We are using resources faster than the Earth can replace them. This is because we have a linear economy, which means we take resources, use them once, and then throw them away. This is not sustainable, and the Earth can't keep up. In fact, the world's circular economy has gone from 9.1% in 2018 to 8.6% in 2020, compared to the linear economy's faster growth.
One of today's best known alternatives is to switch to a "circular" economy, where we use resources over and over again, to make sure we have enough for the future. One way to do this is by recycling more. If we recycle the most important things, we could save a lot of carbon dioxide and help the planet (increasing the recycling rates from their current rates of 25–35% to 80–90%, we can achieve CO2 savings of 40–50 billion tons by 2040).
The European Commission released its Circular Economy Action Plan (CEAP) which includes a proposal for an Ecodesign for Sustainable Products Regulation (ESPR), both key initiatives of the European Green Deal policy framework for promoting a circular economy and reducing the environmental impact of products:
The ESPR identifies a Digital Product Passport (DPP) as key, enhancing the traceability of products and their components. The aim of this initiative is to start the process of introducing a digital product passport in at least three major industrial sectors by 2024, such as textiles, construction, steel, cement, electronic waste, plastics, chemicals, and automotive.
The DPP leverages blockchain technology to enable digital asset traceability. Blockchain is a distributed digital ledger that allows for secure, transparent, and tamper-proof record keeping. By using blockchain, the DPP can show exactly where a product came from and where it goes after it's used (from raw material extraction to end-of-life disposal). This information can be shared with anyone, like customers, companies, or regulators. They can use it to make better choices that help the environment. For example, they can scan a QR code and see where the product came from and how it was made.
With our digital traceability solutions, SABIC has improved their management of circular feedstock, and now has a differentiated product that they can trace back to the waste source. This was applied as part of SABIC's TRUCIRCLE™ portfolio and services.
It is important to highlight that recycling is just one of many ways to improve the circularity of resources. It is also possible to improve resource efficiency by adopting better designs and business models, and by prolonging product life cycles through practices like repairing and reusing items. According to this Accenture study from 2021, circular strategies are expected to generate an additional $35 billion in consumer goods value by 2030 from reduced costs. However, achieving these goals requires accurate information about the products, including their manufacturing and disposal processes. Currently, we do not track and trace resources, lifecycle extension, and end-of-life (EoL) activities along global value chains (value chains). Unfortunately, we lack transparency and value chain collaborations to drive and monitor efforts that increase circularity. To address this issue, it is important to find solutions that foster greater transparency, traceability, and cooperation in resource management, such as DPPs. Studies show that using blockchain can lead to increased material circulation. In this study of 290 manufacturing firms in the China-Pakistan Economic Corridor, a 1% increase in blockchain use resulted in a 0.341% increase in remanufacturing and recycling.
The Center for Regenerative Design and Collaboration (CRDC) is another example of how a business whose approach is based on a collaborative net-zero circular economy model can generate real value. In their case, the plastic industry waste stream becomes the raw material and value stream for the construction and building industry by repurposing plastic waste and transforming it into another material that can have lasting value: CRDC’s product, RESIN8®, is a concrete additive made from hard-to-recycle plastic that has already been used by Habitat for Humanity to build housing in Latin America.
I’ve already said that the DPP can provide a reliable and transparent record of a product's entire life cycle, from raw material extraction to end-of-life disposal. So, using digital product passports in value chains has several advantages for businesses:
But which information should be collected and shared through a DPP?
Due to the complexity of various product supply chains, digital product passports (DPPs) can help with many data requirements for different products. The challenge is to know how to standardize this information for each sector, and although this process is specific to each industry, we are starting to visualize some trends in these data requirements.. We are discussing this with industries to decide on the specifications. The ESPR suggests some ways to make products more sustainable, including:
It’s clear that using digital product passports (DPPs) has some potential drawbacks and limitations to consider. One challenge is deciding what data to include in the DPP. This can be a complex process as there may be a large amount of data available, but not all of it may be relevant or useful for the intended purpose of the DPP. Additionally, there may be concerns about data privacy and security.
To address these challenges, it is important to have clear objectives and a well-defined scope for the DPP. This will help to ensure that the data collected is relevant and useful for the intended purpose. It is also important to have a robust data governance framework in place to ensure data privacy and security are maintained. Another challenge is ensuring that the DPP is accessible to all stakeholders.
Overall, the DPP aims to enhance traceability in this new circular economy by providing stakeholders with standardized information for clients and consumers about the products they use, sell, or regulate. By leveraging blockchain technology for digital asset traceability, the DPP can provide a reliable, transparent, and immutable record of a product's entire life cycle, helping to identify inefficiencies and opportunities for improvement. Finally, it is important to recognize that DPPs are not a silver bullet solution and should be seen as part of a broader set of policies and initiatives to promote a circular economy. DPPs can help identify opportunities for resource efficiency and waste reduction, but they need to be supported by other policies such as product design, extended producer responsibility schemes, and recycling infrastructure.