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Towards Net-Zero: The Imperative of Transparency in the Circular Economy

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We are living in a crucial moment for the planet. The climate crisis, once seen as a distant threat, is now a palpable reality. On August 2, called "Earth Overshoot Day", we reached the limit of natural resources use that the Earth can regenerate in a year. According to the Global Footprint Network, we are consuming resources as if we had 1.7 Earths at our disposal. That is not sustainable.

The solution? The circular economy.

The circular economy is more than necessary, it is mandatory. We need to abandon the old model of "extract, produce and dispose" and adopt a circular system, where waste becomes raw material. This way, we reduce the demand for new resources and minimize waste.

The circular economy is already showing its effectiveness in several sectors (especially in high capital industries such as chemical, energy, agriculture, fashion, mining and plastic), contributing to sustainability and the efficient use of resources. It is the path to a future with fewer gas emissions and a more sustainable world. For instance, a blockchain pilot project for circular plastic recycling by Finboot, SABIC, Plastic Energy, and Intraplás gained lots of recognition because it was a first of its kind in the industry. The project aims to support end-to-end digital traceability of circular feedstock in customer products throughout the recycling process. More recently, Finboot announced a new partnership with CRDC Global, a fast-growing firm that utilizes a proprietary process to convert any type of plastic waste into a construction aggregate, to help them ensure its RESIN8 production processes are even more transparent, efficient, and sustainable.

As we can see, for the circular economy to work, we need transparency. Customers, governments and investors demand ethical and sustainable supply chains. Industry needs to reduce carbon emissions and meet clear targets.

Here's the challenge: How to track and monitor products through their life cycle? The answer may lie in blockchain technology. With it, it is possible to identify and monitor materials along the entire supply chain. An essential tool for the circular economy.

The Power of Transparency in the Circular Economy

Meaningful change requires more than good intentions. COP 28, which will take place in November/December this year, is an opportunity to set decarbonization targets and regulations that encourage the transition to a circular economy and the adoption of advanced technologies.

Studies reveal discrepancies in emissions data from Fortune 500 companies, accounting for around 27% of global emissions. In addition, 42% of green claims are exaggerated, false or misleading, indicating a large-scale greenwashing scenario.

The IFRS Foundation has recently launched new global regulations (ISSB) aimed at tackling greenwashing by requiring disclosure of companies' environmental impact. This measure aims to ensure a carbon neutral economy by helping companies understand and minimize their environmental impact.

The need for transparency is unquestionable. Blockchain technology has emerged as a solution, enabling accurate and transparent recording of carbon emissions, and preventing corporate greenwashing.

According to the World Economic Forum's whitepaper, Blockchain for Scaling Climate Action, published in late April 2023, this technology has the potential to deepen and broaden the fight against climate change by democratizing ownership, improving integrity and providing a real-time view of emissions reduction efforts.

By embracing circular economy principles and innovations such as blockchain, we can collaborate to mitigate the effects of climate change and build a more sustainable and transparent future.

Driving the Circular Economy with Digitalization

Sustainability has been the focus of attention, demanding more accurate and comprehensive ESG data. In this scenario, digitalization emerges as a crucial pillar. Among technological innovations, blockchain stands out, becoming a strong ally in the transition from linear to circular economy.

With its ability to offer transparency and traceability, blockchain revolutionizes the way consumers, businesses and governments track the life cycle of products and services, fostering more sustainable and ethical practices.

Blockchain is an invaluable tool for understanding and improving sustainability, with immense potential to help fight climate change. For instance:

  • Enhancing Supply Chain Management: blockchain, as an open and decentralized ledger, increases transparency and traceability of greenhouse gas emissions, ensuring products are sourced and manufactured sustainably.

  • Facilitating Carbon Trading: blockchain can make the trading of carbon credits transparent and auditable, avoiding double counting and helping organizations offset their emissions.

  • Driving the Energy Transition: blockchain can help create platforms for clean energy trading, connecting producers, consumers and investors and fostering a transparent system for renewable energy generation and distribution.

  • Quantifying Environmental Impacts: blockchain can support a circular economy by enabling a Digital Product Passport (DPP), helping to identify opportunities for product recycling and waste reduction.

  • Ensuring Regulatory Compliance: With blockchain, companies can demonstrate their compliance with stricter regulations on gas emissions by recording and verifying data in a secure and transparent way.

Digitalization and blockchain are therefore essential tools for accelerating the transition to a circular economy, and therefore helping to combat climate change.

Conclusion: The Power of Blockchain towards Sustainability

Clearly, the climate issue cannot be solved by a single measure. Fortunately, blockchain has emerged as one promising solution among many others.

The key lies in the transparency that blockchain offers. Consumers, increasingly aware, need to trust the information that companies disclose about their products. Companies, on the other hand, need to be sure of the information they acquire from their suppliers and their production processes. And regulators need to make sure that all reported information is true. 

Why? So that everyone can trust that the data is accurate and correct.

I'm talking about data such as provenance, durability, resource efficiency, recycled content, environmental and social impacts, among others. Transparency in this data is vital in the circular economy, avoiding errors and fraud, such as so-called greenwashing.

In addition, blockchain increases the efficiency of companies, reduces costs and minimizes the need for intermediaries. Automating processes and facilitating communication improves trust and strengthens brand image. This attracts investors and, undoubtedly, customers.

Despite the benefits of blockchain for sustainability, there is still a reluctance of companies to share data. It is a big issue in our society: there is a lack of transparency, a lack of trust. But blockchain has another advantage: you do not have to trust people or businesses; the data integrity and transparency are enough to rely on.

Finally, I hope that new policies that required transparency, can accelerate the use of blockchain, such as the European Commission's Circular Economy Action Plan (CEAP) and the Inflation Reduction Act (commonly referred to as the IRA) from the United States. This is because sharing information about the origin of materials and products is crucial for a system of reuse, remanufacturing and recycling (3 fundamentals of the circular economy).

The question remains: are we ready to transparently show our commitment and the real impact of our initiatives for a sustainable future?

 

 

 

 

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This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.

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