Blockchain, Traceability and Circular Economy
What is Blockchain?
Blockchain (DLT) has emerged as a significant game-changer in the financial industry. Additionally, blockchain has demonstrated robust supply chain management applications, highlighting blockchain traceability. In essence, the blockchain is a digital system that securely, transparently, and verifiably stores the data of many parties.
Most of the discussions surrounding traceability in blockchain technology would refer to supply chain management contexts. By integrating traceability into blockchain technology, enterprise blockchain technology has the potential to revolutionize traditional supply chain management. The terms transparency, traceability, and traceability are used to describe the three different applications of blockchain in supply chain management. Through the mapping and visualization of corporate supply chains, blockchain can be used to increase operational efficiency. Another significant element underscoring the requirement for blockchain traceability is the steadily rising demand for product-sourcing data. Blockchain technology may enable businesses to gain a deeper understanding of supply chain processes while ensuring that consumers are exposed to accurate, unchangeable, and verifiable data.
Circular Economy
The basic idea of the circular economy lies in the aim of achieving more by using less, which refers to the way of keeping resources and products at as high value and long as possible by extending their lifetime for function longer. It is a fundamental system transformation that makes systems more robust and regenerative by severing the link between economic activity and the extraction of resources from the earth's finite bank.
"The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products as long as possible".
(European Parliament, 2009)
The principles of circular economy are (1) Slow the material loop; (2) Narrow the material loop; (3) Close the material loop.
Traceability is the key.
One important aspect of the circular economy is traceability—identifying materials throughout their life cycle. This is where blockchain and circular economy meet. A blockchain can also be used to handle any payments for the transfer of the materials as well as the record of the location, quality, ownership, and accountability. It can give that actor the knowledge necessary to maintain the maximum value attainable at each stage of a product's life.Supply chains can identify inefficiencies, sort production or post-consumer waste, and reduce financial and reputational risks with the use of traceability. Furthermore, it guarantees trust and adherence.
“In a circular economy we need to know where a material comes from.
What is in it? What happens to it? You can’t really close the loop without knowing those things."
Ken Webster, Ellen MacArthur Foundation's former head of innovation.
Additionally, blockchain offers the chance to future-proof the process of recoverability. Information on the materials can be stored, even for parts that are not currently economically viable for recovery, opening the door to reuse or recycling once methods are established. In other words, it is similar to the "product passport" strategy that the EU is building on. Businesses are more likely to take action to lessen their impact from promoting upstream innovation to remove waste if the materials, components, or substances that make up a finished product are fully transparent.
Where is the Blockchain in Circular Economy now?
Agriculture
Various pain issues in the agriculture industry can be effectively addressed by traceability in blockchain technology. The agricultural industry could benefit from traceability by increasing crop production efficiency and managing agricultural finance more effectively. For instance, the use of IoT sensors and blockchain technology together could aid in agriculture field monitoring. Blockchain could assist in recording the information gathered for various crop fields factors such as soil moisture, temperature, light, humidity, and ph. Additionally, using predictive models and machine learning algorithms could help farmers make wise agricultural decisions. Additionally, blockchain traceability has advantages for the administration of agricultural funding.
Food
Consumers' expectations for the quality of their food are continually changing as each day goes by. Customers want to know where their food comes from and what manufacturing procedures were employed. Customers may be able to identify the precise country of origin of their food thanks to blockchain-based traceability. Additionally, it makes information about the food's genuine manufacturers and its freshness visible. Employees are required to update the database with information on the product at each stage of the food supply chain. As a result, traceability in the food supply chain may provide undeniable benefits, including a decrease in food fraud and misleading labeling.
Fashion
For the fashion industry, the answer to the question "what is traceability in blockchain" would primarily focus on the issue of counterfeiting. Every year, the weight of counterfeit goods costs the fashion sector significantly in terms of sales. Fashion labels are also becoming less credible in the marketplace. Blockchain could therefore aid in tracking the product supply chain to assist customers build a stronger foundation of trust. Blockchain might guarantee that clients are aware of the origins of the fashion items. A prospective advantage of traceability is the use of distinctive identifiers to confirm the originality of items. You can use the product's unique identity to determine where it has been along the value chain.
Why does it not take up?
The ambition ingrained in its promise for the circular economy is the primary cause of this delayed growth. Although the technology has amazing possibilities, it also necessitates a level of collaboration that is unfamiliar to many organizations who are used to giving orders to their supply chain in exchange for their business.
“Effective use of blockchain in the circular economy requires an entire network of players to be taking part, making some fundamental changes to many aspects of their operations, and that’s not simple to achieve.”
Phil Brown, vice president, Circularise.
“I don’t think the trust yet exists right along the supply chain – particularly at spinner and raw material supplier level – for all players to feel confident about giving out the data required. I suspect they fear the information would be used to push them down on price or question their practices.”
Martha Willis, Clothing retailer C&A.
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