Blockchain & Circular Economies
Updated: Sep 11
This insights report is a recap of the TED Circles: Blockchain and Circular Economies workshop held on Sat April 24, 2021 10-11:30 am ET. transform this hosted TED Circles are a free, online, safe and inclusive place to connect with innovators from all over the globe. This workshop included representation from at least 7 different countries: Canada, USA, Spain, India, Nigeria, Bangladesh and Israel. Our special guest in attendance was the Blockchain expert Nitin Gaur.
Workshop Goals
TED Circles' Apr 2021 theme was "Appreciating Earth". Circular economy can build a sustainable future by combining technology and intelligent design to maximize economies of scale and reduce waste. Blockchain has the potential to build this future. Let's meet and discuss:
How can the circular economy create value for businesses?
Can blockchains provide an incentive?
What will it take for us to enable blockchain towards a circular economy?
Team:
Workshop Host: Gunjan Syal – Chief Strategy Advisor, GoEmerald
Contributor: Miri Vinitski – Innovation and Market Analyst (intern), GoEmerald
For inspiration, here are a TED Talk and a HBR article that represent the topic:
https://www.ted.com/talks/kristin_kinder_the_circular_economy
https://hbr.org/2017/03/what-blockchain-means-for-the-sharing-economy
Workshop Insights
We began the discussion by considering the following infographic related to monthly global waste production during the pandemic. At the onset of the pandemic, greenhouse gas emission levels fell due to the temporary factory closures and decreased road traffic, among other reasons. At the same time, unprecedented levels of non-biodegradable waste such as discarded face masks, gloves and protective goggles began to pollute oceans and harm the environment.
The infographic above set the stage for defining the difference between linear and circular economies. A linear economy is one in which natural resources are extracted, processed into products, used by consumers, and discarded after use. A circular economy, meanwhile, is built upon careful re-configuration of the traditional product life-cycle to reduce raw material usage, encourage sustainable resource management, and re-purpose existing products. The latter approach challenges the linear system of "production, consumption, waste" and creates value.
A more detailed look at the various components of a circular economy:
Our conversation transitioned into an overview of how blockchain technology and intelligent design can be applied to reduce waste. Blockchain functions as a digital ledger which eliminates the need for an intermediary to audit each transaction. This technology has the unique ability to instantaneously store information relating to transactions in connected blocks that produce an immutable activity record. Due to the blockchain’s immutable nature, data on the ledger cannot be manipulated by any enterprise or supply chain.
The five basic principles underlying blockchain technology from the HBR article:
Michael: "The world is at the precipice of a paradigm shift. Blockchain and the circular economy are definitely going to play some role in the future."
The 'paradigm shift' Michael mentions above refers to the transition from Web 2.0 to 3.0. We are moving away from Web 2.0's core tenants (social networking, mobile-first design and cloud computing) in favour of a new model, which enables decentralized data architecture, AI-based services and edge computing.
Blockchain is already seeing applications in distributed social networks (for instance Steem), which fundamentally differ from the traditional platforms because they operate in a secure and decentralized manner. This eliminates the need for third party intervention. With this information in mind, the following deserves contemplation regarding the sharing economy, in conjunction with the circular economy:
Nitin shared that blockchain can aim to solve problems related to trust and time.
These are important considerations due to the fragmented nature of today’s supply chain systems. Currently, blockchain use cases center around the tracking and tracing of supply chains as they are highly inefficient and require significant energy consumption.
For example, to address the challenge of manual document handling within supply chains, an online shipping platform called TradeLens is using blockchain technology to increase efficiencies, collaboration and ensure transparency throughout the life-cycle of shipping data. The impact of data digitization should not be overlooked, especially as global trade continues to grow and existing logistics systems fail to capture nearly $1.8 trillion annually (TradeLens, 2021).
According to Nitin, the linkage between blockchain technology and sustainability can be understood as:
Energy efficiency and the efficacy of the business process which it serves
Impact of tokenization on the movement of physical assets and in resource-intensive supply chains
Enter, non-fungible tokens: Non-fungible tokens, also known as NFTs, are data units that are part of the blockchain digital ledger. NFTs contain instructions that identify digital assets to be unique in nature. For additional information on blockchain and NFTs, please take a moment to review Nitin’s recent blog post.
Nitin mentioned that, to inch towards the circular economy, pricing models must reflect the complete cost of a product "...just like how we have nutritional facts on a label of a food product".
This is an interesting perspective because it emphasizes full cost transparency and provides consumers with the information they need to make well-informed purchasing decisions. By reconciling the supply chain and calculating the carbon footprint associated with each purchase, companies can instill a sense of trust in weary consumers and ignite a chain reaction that encourages others to do the same.
How to enable blockchain technology in the circular economy:
When discussing sustainability, we explored how the environmental, social and governance (ESG) criteria can be used to hold businesses accountable. Note that 'E' also represents ethical. Today's enterprises can be evaluated on the basis of their performance against standards in resource use, human capital and business ethics. ESG scores can be created and can have far reaching implications. Stakeholders such as investors, financial institutions, and asset managers can pay close attention to the year-over-year performance of companies and comparatively assess their scores by looking at competitors. If a company’s ESG score is negative, investment opportunities may be pulled or loans may be rescinded. Governance of these ESG score is another matter around the globe and requires a deep view into policies and diplomatic discussions.
Gunjan: "...which metrics should be used for ESG scoring and who should govern them?
One noteworthy use case to consider is Lululemon’s decision to pilot an exchange program allowing customers to trade in their gently used workout gear for a company gift card. The athletics apparel giant is one of many retailers entering into the resale market amid growing environmental concerns brought on by the linear economy. Accordingly, items which do not meet Lululemon’s quality guidelines will be recycled. Here, Gunjan raised an important point about the need for retailers to clearly define how they "recycle" and which metrics they will consider.
When closing the workshop, we reflected on today’s socioeconomic challenges that must be addressed to make measurable and lasting impact.
Tom: "We have made a mistake in how we assist communities and people in past. We have to consider the business model and ecosystem impact before deploying technologies"
In his work with social enterprise teams, Tom observed that the actions being taken are commendable, but fail to be placed within the appropriate context (the business model). Prior to measuring outcomes through the aid of blockchain technology, we must understand the underlying cause of the given problem, create tangible solutions, and ensure that government policy is applicable. To ensure a lasting impact, we need to address some of these open questions as a society:
How we will measure success in circular economies for people, corporations and planet?
Who will uphold these measures of success (i.e. governance)?
Who will design and own the technology solutions, such as enabling blockchains, and will the business model include sharing economy aspects?
Once again, our gratitude to the global transform this tribe for returning week-after-week and bringing their diverse perspectives for inclusive innovation to flourish. We hope you will join us in taking specific actions as stakeholders to drive inclusive, measurable, and ethical changes aimed at promoting sustainability.
As usual, these conversations continue past the workshop and spill to the social media with our tribe. We are encouraged by this because open discussions such as these bring together multiple global perspectives, bringing us inspiration to find holistic solutions.
Wishing you much health and success until we meet again.
Resources shared by the audience during the workshop:
This workshop included numerous recommendations from the group. We have consolidated the list as follows:
Project Jasper in Canada: https://www.bankofcanada.ca/wp-content/uploads/2017/05/fsr-june-2017-chapman.pdf
Giants by Peter Phillips:
https://www.sevenstories.com/books/4097-giants
Winners Take All by Anand Giridharadas:
https://www.penguinrandomhouse.com/books/539747/winners-take-all-by-anand-giridharadas/
Thinking Fast and Slow by Daniel Kahneman:
https://www.penguinrandomhouse.com/books/89308/thinking-fast-and-slow-by-daniel-kahneman/
The Third Industrial Revolution by Jeremy Rifkin:
https://us.macmillan.com/books/9780230341975
The Zero Marginal Cost Society by Jeremy Rifkin:
https://us.macmillan.com/books/9781137280114
Seaspiracy Documentary:
https://www.youtube.com/watch?v=1Q5CXN7soQg
Volunteers Unleashed Documentary:
https://www.facebook.com/cbcdocs/videos/10153597104686950/
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