Blockchain is an ideal tool for circular economy – EURACTIV.com

Digital product passports will be crucial to trace the origin of products and recover raw materials, and can provide several new opportunities for companies, according to Phil Brown of Circularise.

Phil Brown is vice president of business development strategy at Circularise, a Dutch circular economy startup that has developed prototype digital product passports using blockchain technology to track industrial supply.

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Why are digital product passports so important for 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 product life extension, they return, they are recycled.

This fundamentally requires that all actors in the value chain must be able to communicate with each other. If all supply chain actors would share information openly and publicly, we would not need digital product passports.

If the EU actively wants to meet its own emission reduction targets, you need a computer system that can share that information, and a digital product passport is one way to do that. We create digital passports on the blockchain because we feel it is the easiest way to then validate and set up.

But the simple thing is, if we’re looking at recycling materials, if we’re looking at really understanding the impact of those materials, there really aren’t many other ways you can do that without the concept of a digital product passport. It is essential for a circular economy: the potential, the opportunity is huge, but it requires a big change in mindset.

I don’t see many organizations yet really focusing on the benefits of a digital product passport. They only look at the minimum of what they have to do to comply with the legislation.

Does this mean that digital product passports will also help Europe deal with its dependence on raw materials?

If we think geopolitically, Europe does not have that many resources. If we look at the critical raw materials that go into wind turbines, solar cells, batteries, Europe does not have these materials, but we buy many of these products.

Let’s say I buy a mobile phone, not manufactured here. It enters Europe and it has a digital passport. What allows us to end the life is – with the information in the passport – to restore it in Europe.

So if we make the rules and say you have to share that information with us if you want to sell products here, then we see that the products are already here. The materials of today can be the materials of the future. So from a long-term, geopolitical point of view, what does that allow the EU to do? It allows the EU to start turning the material problem around because we have loads of materials here. They are only in waste products.

And what are the benefits that digital product passports can bring to companies?

If you start by looking at the product, and you’re a manufacturer or brand, you’ll want more detailed information about what’s in your product. For example, what is the percentage of recycled content? What is the percentage of flame retardants, what percentage of materials can they reuse?

The EU is looking at mandatory sustainability labelling, and that means that in future I must be able to provide information about product A versus product B in a standardized way. If I don’t have that data, I can’t do it.

Now let’s say I want to have a year-over-year reduction in the impact of that product from a material selection standpoint. So how do I rate it right now? If I have a digital product pass in action from 2022 and then fast forward a year, I can consider batches from 2023, 2024, and so on. If there is a change or an improvement at any point in the supply chain, it can 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 this data structured and you can actually ask an external auditor to validate all of this.

So this is also about holding businesses accountable for their claims?

Actual. There are cases where we are increasingly seeing regulators and consumers look at statements made about the sustainability or origin of products that consumers buy. But these companies don’t always have the data to back it up. So in a digital passport all this data should be there.

One of the most important concerns is issues around data protection and confidentiality. How should the supervisory authorities deal with it? Should the data in digital product passports have different levels of access?

I totally agree with that. It makes absolutely no sense to share chemical composition data with a consumer. But it makes 100% sense to share chemical composition data with a recycler. But then I have to confirm that this user who gets access to the information is a certified recycler, because otherwise I give out information that could theoretically be sensitive.

Since we are talking about global supply chains, what impact could the introduction of digital product passports have for the EU’s trading partners?

There are some connections to carbon accounting, for example. Within, there is this opportunity for new business models, especially when you start looking through a future lens with new legislation like the Carbon Limit Adjustment Mechanism (CBAM). What the EU is trying to collect in CBAM is that if you produce outside the EU, there should be a balancing effect of the carbon dioxide emitted by companies moving outside the EU.

Let’s fast forward five years when CBAM has become a real thing. And we have carbon prices in other regions of the world. If I manufacture in different areas and I can prove that my manufacturing facility in Asia has a solar or geothermal or wind turbines and therefore has a reduction in impact compared to its other manufacturing around the region, this information will be kept in that digital product passport.

[Edited by Frédéric Simon]