Tech start-up: Blockchain is ideal tool for circular economy
Digital product passports will be critical to trace the origin of products and recover raw materials, and could bring several new opportunities for businesses, according to Phil Brown from Circularise.
Phil Brown is Vice-President for Business Development Strategy at Circularise, a Dutch circular economy start-up that has developed prototypes of digital product passports using blockchain technology to trace industrial supply.
Why are digital product passports so important in reaching the EU’s climate goals?
If you want to reach a functioning circular economy, the idea is that materials and products flow, they go through their product lifetime extension, they come back, they are recovered.
What that requires fundamentally, is every actor in the value chain to be able to communicate to each other. If all supply chain actors would share information openly and publicly, we wouldn’t need digital product passports.
If the EU actively wants to meet its own emissions reduction targets, then you need a data system that can share that information and a digital product passport is a way of doing that. We are doing digital passports on blockchain because we feel that’s the easiest way for it to then be validated and set up.
But the simple thing is, if we’re looking at recovery of materials, if we’re looking at really understanding the impact of those materials, there’s not really many other ways that you can do that without the concept of a digital product passport. That is critical to a circular economy: the potential, the opportunity is huge, but it requires a big change of mindset.
I am not seeing that many organisations yet really focusing on the benefits of a digital product passport. They’re only looking at the bare minimum of what they must do to comply with legislation.
Does this mean that digital product passports would also help Europe address its dependency on raw materials?
If we think geopolitically, Europe doesn’t have that many resources. If we see the critical raw materials that go into wind turbines, photovoltaic, batteries, Europe doesn’t have those materials, but we buy a lot of those products.
Let’s say I’m buying a mobile phone, not produced here. It comes into Europe, and it has a digital passport. What that allows us to do end of life is – with the information held within the passport – to recover that within Europe.
Therefore, if we create the rules and say you need to share that information with us if you want to sell products here, then we see products are already here. The materials of today can be the future materials of tomorrow. So from a long-term, geopolitical point of view, what does that allow the EU to do? That allows the EU to start flipping that material problem because we have lots of materials here. They’re just in waste products.
And what are the benefits that digital product passports can bring for companies?
If you start by looking at the product, and you are a manufacturer or brand, you would have more granularity of what’s in your product. For instance, what’s the percentage of recycled content? What is the percentage of flame retardants, what is the percentage of materials that they can reuse?
The EU is looking at mandatory sustainability labelling, and this means that going forward, I must be able to provide information about product A versus product B in a standardised way. If I don’t have that data, I can’t do that.
Now, let’s say I want to have a year-on-year reduction on the impact of that product from a material selection point of view. So how do I assess that right now? If I have a digital product passport in action from 2022 and then fast forward a year, I can assess batches from 2023, 2024, and so on. If there is a change or an improvement at any point in the supply chain, that can then be represented in the digital product passport. And the idea of a digital product passport on a blockchain system means that you can also have all of that data structured and you can actually ask an external auditor to validate all of that.
So this is also about holding businesses accountable for their claims?
Indeed. There are instances where increasingly we’re seeing regulators and consumers looking at statements that are being made about the sustainability or the origin of products that consumers are buying. But these companies not always have the data to back it. So in a digital passport, all of that data should be in there.
One of the main concerns are issues around data protection and confidentiality. How should regulators address that? Should the data contained in digital product passports have different levels of access?
I fully agree with that. It makes absolutely no sense to share chemical composition data with a consumer. But it 100% makes sense to share chemical composition data with an end-of-life recycler. But then I need to verify that this user who accesses the information is a certified recycler, because otherwise I’m then giving out information that could, in theory, be sensitive.
Since we are talking about global supply chains, which impact can the introduction of digital product passports have for the EU’s trade partners?
There are some connections to carbon accounting, for instance. Within there, there is this opportunity for new business models, especially when you start looking at a future lens with new legislation like the carbon border adjustment mechanism (CBAM). What the EU is trying to bring together in the CBAM is that if you’re producing outside of the EU, then there should be a balancing effect of the carbon dioxide emitted by companies that relocate outside of the EU.
Let’s fast forward five years when CBAM has become a real thing. And we have carbon pricing in other regions in the world. If I’m producing in different areas, and I can prove that my manufacturing facility in Asia has a photovoltaic, or ground source heat or wind turbines, and therefore has a reduction of impact comparative to its other production around in the region, that information would be held in the digital product passport.
[Edited by Frédéric Simon]