitable global industry by reducing costs and eliminating wastages. A report published by the World Economic Forum estimates that circular economy adoption in India will bring an annual benefit to a tune of Rs 40 lakh crore ($624 billion) in 2050 and reduce GHG emissions by 44%.

Infact, at a much larger scale, the global circular economy opportunity by 2030 is expected to reach an astonishing $4.5trillion. Considering only 8.6% of materials are currently being recycled, the future can truly be limitless.

Furthermore, circular economies could reduce the cost of remanufacturing mobile devices upto 50%. From a livelihood perspective, circular economies are expected to generate 65 million new low-carbon jobs by 2030 with the creation of new business services such as reverse logistics, collection of used items and recycling services.

A successful circular economy initiative requires a multidisciplinary approach, encompassing solutions that focus on end-to-end visibility, life-cycle assessment of products and First Time Right (FTR) manufacturing. Achieving these key pillars requires the utilization of technologies such as IoT, blockchain and RFID to assist in tracking resources and monitoring waste.

As with all progressive steps, creating a circular economy, too, comes with its own set of obstacles.

• Circular Design: The biggest difficulty in achieving circular economics is fully adhering to circular designs; this includes the incorporation of easy-to-recycle materials, digital PLMs and repairable designs.
• Tracking: Having limited end-to-end traceability for the product up to is EoL/EoSL (End of Life/End of Second Life) can be challenging when trying to achieve sustainability.
• Scalability: Due to limited visibility, the product availability becomes unclear, leading to limited investments in scaling.
• EoL Management: The majority of current EoL decisions are taken manually and without the use of data, creating issues with recycling, refurbishing and reusing.
• Incentivization: Establishing circular economies requires organizations to embrace circular behaviors. With problems in providing the necessary incentives, sustainable circular economics cannot be achieved.

Blockchain is a distributed ledger that removes unnecessary third parties and stores real-time information of transactions in ‘blocks’, creating an immutable, cryptographically linked record of activities. To put it more clearly, blockchain technology can tokenize assets and give them unique digital identities to encourage data sharing and incentivize the stakeholders to adopt circular behaviors. With closed-loop recyclability and refurbish-ability indexes, transparency can be achieved across the industry.

Let us examine two use cases for blockchain in closing the circularity gap. While EVs are a greener alternative to automobiles powered by fossil fuels, more than half of EV batteries often end up in landfills as waste - their full potential unrealized. This is due to poor tracking mechanisms for batteries up to their EoL or EoSL. Blockchain implementation can increase transparency in the product lifecycle and incentivize interventions at the EoL stage for refurbishing, second life usage, and materials recycling. Similarly, leveraging blockchain for establishing parts provenance in Heavy Vehicle Parts (HVPs) will ease regulatory compliance, increase identification and verifiability, and result in significant cost savings for the manufacturer.

With real-time data sharing capabilities provided by blockchain, unparalleled visibility, instant reporting and invaluable insights can be leveraged to encourage circular behaviors. Blockchain represents a key technology solution towards creating sustainable, circular and transparent supply chains for industries.