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Circular Economy

How Software Will Power Sustainability and Change the Economy

Aug. 17, 2020
Blockchain and AI have the potential to propel us quickly towards a closed-loop future.

Fossil fuels have helped build the world as we see it today, with everything from transportation to energy production relying on fossil fuel energy sources. While it’s important to acknowledge the impact that fossil fuel has on building our society and economies, it’s also equally important to acknowledge its setbacks, especially around the impact fossil fuels have on the environment and world climate.

The data clearly illustrates these impacts, with reports from the United Nations showing that the concentration of greenhouse gasses and the average global temperature have steadily risen since the Industrial Revolution. These temperature changes are a cause for concern, with scientists predicting a number of climate change implications as a result, from extreme weather events to ocean acidification.

Luckily, there is still time to make a difference by curbing greenhouse gas emissions to a point where the Earth’s average temperature only heats an additional 1.5 degrees since pre-industrial levels, and it requires us to drop the fossil fuels and turn to renewable energy sources. While doing this requires a lot of change at a relatively rapid pace, it’s also a tremendous opportunity to redesign traditional business structures and the structure of the economy itself.

So, what exactly is the solution? 

As it currently stands, the way the world and economy operate is not conducive to change. This is because our current linear economy looks at the world’s finite resources as a never-ending supply, used to create products with a finite lifespan, which ultimately end up as landfill or are incinerated. This leads to the depletion of resources and excess pollution, and doesn’t allow for the structural changes necessary to fight climate change. This is where the solution lies. Through shifting the way businesses operate and the way our economy works to a circular model, we can effectively fight climate change.

A circular economic model, also known as a “closed-loop system,” refers to a system where the output of one process sustains the input of another. This means that materials are kept at their highest possible value while excess waste and pollution are phased out, allowing for natural systems to regenerate. The benefits of a closed-loop system also have the potential to save money, with an existing project in Denmark reporting that $35.3 million was saved per year as a result of less waste disposal costs and the availability of low-cost energy and raw materials for production. 

While these environmental benefits and cost savings are great on paper, the shift to a circular economy is still some time away. This is largely thanks to the simplistic nature of our current linear economic model, which, when compared to the interconnected and complex nature of a circular model, seems like the easier option despite its lack of sustainability. As such, current and emerging technologies need to be utilized in order to drive the shift from the unsustainable economic models of the past towards a cleaner, circular economic system.

Blockchain is one such technology with great potential thanks to its record-keeping capabilities, an essential element in helping the world’s existing supply chains transition to an emerging circular economy. So how exactly can it do this? Essentially, blockchain has the potential to help participants across the supply chain cooperate and make collective decisions when needed through providing each of the participants in the network with one decentralized, true source of data that can’t be edited or tampered with.

 In practice, this means that products are easier to track, so participants can see where they’re from or where they’re going. Ideally, these products can be tagged from inception by applying unique blockchain markers to them, which are represented by a ‘token’ on the network. These tokens are then used to track the product through the supply chain, allowing for full transparency from start-to-finish in the product and material life cycle. The data created by this process also enables collective decision making to formulate new circular chains of supply, which perpetuates the circular economy.

Another standout technology that has already proven its potential in transitioning to a circular economy is artificial intelligence (AI). For the uninitiated, AI is an umbrella term for any technology with the ability to learn, reason, or perform human-like functions like pattern recognition, prediction or optimization with more accuracy, speed, and efficiency than humans. Because of this, AI can help solve some of the complex problems that stand in the way of adopting a truly circular economy.

There are a myriad of ways AI can do this, but the most obvious are product design, business modelling, and the mapping of circular infrastructure. In a circular economy, a product needs to be designed with reintegration in mind, and AI can enhance the development of new products, components and materials that are perfectly developed for a circular economy through machine learning processes that speed up all stages of product development. Business models can be completely reworked through bringing together real-time and historical data to advance product circulation and asset utilization through demand forecasting, predictive maintenance and resourceful inventory management. Last, but not least, AI can map out effective and achievable paths to viable circular infrastructure where all products are efficiently re-integrated into the supply chain, which completely closes the loop and reduces demand for new resources. 

With all this in mind, the environmental and economic benefits of a circular economy are clear—and that’s without taking the social benefits of such a system into account. While we’re slowly inching towards a more environmentally conscious future, the utilization of technological developments like blockchain and AI have the potential to propel us quickly towards a closed-loop future. Now, it’s just up to humanity to decide to adapt.

Kunal Phalpher is the chief commercial officer of Li-Cycle Corp. He has extensive international experience in the lithium-ion battery and renewable energy sectors, with a focus primarily on strategy and business development. His recent experience includes working as a director of product development at a residential solar company and director of business development with a lithium-ion battery manufacturer. Prior to those roles, Kunal spent several years in Germany working in the renewable energy and energy storage sectors.

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