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Blockchain’s role in the circular economy in the built environment

With blockchain's ability to track and prove provenance it seems a perfect match for the circular economy, but what do you need to consider before implementing it?

Steven Matz, Global Research Assistant, RICS
22 August 2019

With blockchain's ability to track and prove provenance it seems a perfect match for the circular economy, but what do you need to consider before implementing it?

Keeping asset values high

To many people the circular economy is synonymous with sustainability and recycling, but it is also about assets and materials retaining the highest possible value for as long as possible. The closer the recycling of a building material is to its original use, the more it adheres to the principles of the circular economy and the higher the profit value for the end user. For example, a steel beam that can be used in situ yields a better financial return and is more energy efficient than a beam that is transported to another location or smelted down. Of course, reusing materials avoids landfill tax.

A poll during the WBEF webinar Blockchain's role in the circular economy in the built environment, reveals that relatively few respondents are being asked by customers/clients about the circular economy. Around 70% say they are rarely or never asked. If the findings are repeated across the built environment, this suggests there is a need to raise the awareness in the industry of the positive outcomes from the circular economy.

Uncomplicating the supply chain

A supply chain can get complicated very quickly, with each component having its own supply chain, and can be difficult to map with a centralised system. Blockchain provides a solution to this. In brief, it is a decentralised list of records or data, known as a block, connected using encryption technology, and for every transaction carried out using blockchain, there are multiple copies of the audit trail. This can be particularly valuable in the built environment, where the average building use is around 50 to 60 years, as it gives the ability to track providence throughout the lifecycle of a product.

While blockchain is getting a lot of publicity, it's still in its infancy. Reflecting its newness, a poll of the webinar audience shows that no-one has yet implemented blockchain. Only 16% say they probably would and nearly 60% say they are unsure, and a quarter are unlikely to. According to research company Gartner, we are five to ten years away from having a blockchain that is as evolved as social media or cloud computing. But there are already some imaginative uses of blockchain, for example, small cooperatives of olive growers use it to track olives from grove to shop front. On a larger scale, Walmart has mandated all its leafy green vegetable suppliers use blockchain so it can trace products back to source in seconds if it ever needs to. Before blockchain can become the next cloud computing or the next dot com, it needs investment and adoption. It is likely to be led by major players in sectors such as food, shipping and automotive, who are in a good position to pull in the resources and other organisations in the supply chain to participate.

Watch our webinar: Blockchain’s role in the circular economy in the built environment

The ability to track and prove provenance is a key aspect of the circular economy. Can the transparency that blockchain offers improve the process and lead to greater sustainability in the built environment?

The need for a business case

But it's not all about the technology, there must also be a business case for implementing it. Dr Yingli Wang, Senior Lecturer at Cardiff Business School says that from a supply chain perspective, you don't implement blockchain for the sake of it, you need to think about the value creation. Either you have existing problems in your supply chain within the circular economy that you think blockchain can help solve, or you see new business opportunities that arise from the use of blockchain.

For those who want to be early blockchain consumers, Alexander Bardell, founder of SDAdvocate, advises on avoiding the pain suffered by some early adopters of the cloud. Remember that some of the starter companies offering blockchain services may not be there in years to come or may no longer be the best choice. Adding your own intellectual capital on top and controlling your data underneath so it becomes a procurement process means that you can pick up all your data and put it somewhere else should the need arise.
Arup is currently working with the Construction Blockchain & Smart Contracts Committee and conducting a proof of concept putting digital passports on assets. Kevin O'Grady, Associate Director at Arup, explains the firm is looking at the difference between business as usual, and tagging and mapping assets. Some assets that may not be categorised as traditional assets, for example, natural floor tiles, with care may still be viable after the life of the building. It's therefore important for the data to be captured in a blockchain, for trust and transparency. When you have multiple stakeholders, such as FM providers, the data is immutable throughout the life of the building, and this also provides true providence with the ability to track back over time. Therefore, inside the blockchain you would have all the environmental product data and transparency. Once the asset has a digital passport, at the end of the life of the building it's easy to implement the circular economy concept.

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