Blockchain – The Solution to Waste Industry Challenges and Circular Economy Answers?
What is Blockchain?
Blockchain is Bitcoin.
False – Bitcoin is a cryptocurrency application of Blockchain. Blockchain can be used for a range of different applications.
Blockchain supersedes traditional databases.
False – Blockchain’s advantages come with significant technical trade off. Traditional databases can still outperform Blockchain. It is particularly valuable in ‘low-trust’ environments, trading or use of
Blockchain is ‘immutable’ and tamper proof.
False – Blockchain is add-only, data cannot be removed. It could be tampered with if greater than 50% of the network is controlled and all previous transactions rewritten.
Blockchain is 100% secure.
False – Blockchain uses immutable data structures protected by cryptography. Blockchain depends on additional applications that maybe breached.
Blockchain is 100% verifiable.
False – Kind of. Blockchain can verify all transactions and data contained and native to blockchain. It cannot determine whether an external input is accurate or the truth.
- 10% of global GDP will be stored on Blockchain by 2027 (weforum.org 2018)
- VC investments were up to 1bn in 2017
- IBM has invested over $200m and a 1,000 staff in blockchain
- powered IoT projects
- Still an immature technology, clear application has not yet distinctly emerged
- There are a number of potential values across major industry sectors
- Blockchain doesn’t have to cut out supply chain actors, and will reduce cost before having strategic transformative value, although a number of platform servers exists, common standards are still a few years away
Blockchain is a distributed ledger or database shared across a public or private network, each node in the network holds a copy of the ledger, so there is no single point of failure.
Every piece of information is encrypted and added as a new ‘block’ to the ‘chain’ of historical records. Consensus rules are used to validate a new block (transaction) with other participants (nodes) before it can be added to the chain.
Preventing fraud and fake entry as controlled by joint authority. The ledger can also be constructed to automate transactions if certain preconditions are met.
The core advantages of blockchain are that it is decentralised, has cryptographic security, is transparent and permanent. It exchanges and verifies information without third party reliance.
Blockchain can also be configured to meet the requirements of a particular use case, which makes it particularly effective at keeping records and performing transactions.
What Does Blockchain Do?
There are two high level functions to blockchain, transactions and record keeping. As it is encrypted, rules based, multiple authorities automate and validate to prevent fraud. It has a strategic value where transactions are difficult to follow, records are difficult to keep, manual systems are in place to keep track of transactions which are susceptible to fraudulent activity.
Blockchain is adept at storing and recording information as a static registry in a distributed database for safety aspects and origin. Blockchain can hold identity related information and certification for civilian related application or where formal identity is required to provide credentials for authorisation of an activity. These use cases can be automated by ‘smart contracts’ that trigger automated self-executing steps when the conditions are met such as trading or payouts that are simple yet still require certain verified identification.
Blockchain manages transactions by keeping a registry or database that automatically updates when the authorised exchange of assets takes place. A typical example is the complexity in supply chains for thousands of products, the batches and the serial numbers that may move through multiple, different gateways (or nodes) to get to their destination point. Additional technology could also help automate this process further such as Radio Frequency Identification (RFID), Internet of Things (IoT) and Barcoding.
Blockchain can assist with transactions associated with payments infrastructures updating as cash or cryptocurrencies made to the individual participants. The scope here is incredibly wide and diverse with the prospective coverage of authorised, transparent transactions globally between peers.
Permissioned & Permissionless Blockchain Architecture
Blockchain architecture is governed by read, write and commit permissions to the participants. It is also governed by public and private network ownerships. Public ‘Permissionless’, where anyone can join, read, write and commit. Private ‘Permissionless’, is where only authorised participants can join, read, write and commit.
Public ‘Permissioned’, anyone can join and read, only authorised, known participants can write and commit. Private ‘Permissioned’, where only authorised participants can join and read and only the network operator can write and commit. Hybrid examples do exist, where best fit of the architecture is employed to best serve the use case.
Currently, organisations are starting to capture value in Blockchain rather than be overwhelmed by the technology. Therefore, permissioned blockchains on private networks with controlled access managing the above types of use cases present the most valuable opportunities, currently. Small scale experiments can be proven then scaled according to capacity.
Blockchain Summary Value Analysis
Blockchain can deliver huge value where a record of transaction needs to be authorised and kept in order to trace, follow and audit. Guarding against counterfeit or fake transactions with a view to automate and utilise the data for greater intelligence.
Blockchain can be used in conjunction with other technologies aiding machine learning, process automation, data, IoT and analytics.
There has been a great deal of discussion on the value of peer to peer models. Whereby particpants are compensated with their contributions by ‘tokens’ linked to future value. However, this is a significant shift in mentality and commercial disruption is currently not proportionate to the value gains.
If organisations within a sector are already utilising technologies that automate identity and records then in the short term the prospective value that could be delivered has limited scope.
However, blockchain is potentially significant so, the adaptation and integration to the use case will be the determining factor of value and disintermediation (reduction in the use of intermediaries from production to consumer).
Ultimately Blockchain will drive new operating models but initial impact, believed to be from 2020, will see a drive in operational efficiencies. Currently blockchain has been relegated to Gartner Hype Cycle’s “Trough of Disillusionment”.
Basically, the operational efficiency will come in cost and time savings of record keeping and transaction reconciliation – and negate the ability to counterfeit these activities. McKinsey analysed 90 use cases and estimated that the 70% of the value in the short term would come from cost reduction, followed by revenue generation and capital relief.
The Value at Stake Varies Across Industries
Certain industries core processes are more suited to the cost saving and revenue generating benefits of blockchain. Financial services, public sector and healthcare can benefit inherently. The fundamental transactions associated with financial services moving assets and information align with the blockchain value proposition, in particular, cross border payments and trade finance.
Typically associated with many intermediaries across a number of geographic locations, post transaction settlements and statutory reporting, which blockchain eradicates the manual complexity associated with transaction, record keeping, confirmation and reporting.
As of June 2018 90% of Australian, European and American Banks are investing in blockchain technologies (Source: McKinsey).
Public Sector data is often disparate and incomplete across shared agencies. From identification to taxation, blockchain based technology and smart contracts can simplify interactions, transactions and verify identification. As of June 2018, 25 governments are introducing blockchain pilots (Source: McKinsey).
In healthcare, Blockchain could help the availability of data between providers, patients and medical research. Blockchain enabled healthcare records could increase administrative efficiency and give research access to historical data sets for advance in medical condition treatments. IoT enabled blockchain could also help with the identification and distribution of drugs, blood and organ transplants.
Looking forward, deploying blockchain at scale is probably a mid-term objective. One of the transformative use cases in new models and development of revenue streams is consumer identity and the ability to know your consumer. Driving leadership in the experience economy.
The Waste Industry
Waste is an issue that affects us all. We all produce waste. From the 500m people in the EU, there is about 500kg of waste per capita per year. An additional 360m tons is generated from manufacturing. Construction 900m tons. Water supply and energy 95m tons. Totalling 3bn tons per annum. This has a huge impact on the environment, causing pollution and greenhouse gases. Contributing to climate change and loss of raw materials.
The amount of waste is increasing. The types of waste are becoming more complex due to the use of raw materials in high tech products. A mix of materials are used that include hazardous materials in e-waste. Making it difficult to move and recycle safely. Wealthier societies and higher standards of living and single person households buy more products, for easier consumption, single use, disposable, designed with shorter lifespans. Allegedly this has increased our “quality of life”, but meaning we generate more waste.
The longer-term goal is to reduce environmental and health impacts of waste. Increasing resource efficiency, how we use raw materials. We need to turn into a recycling society. Avoiding the creation of waste and the disposal of raw materials. Avoiding the extraction of natural resources and achieving higher levels of recycling.
What are The Waste Industry Challenges?
Collect, Sort, Transport & Treat: The Supply Loop
Waste can be reused, recycled, incinerated or landfilled. It firstly needs to be collected, sorted, transported and treated, which can prove expensive and result in greenhouse gas (GHG) and pollution to air, soil and water. In the EU 100m tons of waste is hazardous.
Making the materials difficult to treat and often requiring additional materials and special processes to deal with the components. Certain materials have been banned and other’s restrictions imposed. Waste infrastructure is being improved to deal with materials safely, however, many hazardous materials are exported sometimes unsafely with inadequate treatment. Illegal waste shipments and crime, like illegal dumping, ‘fly-tipping’ are common across all waste material streams.
Identifying Materials for Recycling
The waste hierarchy helps with the simple rules to waste and recycling. From which the waste framework directive updated in 2008 in the EU details the main concepts of waste management. It aims to prevent, prepare for reuse, recycle, recover and dispose.
Targets have been set to recycle certain material streams. There are also directives for landfill, shipments of waste, packaging, WEEE or e-Waste, batteries, vehicles, ships, waste from extracting materials, polychlorinated biphenyls and terphenyls (PCB/PCT), sewage sludge used in agriculture and radioactive waste. There are also numerous acts to govern and audit specific installations and how they deal with waste, such as animal by-products.
Classifying and Tracking Hazardous Materials
REACH regulations monitor chemicals in products. However, aligning with waste legislation becomes incredibly complex. As ‘waste’ it does not apply but after recycling it does, which is simplified. There are calls for this to be changed. As a producer or manufacturer, it is legislation to register chemicals used and identify products those chemicals are used in. Recyclers have to identify and check on substances that could be present in the products or materials they are recycling. Sometimes this data is not readily available or public. Continually checking products and materials can be time consuming and costly.
Establishing Detailed Relationships Between Products and Materials
The EU’s Circular Economy Action Plan aims to address the relationships between products, chemicals, substances and materials and waste legislation. To achieve stability in recycled materials the EU cites issues to be addressed are a lack of data and information on substances in products and waste. And substances in recycled materials. Harmonising waste with new materials and chemical legislation. Currently, the alignment in classification of waste chemicals and hazardous chemicals is very confusing. This is currently in discussion, the EU states “One of the considerations is how to improve the tracking of chemicals of concern in products.”
Extended Producer Responsibility
Extended Producer Responsibility (EPR) schemes indicate that the producers take the financial and organisational responsibility of collecting and taking back used goods, sorting and treatment for their recycling. Inherently this is an incentive for manufacturers to identify the use of materials and the impact these materials have on the environment.
Ensuring that in the product design phase the waste hierarchy is supported. The producer can also delegate this responsibility to a producer responsibility organisation who are paid for used product and materials management.
Take back programs go a step further and encourage manufacturers to design for recycling, incorporate recycling costs into the price of the product and encourage recycling. Challenges with these programs vary, difficulty in materials recycling, additional costs of products, reprocessing materials rather than repairing to keep in circulation for longer, recycling is incentivised but use of materials isn’t and material fees range vastly in recycling price.
Resources Wasted to Landfill
A range of non-hazardous materials sent to landfill means that vital resources are being wasted. In many countries hazardous materials end up in landfill due to the collecting and recycling capability in that country. Additionally, biodegradable and organic materials create decomposition gas, methane and carbon dioxide. Flaring gas produces carbon dioxide. Leachate, moisture run off from precipitation can cause groundwater and soil contamination. Poorly managed landfills can cause infectious disease. It is vital that if the effects of climate change are to be slowed according to global directives organic and technical, recyclable materials are kept out of landfills.
Sorting, Segregation, Contamination & Quality
Comingled material resources need to be sorted into different material streams in order to be recycled effectively. This can be achieved by a number of methods according to the collection points and types of materials collected. In principle, segregated streams into recyclates for mechanical recycling and reprocessing is relatively straight forward, however, problems exist if containers become contaminated with different material streams either through lack of knowledge or lack of effort. It may sound trite, however, if you can identify what the product and material is you can classify how to recycle it.
With automated segregated sorting, small amounts of contamination can render full containers irrecoverable. Identifying feedstock quality for recycling to be sold as an input to secondary market is imperative in the reduction of costs and the inherent feasibility of materials supply to be reused. Plastics are a good example of this when one type of polymer is in demand such as food grade PET or HDPE.
At the other end of the spectrum complex electronic products yielding multiple parts and hazardous and non-hazardous material outputs require identification, parts inventory (Bills of Materials / BOMs), components and characteristics and a range of refurbishing, repair, reuse and recycling can be possible.
Varying Practices, Legislation & Policy
Waste collection practices and performance vary greatly across regions and countries. Collection routines for municipal, trade and or commercial waste, the types of materials collected, container types and quality of recyclates differ greatly across localities. According to these types of collections, materials, containers and contracts define where the materials go to be recycled.
Corresponding recycling centres accept the materials according to the types of resource streams they are authorised to sort and recycle largely based on separated value and the cost of sending those materials on to be reprocessed at suitable infrastructure, providing there is onward demand and ability to sell to secondary markets.
Often this material is traded, sent abroad to be reprocessed, incinerated or landfilled. And therefore, relies on complex offshore trade agreements, additional costs and waste materials shipments legislation.
Data Collection, Reporting & Analysis
Similarly, the methods and tools for the collection of waste data varies greatly from organisation, region and country. Often due to the inadequate methods and tools used to capture the data and subsequently report on it, statistical analysis can often be unreliable. Different standards and different legislations can further complicate continuity of collection, traceablity and recycling of different material streams.
Although waste prevention is the top of the waste hierarchy, most countries lack efficient methods for the elimination of waste. This is due to the flow of materials throughout the entire economy, not just at the perceived end of life and disposal. It also includes the design of products, the manufacturing and the consumption of goods. Again, data to track materials and products makes reporting for the benchmarking improvements on prevention very difficult.
Increasing Recycling Rates
It is now widely recognised that greater policy shift towards circular economy and the promotion of higher value materials, rather than a take, make, dispose linear model, would allow for waste prevention. Reuse, remanufacturing and recycling, keeping technical products and materials in circulation for longer and the recycling of organic wastes.
There has started to be a shift in the policy of recycled material used in a variety of plastic products. However, quality and traceablity of these products is important if organisations are going to maximize the lifecycle of materials for recycling and reuse and benefit from the fiscal savings along with the natural capital benefits of lowering greenhouse gas emissions (GHGs) and limiting soil, air and water degradation, including discarded marine plastics and leakage to the biosphere.
Increasing collection, sorting and recycling is costly however, there are many studies that the savings in raw materials, along with the environmental benefits gives greater return. If recycling is to increase there are a number of instruments that can be used to engineer the correct increase, some of which are previously listed.
Conclusion on Waste Management Challenges
So, if we were able to identify materials used in products and they had more known value they would be easier to sort and collect. If they were easy to identify it might be easier to transport to known, trusted recycling technology infrastructure could be used to reprocess these materials for secondary use. Once the products and materials have been recycled they can be identified to be utilised by different authorised partners within a supply loop.
If the identification of hazardous components used in materials and products is easier, then recycling, reuse or safe, legitimate disposal and treatment could take place with the correct credentials being tracked for both recycler and materials. This could help eradicate waste crime, illegal shipments and dumping of materials.
If the traceablity of materials used in products was easier it could be more straightforward to identify the types of yield in the components of waste materials. This type of data could be held publicly, privately or both, permitting handling and access to the information.
Business Models That Reduce Waste, Add Value & Track Materials
The circular economy is an economic system that aims to eradicate waste by reusing those resources through the waste hierarchy ideally in a closed loop, lowering pollution, carbon emissions and negative health effects. All waste should become and input into a secondary process from a by-product or resource that has been recovered from manufacturing. By decoupling linear growth and resource consumption through use and disposal, there is an opportunity to increase revenues per unit by offering product as a service. While also enhancing the level of customer service i.e. warranty alongside that product and including refurbishing and repair.
Product recovery could also include reuse by a secondary customer with or without repair or reconditioning. Or repairing damaged components to enhance the functional condition of the product(s). Or reconditioning by enhancing the product with restored parts. And recycling, taking product and products to reprocess them into a raw material for reuse. Each of these processes could present an opportunity to add value, reduce waste and track the product for service enhancements and materials that are being recycled. The now more common product stewardship, also presents numerous opportunities. Involving all actors in the lifecycle of the product and materials to take responsibility in reducing environmental impact.
Can Blockchain Help Waste Management & Circular Economy?
The advance in technologies to identify and manage the transfer of waste materials to recycling and the duty of care underpinned by legislation has gained momentum over the last few years. The introduction of the voluntary waste transfer note eDOC from 2011-2014 was a good example. Why was there a lack of take up in the waste and recycling community? Maybe it was due to theability to use the application, through automation and integration, the perceived value of the application, the voluntary nature of the application and underpinning of legislation or the weight-based dependence in the movement of materials? Maybe it was a mix of many conditions? (Comments have been switched on).
What is certain now is that we’re in a different place than 2014. The lack of initial take up of eDOC could be put down to standardised behaviours on a technology curve and innovation adoption lifecycle. What is also certain is that Blockchain technology and subsequent technologies to enable these types of transactions are far greater understood and the weighting put on them to business survival by digital transformation are significant.
Additionally, there is a far greater understanding of the importance of waste, recycling, environmental and the economic impact of climate change and the use of raw materials. The convergence of social, economic, technological, legal and political inputs and understanding would seem to be catalysts for a resurgence and or kick start along the technology curve again. Maybe with more appreciation of the alternative, a laissez-faire attitude is now known not to be an option. Due to the severity of the messages on digital transformation and climate change, one would certainly hope so.
Therefore, it would seem that the Blockchain technology is ready and primed albeit on its own technology curve. There is considerable investment in the technology by users and vendors. It could certainly help, identify, track and authorise, products, materials and nodes in the supply chain while creating significant efficiencies to those using the technology as early(ish) adopters. Like all digital technologies in today’s world, it already here, in use and continually being trialled to solve a range of problems and provide efficiencies.
SAP Blockchain References
Source: McKinsey – Blockchain – What is the Strategic Value? Source: SAP – Blockchain Trends & Industry Disruption Source: European Union – Being Wise with Waste (Document) Source: European Parliament – Briefing June 2015, Understanding Waste Management, Policy Changes and Opportunities.
Blockchain – Identification, Authorisation & Traceability in the Circular Supply Loop
Diagram Overview – The diagram highlights some of the key areas in the reverse logistics and supply loop business processes where Blockchain can help track, identify and authorise products and materials. It does not focus on the key business process and complementary data, whereby it is assumed that this infrastructure, along with Blockchain technologies is integrated and already in place.