The Need for Better Data Collection for Sustainability and the Circular Economy
During the last few years, supply chains and their limitations have been dragged into the spotlight. The COVID-19 pandemic brought unprecedented challenges to supply chains worldwide and across all sectors (Sharma et al., 2020). Disruptions caused by lockdowns, restriction of movement and uncertainty about the future caused drastic changes in both supply and demand for different products. Supply chains barely had a chance to recover from this turmoil before being hit by new challenges arising from the economic and political world situation. Rising energy prices and other consequences of the conflict in Ukraine revealed further points of failure in supply chains worldwide, mostly perceived in the form of food shortages (Jagtap et al, 2022). Other obstacles in the economic and business environment such as Brexit provide more examples of the volatile political landscape that supply chains need to navigate. Alongside these political and economic threats, the clock is ticking faster for another crucial challenge that supply chains need to address: the environmental impact of their activities. The climate crisis is one of the most critical challenges of our time and sustainable supply chains are key to facing this challenge.
The climate crisis cannot be tackled without restructuring the way in which most supply chains currently work. According to Oberle et al. (2019), over 50% of greenhouse gas emissions and 90% of biodiversity loss and water stress (all major contributors to climate change) come from resource extraction and processing of materials, fuels, and food. These operations are an intrinsic part of global business supply chains. To make supply chains more sustainable, it is essential to measure and, where possible, adjust the environmental impact of raw material extraction, goods production and disposal, and provision of services.
Blockchain enables the collection, analysis, and reporting of supply chain data in a secure, transparent, and immutable way. By digitalizing the total life cycles of products and supply chains, from the extraction of raw materials to the refurbishment or recycling of the product, blockchain solutions support companies to track and optimize the real impact they generate in society and enable the inclusion of factors that are often overlooked when calculating generated impact, such as the carbon footprint of production and transportation, or the consumption of water and energy. This data facilitates a more sustainable manufacture of products and can moreover be used by manufacturers and those involved in the supply chain to understand where in the supply chain and product life cycle there is potential to incorporate more sustainable practices, which areas and processes are impacting the environment the most, and where action needs to be taken to mitigate that impact.
Action taken on a continental level indicates that the urgency to adopt innovative technology solutions is widely accepted. The European Union has allocated major investment in developing clean technologies that promote circularity and support the achievement of Agenda 20301 and the United Nations Sustainable Development Goals2 (SDGs). The EU Innovation Fund intends to support innovative clean-tech projects with grants amounting to around €10 billion over 2020-2030, which will help bring breakthrough technologies for European decarbonization and climate neutrality to the market (Clerens, 2022). Additionally, the EU’s key funding programme for research and innovation, Horizon Europe, has allocated a budget of EUR 95.5 billion to tackle climate change and contribute to the fulfillment of the SDGs (European Commission, 2022a).
Countless blockchain organizations seek a more sustainable future, for example by developing sustainable solutions based on blockchain through partnerships with businesses, industrial entities and institutions. Technology achieves its biggest impact and scale when it is interoperable and applicable across borders and jurisdictions. Blockchain offers a fully trusted, immutable, and interoperable data system that can speed up automation and innovation across a supply chain, enabling new adaptive business models to move faster towards the circular economy.
In this chapter, we will explore the potential of blockchain in supply chain use cases. We will review the unique characteristics of this technology and how it can enhance sustainability and the circular economy. Moreover, we will briefly refer to the evolution of blockchain to become greener, energy efficient, and scalable. Finally, we will review supply chain use cases in different regions.