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Circular economy: how can be easy with blockchain and inter-collaboration

Road To Forest Valley Podcast

Published on 2021-06-25

Listen the full podcast or read the article below!

Phil Brown, VP Business Development & Strategy at Circularise, explains how blockchain technology and inter-organisational collaboration can make it easier for companies to implement circular strategies.

 

My circular journey actually started from my engagement with the Ellen MacArthur foundation back in 2013.

I graduated in 2009 from Manchester business school and it wasn't the best time to graduate: I wanted to go into sustainable consulting but unfortunately at that time, in the midst of a recession, sustainability was a “nice to have”. And I took the advice of a mentor of mine who highlighted that I should learn how businesses operate and he identified that I would probably be good at sales.

I ended up in a sales organization where I worked in business development for five years. But then I kept on developing projects and then having to hand over to the quote, unquote, more technical people to develop the project. This always left me feeling a little bit hollow. At which point I decided to make a big change in my life: I left London, I left my job and I left the company and the life of sales.

I went into the masters in Environmental management at Cranfield University prior to this, though, I scoured the internet for everything I could find vis-a-vis sustainability thinking and was very lucky to find the Ellen MacArthur Foundation were running their first massive open online course introducing the circular economy concept. I was doubly lucky when I found out that Cranfield was also a pioneering university and this allowed me to focus my master’s research on a circular economy innovation project, in which I explored the recovery of plastic materials for 3D printing. This was a project that I ran in 2013 as part of my master. And for me, the idea of it staying in a piece of paper was again, a very hollow victory. So I joined a startup based in the Netherlands and I worked with the Better Future Factory to commercialize the idea of recycled material between then and now I've been back to the UK.

I've worked for research organizations and through this experience, I understood that to deliver on a circular economy, collaboration is hugely important. At this point, I wrote my PhD proposal and through my contacts and network within T U Delft was able to secure funding to explore the challenge of how to facilitate collaboration.

Now I find myself within Circularise, I've known Mesbah and Jordi - the two co-founders of the company - since they founded the company from a project that grew out of Mesbah master's project. 

At a certain point, I ask them the question "where is Circularise going?" and they ask me a question in return "what are you doing post your PhD?" because my focus topic is on collaborative innovation and the key aspect that I come to from this is: if you can't transfer data and share that across the value chain, you can't develop a circular economy, business models, or product design, or recovery strategies. You need transparency of data and information flows to be able to unlock the potential of the circular economy.

So this is where all of these strains come together and I'm working with Circularise team to help them transition. 

But firstly, business models within the companies that we're working with unlock the features that blockchain can enable to try and see if the circular strategies - that have a lot of promise - can actually be realized.


 

What does circular economy mean?


 

What I mean by the "nice to have" within the specifics of 2009: when the recession was in full swing, organizations were looking at their bottom line in a very focused way. But what we have seen since then is extinction, rebellion, Fridays for future. There is a growing assessment both from the public but also within academia, it's been there for a long time, but only now in policy and business are wanting to look at not just the bottom line but the sustainability of the portfolio that they're managing. 

I think circular economy means to be more sensible about what you're using and plan for the end of life of the material, looking for opportunities to maximize any material or energy that you're using throughout the supply chain. So it is about unlocking economic potential while also trying to do positive things in the world.

The lifestyle that we have today is fundamentally built upon materials that have a very finite supply. So it just makes sense, not even from a business point of view, but even from a societal point of view, to start looking more critically at the materials that we have and how we use them.



 

Building a transparent supply chain using blockchain


 

The Circularise project started as a master's research project and Mesbah himself didn't plan on becoming a blockchain expert. He wasn't looking for a use of blockchain, actually the exact opposite: he was looking at the problem. I would argue as well, that circular orientated innovation is a problem-centric innovation approach.
How do we change something within the current system and try to create a better system in the future? Systemic change. 

Our goal was to understand the challenges of transparency within the supply chain. 

The trigger for Misbah was when he visited an end of life recovery company, whereby a person's job was to check if there was a vial of magnesium in the back of LCD TVs. That magnesium vial shouldn't have been there, but due to certain manufacturing processes, in a percentage of those, there was magnesium. If you then throw that into a shredder, you contaminate the rest of the material that you're trying to recover. It then becomes waste and you have to be essentially incinerated. The challenge here was really how to create product reuse, refurbishment, recovery of materials, which are core aspects of a circular economy without the transparency of what is inside the product.

So the reason that Misbah came to the blockchain solution was that he felt that this was a way to connect the dots along the supply chain and provide that transparency. Whilst within our approach, which is using a smart questioning feature, which essentially means it's a zero-knowledge proof, that means we don't share the actual data of the bill of materials or of the life cycle assessment or whatever information the organization chooses to share. We actually allow other organizations to interrogate that information. 

So an example here would be if a company wanted to include their bill of materials at the start of the chain when they're producing a plastic material. For example, that plastic material is picked up and maybe go through five or six actors to become a television, but the end of life material recovery actor would want to know "does this product include flame retardant chemicals at the moment? ". The best case that they can do is ask the actor in front of them, or maybe most organizations don't have transparency of two to three nodes in the supply chain. What we provide with the smart questioning feature is an option to interrogate any single actor that has handled that material.

And by proxy, our system handled the digital token and can ask the same question: "does this TV include flame retardant chemicals?" and what you would receive is a yes/no answer. You'd obviously want to ask a follow-up if it was yes: If it's a yes "to what tolerance or what level is this in the product?"



 

The benefit of a blockchain solution: the privacy of the data


 

Circularise do not control or have central authority over the data, but we hide the information for everybody behind a zero-proof knowledge that allows the organizations to interrogate the information without having to see all of the information that's there.

What Circularise provides is the information highway: we provide a system for each actor in the chain to upload the information that's relevant for that particular material or product or component. 

So for instance, let's take an example of an OEM - Original equipment manufacturer - who wants to make a public statement that their product is 95% recycled material. What we provide is a data system that allows that OEM to track how much-recycled content is in their product and can then make that certified statement. They can say "yes, we are a hundred per cent aware that 95% of the material that has come from this source has been processed in this facility and is certified as a recovered plastic material provider".

What we provide then is not the data necessary, that is the company's data, but the mechanism to transfer it whilst also keeping proprietary and sensitive information behind the zero-knowledge proof protection.

The reason for using blockchain is that each actor who's handled the token has access to that ledger. So once the information is loaded, it cannot be edited without every single actor engaging with it. 

For example, if I send an email to a person, which contains private information, the other person that has received my email can forward it to any other actor he likes without my knowledge. 

On the blockchain system as soon as you forward that token to anyone else, every single actor on the ledger will know that you have done that, which means that you cannot forward the information to an alternative actor without everyone in the supply chain knowing.



 

The benefit of a blockchain solution: don't require tech-savvy user


 

If somebody wants to interrogate the technical specification of Circularise and our blockchain technology, we have a white paper live on our website, where you can look into some of the more technical aspects of the zero-knowledge proof. We're built on the Ethereum network, which is a fully permissionless public blockchain, and you can look at how Ethereum is written and also any of the changes that they write. So the technical specs are there if you want to interrogate it. 

But if you just want to explore the functionality, the best way to do that is going through a process of learning by doing and actually seeing what blockchain can do.

So the question there is, do you need to know everything to be able to use it?



 

The blockchain energy consumption


 

As I said before we are building our system on the Ethereum network, we're aware that currently, it uses significant amounts of energy. However, Ethereum is also looking to solve these problems for themselves with their release of Ethereum, 2.0.
Our way of dealing with this is that we are not linked to any specific blockchain. We are actually agnostic: we can switch Circularise system to a different public permissionless blockchain with relative ease. 

The reason we built this functionality and capability is that if there was a more suitable blockchain that used less energy, then we would move to a more sustainable and energy-efficient blockchain.

The challenge here is not just the energy use, but where is that energy coming from? I think this is a much bigger debate within the whole digitization approach. How are we going to make sure that the increase of data centres doesn't essentially wipe off any of the carbon savings that we try to do via switching to electric vehicles, by travelling less, et cetera.
So it's a global challenge. But our approach is to be as agile as possible so that we can switch to the best available technology, both from a functionality point of view and from an energy point of view.

But you have to think about the scale of the use of that energy.

The blockchain solution allows the recovery of materials that can go through three or four lifetimes because you can maintain the digital thread and the awareness of the bill of materials, and that material recovery rate can jump to 90%.

Let's say companies could in the future create contracts whereby primary material producers agree and create a smart contract on the chain that states they would purchase material back at a particular property ratio at end of life, with the direct aim to reuse. 

If you can reuse the material four or five times because you are aware of what is included in that material, that product could be refurbished or remanufactured. You don't always have to go to the end of life material recovery to gain these benefits. But if the blockchain system allows you to look at multiple life cycles for a product or component, then you've got to start thinking about the embodied energy that is saved by the lack of processing new virgin material and all the reduction in processing.  

I think we need to start thinking about what the scope of technology is and what technology allows for the reuse and recovery of materials.



 

The collaboration inside the companies


 

Within my research I studied the soft side of collaboration, how to get humans within companies to work together looking into the thinking process, how do you get them to ideate together and align around a specific problem or challenge?

Firstly, it's around identifying those internal and external mechanisms for the individual to change their behaviour. Some actors within a company have a deep intrinsic motivation for sustainability, but some do not. Understanding what is the individual actor's motivation is crucial to collaborate with them.

There's a lot of research around if sustain if you are only sustainability-focused and you actually put blinkers on to organizations that could help you deliver on your sustainability goal. But there's this fear of selling out for some sustainable entrepreneurs.

How to get these organizations to work together requires a lot of work around alignment, also creating a common language.
These soft challenges take a lot of time and companies and individuals need to want to do this. And I want to achieve the bottom line, which is changing, making sustainable changes. 

What I worked on was also the application and development of tools, methods, design processes.

With two colleagues from T U Delft, we developed a methodology starting from ideation - which incorporated a card deck that looked at the different strategies of the circular economy, be it slowing, closing, narrowing or regenerating loops and then indicating these at a product design business model and ecosystem level.
That first step is really around the potential ideas and strategy combinations that you can deliver. 

The second aspect that we worked on was how do you take those ideas and bring them into a collaborative structure because no organization can develop a fully circular solution or product in isolation: they need collaborative partners.
So, what are the resources that you need? Who is the customer and what is their problem? And ultimately, which are the actors that are going to help you scale your idea? Because it's very nice doing a one-off lighthouse project to show proof of concept, but unless the concept can scale, it's not going to create an impact.

Now, once you've got that idea, you then need to pilot and test. Both in the immediate stage and then also at a scaling stage. 
So, the third step was implementing pilots. 

We decided to publish the research on an academic published site making it an open-source publication so that as many people, practitioners, students, researchers can access it as well.



 

An optimistic view of the future of blockchain


 

Throughout my time studying, researching and working with companies, I have had many moments of what I would call disillusionment but I'm still here and I'm still trying.
What is keeping me optimistic is that I'm seeing more and more individuals and companies really putting down statements and plans for changing what they're doing and they recognize that time is running out to make these big changes. 

What also fills me with a lot of optimism is seeing the general discussion within society, both with the Fridays for future campaigns but also just how governments are trying to respond to this, as the recent announcement in the German courts around the targets being set.

Now, I think there's a consensus amongst the world that we need to start making changes and it's not just one actor leading it anymore, it's not just the sustainability professionals saying this. It's also business, it's also governments: they're looking at their future operations. This general consensus is filling me with optimism because there are lots of cool ideas happening, and I see the circular economy triggering people to try a lot of new ways of doing things.

I see blockchain as a base technology, it's not going to be a solution or it will fix everything, it's not the magic bullet that's going to destroy any problem that we have or challenge, but what it allows is a way to connect actors so they can share information. And once you have information about where the material has been, its sustainable impact on assessments throughout the supply chain, you can start to make decisions about that. If you don't have that information, to begin with, you can't make decisions. So the trend that I'm seeing is that more and more companies are investing the time, energy, and effort to understand their own impacts. 

And this is where technologies like blockchain, that's not the only technology that's suitable for this, but it's one of the more robust ones that allow this transparency to be there whilst still protecting information. So that general trend towards wanting to understand the impact of their supply chain, I think is very important.



 

The challenges for circular economy implementation


 

Circularise is a startup that is growing as a company, but we're a tiny organization and we're talking to massive incumbent processes, organization companies and huge brands. They are very slow to change. 

Somebody that I interviewed years ago that was working for a large process orientated company, said a good analogy for this "trying to innovate within the circular economy is like trying to drive a car down a highway while changing your tires at the same time".  So their approach is to change one tire at a time.

Anyone outside of that organization may think "yeah, but you've only done this small little bit, but this car still needs to keep going down the motorway while paying wages for people while providing the products and services that it does".
So even though we see these incremental changes happening, actually the impact of those can be huge once they've aligned on it. 

What we're finding - and the challenge aspect - is making those proof of concepts tangible enough that the large incumbents and OEMs of the world say this makes sense. But once they do the impact will be huge. It's just about how do you change the wheels of your car while you're driving at a hundred miles an hour down the motorway: there are many challenges involved. 

The key to all of that is also education and getting people to get their heads around the systemic nature of what a circular economy transition will mean.
And because there are so many challenges, what I hope is that this triggers people and excites people to roll their sleeves up and try to look at what they can do with either in their job or within their behaviour, how can they interact with these ideas and how can they be part of that transition and change either by who they vote for by the products they buy and also challenging themselves on what are they willing to pay for a truly sustainable product because consumers have a large body of power. If they stopped buying products companies will change to make sure that they buy their products. 

A challenge here is how to engage sustainable behaviour with consumers. Now, one of the bigger challenges that I see there is how do you turn round to consumers of today and or tomorrow, and say "think about sufficiency: do you need this product? And if so, use it, but what are you going to do with that product afterwards?" 
The challenge is for people to look at their own scope and what they can control. 


 

The first step for being a circular sustainable company


 

First of all, you must have a very clear vision of what you want to do and what your challenge is, and make sure that when you start working on that vision and challenge, you share it as widely as possible so that you can build a critical mass of people who want to join you and want to help you work on that challenge.

When you trigger people's excitement, interest, creativity and present challenges - but also simultaneously present interesting solutions and promote that and share that idea and be collaborative from the outset - you will find that many organizations and people will want to work with you based upon your vision of your idea.

Working with people and sharing what you have rather than sitting there and saying "I'm keeping my cards close to my chest until we've agreed". Instead, you should put your cards on the table and say: "this is the problem we have, this is the resource that I have. What resources do you have to try and deal with this problem? It's much more of an effective way of entrepreneurship assessing what is of interest to you? What skills do you have? What can you do? What do you have and what are you willing to lose?" 

And if you start at that position and you get interesting products out of it, you get great marketing potential. Then this is all a key win. If you solve the problem by trying to make this more effective approach that plan will change massively as you start working with people because they will bring in ideas and creativity. But if you start by keeping your cards extremely close to your chest, you're only actually dealing with yourself and the opportunity for creativity and problem solving is greatly reduced.


 

About the author

Phil Brown

VP Business Development & Strategy at Circularise and Co-Founder at Circular Strategies


 

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