Blockchain and Circular Economy

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Introduction to Circular Economy

Nowadays Circular Economy is mostly linked to anything, at the centre of many international debates, but what is it specifically?

Despite our actual Linear Economy, where production systems end with the disposal of dangerous waste, a Circular Economy aims to reduce most of the waste, converting it into an available resource that can be reused as secondary raw material in the production process. Every product or output, from the moment it is manufactured to the moment of its actual use, is optimized until the end of its life cycle. In this way, it is possible to recover and reuse all (or almost) the waste material as a starting point in another production chain.

Introduction to Blockchain

Blockchain is basically a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system, it’s not as complex as it may seem. Put simply, a 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. But how can we link the blockchain system with a Circular Economy, and how can it help a transition to a more sustainable future?

Circular Economy and Blockchain

Circular Economy best practices are so good to hear, but what about when trying to apply them to real businesses? To ensure that companies, public administrations and different organizations around the world are applying sustainable practices it is needed a key element: transparency.

Transparency is able to increase by a lot the fundamental trust both between consumers and stakeholders. 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. Therefore enhancing a fidelity program from consumers to trusted business, while enterprises can ensure better transparency with stakeholders, increasing investments and profits.

Incentivizing sustainable consciousness

Without a cultural consciousness of sustainability and a Circular Economy, it’s impossible to aim for a greener future. Rewarding circular purchases, consumption or disposal will add motivation beyond the somewhat abstract need to protect our planet. in this sense Blockchain is able to monetize 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 incentivizing people to adopt Circular behaviours.

A striking example

What is written above is not just theory, is a business practice already applied to buy international firms all around the world. Ford and Volvo Cars are using blockchain to trace cobalt in their electric vehicle batteries. These companies monitor and constantly control the production process on the blockchain, which includes details like the origin of the cobalt, attributes such as size and weight, the chain of custody and information ensuring that supply chain participant behaviour is consistent with globally recognized supply chain guidelines, thus enhancing investments from stakeholders.

References

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