Environmental sustainability

Michael Peshkam, INSEAD Executive in Residence, and David Dubois, INSEAD Associate Professor of Marketing | July 24, 2019

Read more at https://knowledge.insead.edu/blog/insead-blog/how-blockchain-can-win-the-war-against-plastic-waste-1...

Start-ups are making incremental use of blockchain to reduce plastic waste, but the technology’s power to drive real change is yet to be realised.

It is always difficult for business executives to grasp when a new technology is ripe for use, and blockchain is no exception.

This is ironic given blockchain is often presented as the “technology of trust”. Blockchains can be thought of as networks of virtual ledgers able to securely store and distribute data without a controlling intermediary.

Unlike most digital technologies used to facilitate connectivity and duplicate processes, blockchain can tokenise, securely distribute and transfer anything of value to individuals on the network (such as a person’s vote or their financial assets).

The ability to assign and transfer unique value to specific assets has proven particularly useful for helping new markets to emerge (e.g. Bitcoin and Ether) and is now being used to solve some of the most pressing global challenges.

Plastic packaging: turning waste into an asset

One crucial area in which blockchain may be pivotal in creating change is the growing plastic waste crisis. In 2019, economists estimated the level of plastic waste to be around 6.3 billion metric tonnes (mt) with a value of US$7.2 trillion.

Around 90.5 percent of plastic ever made has never been recycled. At this rate, by 2050 we will have amassed roughly 12 billion mt of plastic waste, enough to outweigh all the fish in the ocean, with an economic loss of more than US$14 trillion.

Digital technologies – from social media to apps promoting recycling behaviours and nudging change – have significantly raised public awareness of the challenge. Litterati, for example, has created an app to share geolocalised pictures of waste tagged by brand and item type.

The app has had many successes including public institutions reportedly switching from plastic to paper packaging after students documented an overload of plastic packaging in their school’s vicinity. 

Beyond public awareness, a solution to the plastic waste challenge will require both a massive public behavioural shift to stop packaging leaking into the environment, and an increase of resources to change and accelerate the process of innovation.

Currently, most plastic waste innovation initiatives undertaken by producers, retailers, research institutions, NGOs and waste management are siloed, which limits their impact.

They are entrenched in traditional frames of thinking rather than seeking a systemic shift.    Such a shift will require a change to the actual and perceived value of plastic packaging so it is seen as an asset rather than junk.

Economic, societal and ecological ideals will need to be married and market mechanisms created to assign, transfer and exchange this value. This could take the form of crypto-credits or blockchain tokens. To be truly effective, these credits need to encompass all the ideals mentioned above – like carbon rewards.

Technological advances in plastic waste managementTechnology advances already exist to assist with each step of the plastic waste management process – from asset creation and valuation to transfer and exchange.

For instance, to optimise collection and recycling (and reduce poverty around the world), Canadian company Plastic Bank has created collection centres in Haiti, the Philippines and Indonesia (additional centres are soon to open in Egypt and Columbia), which buy waste by type and weight.

Participants take their plastic packaging waste to one of Plastic Bank’s collection centres and receive credits on their blockchain-based app, using smart contracts accessed from their mobile device.

Another initiative that focuses on transparency in asset valuation and transfer is Circularise, a Dutch start-up founded in 2016.

Circularise created a blockchain solution that provides an accurate pricing system for any recycled material and can indicate the number of times the product has gone through the recycling process.

For example, in textiles and plastics, it transmits info on recycled contents to the brand owners (e.g. Calvin Klein) by leveraging both the Circularise system and a tracer made by a third party.

Many other solutions are likely to emerge to accelerate and promote plastic packaging recycling practices at the company level. One example is Empower, a Norwegian start-up that uses blockchain tokens to foster donation-based recycling.

For every euro donated by an organisation, Empower commits to clean up the same amount of plastic waste by weight. So, if Nestlé donates €1,000, Empower will collect 1,000 kg (€1/kg) of any Nestlé plastic packaging waste.

But the opportunities that blockchain offers extend even further. The technology’s role as an enabler to create and transfer assets means it can connect each item of plastic packaging with the consumer so that it can be treated like an asset with clear monetary, social and ecological value.

This could be achieved by adopting technologies such as digital watermarks, RFID, NTFS or IoT, which are currently being used to trace products through the supply chain. Another option could be a QR code printed on the packaging. A simple scan of the code could automatically link information to an app and generate a crypto-credit.

Blockchain also provides the means to create for each item a “material passport” containing valuable information about the packaging features, including the material composition, the proportion of raw vs. recycled plastics, the origins of the material or even the number of times it has been recycled. 

The key lies in adding value to the waste

At present the near-zero value of plastic packaging after use makes any new business model almost impossible. This needs to be urgently revisited. One potential solution could be to borrow from the United Kingdom’s deposit-return scheme model.

This adds a small surcharge to the total price of each product, redeemable when the empty container is returned to the store. In the case of plastic packaging, the consumer would receive a crypto-credit and become accountable for disposing of the packaging in the appropriate container.  

Just as microcredits have transformed global development, the simple act of assigning value to packaging and connecting it to consumers through blockchain has the potential to profoundly transform consumer behaviour and entrepreneurial projects in the coming decades.

Keeping in mind the pioneers of technologies, from social media (Facebook) to e-commerce (Amazon) and e-marketplaces (Airbnb), it is clear that there are tremendous opportunities and first-mover advantages to be had by leveraging blockchain in emerging digital markets where asset valuation is under-formalised.

Addressing the issue of plastic packaging pollution is no exception. What is needed is a change champion, someone from inside or outside the field who understands the opportunities blockchain presents and has the foresight and resources to use it to bring about sustainable, large-scale change.

The authors have produced a comprehensive research study, titled “Thought Leadership Project: A World Without Beverage Packaging Waste”, for Coca-Cola European Partners, due to be published in 2019.Michael Peshkam has written a more detailed article, titled “Transforming Plastic Pollution Using Blockchain: Toward a World Without Single Use Plastic Packaging Waste” to be published shortly by the Blockchain Research Institute. Both documents are available upon request.

Michael Peshkam is an INSEAD Executive in Residence.David Dubois is an INSEAD Associate Professor of Marketing.Found this article useful? 

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Read more at https://knowledge.insead.edu/blog/insead-blog/how-blockchain-can-win-the-war-against-plastic-waste-1...

Today, a report by venture capital group Outlier Ventures emphasizes the need for blockchain based technologies to bring us into the future of clean energy.

The firm worked with organizations such as Siemens, WePower Network, and Stanford University for its research.The report, ‘The 3Ds of Energy: Decarbonization, Digitization and Decentralization’, presents a clear link between moving to a blockchain based grid and lower carbon emissions.

It outlines three technologies needed to create the grid of the future; blockchain, Internet of Things (IoT) and Artificial Intelligence (AI).

The Head of Research at Outlier Ventures, Lawrence Lundy-Bryan, said: “We must move to a low-carbon economy as fast as possible to avoid the consequences of the worst climate change predictions, and to do so, the energy sector must upgrade its data infrastructure immediately. We can no longer afford to wait.”

How can blockchain help?

Current a large slice of energy networks are centralized, outdated, and reliant on nonrenewable resources. As the industry must move to clean energy, more power plants must be added to the grid which must be interoperable with the old ones. Allowing the old to the mix with the new leaves the grid vulnerable to cyber-attacks.

Today’s report suggests using blockchain’s immutable and verifiably secure properties. Identities could be managed on a distributed ledger, allowing only those with permission to access the database. The data itself would be easily authenticated, as blockchain technology protects from tampering.

Outlier also mentions the use of smart contracts to speed up and automate complex transactions without compromising on security. The firm praises blockchain structured networks for the traceability and scalability they enable.

Of course, one of the key reasons to use blockchain is to move away from a centralized energy grid. Walter Kok, the COO of the Energy Web Foundation (EWF) said:

“With blockchain in energy, one of the big potential shifts is from value primarily accruing to relatively few big players such as utilities to a scenario in which many smaller players—down to individual consumers—can become active participants in a much more decentralized market.”

Where does AI and IoT come in?

The report suggests a new type of framework for the grid: The Convergence Stack. Essentially this stack relies on three stages of technological advancement.

First, objects on the grid will be connected on an IoT network, which can communicate. For instance, wind turbines and solar panels can be automatically balanced to match the demand on the grid, as these sources are unpredictable.

Sensors across the network will continually give status reports, since, as the report states, “we cannot monitor, control, and balance what we cannot measure.

”Then, blockchain technology will ensure this data is traceable, authentic and secure. With this mass of information, how will it be put to use?Finally, AI will ‘learn’ how efficient the system is depending on certain factors. Then the entire grid can be optimized in real time.

The report gives the example of Google’s DeepMind using wind turbine and weather data to predict future energy generation. This project increased the value of that energy by 20%. However, it didn’t use blockchain, so the data had to be standardized, delaying progress.

Using blockchain for energy networks is a hot topic in the enterprise space. Siemens, one of the contributors to this report, is among numerous prominent members of the Energy Web Foundation. Two days ago, it announced that its public blockchain went live.

There has been a lot of hype about blockchain technology – in particular, its potential to transform how humans transact, which could fundamentally redefine how business, governments and society operate.

Despite this hype, it is still a nascent technology with considerable challenges that need to be overcome. As the technology matures and is applied across a wider set of sectors and systems, there is both a challenge and an opportunity to realize blockchain’s potential – not just for finance or industry, but for people and the planet.

This report outlines how blockchain could disrupt the way the world manages environmental resources and help drive sustainable growth and value creation.

It identifies more than 65 use-cases where blockchain can be applied to the world’s most-pressing environmental systems challenges, along with eight ‘game changers’ where the technology could fundamentally disrupt current systems and approaches.

To date, these opportunities remain largely untapped by developers, investors, and governments, yet they represent an opportunity to unlock and monetize value that is currently embedded in environmental systems.

The report also highlights many of the current challenges that need to be addressed, outlines a set of principles for developing blockchain applications for the environment, and identifies the need for global platforms to incubate a responsible blockchain ecosystem.

Download the report here: http://www3.weforum.org/docs/WEF_Building-Blockchains.pdf

Alongside craft beer and organic Fairtrade coffee, “conscious capitalism” is a millennial phenomenon; a secular trend away from the disposable products sold en masse on negligible margins to brands with sustainable practices and our youngest generations are now starting to vote with their (often digital) wallets.

The trend towards conscious capitalism is just as significant for listed companies who want to drive their share price as it is for startups trying to get their product off the ground.

As the baby boomer generation come closer to mass retirement and they readjust to more defensive investment portfolios (divesting of large amounts stocks for more low-risk bonds) public companies will have to start thinking about the next generation of investors who they want to buy their stock. 

Investors' move to smart beta is reflected in the proliferation and performance of environmental, social and governance (ESG) and low-carbon exchange-traded funds (ETFs) in recent years, the most prominent iShares MSCI Social ETF (DSI) which tracks US companies that have positive ESG characteristics has even outperformed the S&P500 SPY ETF year to date.

Synonymous with smart beta, the ESG premium for listed companies has been widely accepted and "companies with strong corporate oversight have tended to outperform their poorly governed competitors by an average of over 30bps per month since the beginning of 2009,” Hermes Investment Management said in their latest ESG report. 

Environmental responsibility on the blockchain
IBM has announced it is collaborating with environmental technology firm Veridium Labs with a goal of shaking up the carbon credit industry. Veridium’s token Verde will run on the Stellar network and is backed by carbon credit company Infinite Earth.

The company’s REDD+ carbon credits are traded by companies to offset their carbon footprint and the credits are backed by projects which pursue long-term strategies to counter deforestation and the management of existing forest stocks. 

Infinite Earth oversees the 64,000ha Rimba Raya Biodiversity Reserve in Borneo, which serves as the “natural capital” for the carbon credits. The trading of carbon credits is cumbersome and fraught with counterfeit and double spending and the Redd credit is not without its detractors, even being labelled as “a collection of conflicts, contradictions and lies” for failing to have any impact on the issues it aims to address. 

One of the main criticisms is that the trading of credits fails to offset any emissions at all.IBM’s blockchain manager Jared Klee said the project chose the Stellar network to run the tokens on because it has built in decentralized exchange that can “mitigate against central points of failure” and credit hacks.

 It is touted to also increase the transparency of credit spending to avoid the double spend problem and track the performance of sustainable projects.

Another project that drills even deeper into carbon offsetting, down to the individual’s carbon footprint, is the Malta-based project Poseidon.

Unlike corporations and countries that trade REDD carbon credits, Poseidon credits offset individual purchases, such as clothes, by breaking carbon credits that  are issued per ton of C02 into grams to be used to offset microtransactions.

So, when someone buys a pair of shoes with a carbon impact of 12kg, the price for the required carbon offset is added to her bill and the buys 12kg worth of carbon credits with Poseidon tokens, making the purchase “carbon neutral.

”Poseidon is also built on the Stellar blockchain which it touts as a low-energy alternative to the energy intensive protocols of bitcoin or ethereum and only uses a fraction of the energy per transaction as a Visa payment. 

Conclusion
The contentious topic of energy consumption and the environmental impact of crypto mining, especially bitcoin, coupled with the demographics of more conscious young consumers will play an increasingly crucial role in the adoption of a prominent cryptocurrency. So it would be wise for investors to consider facets of ESG criteria when assessing investment opportunities in crypto as well as traditional markets. 

Discover more from Brave New coin here: https://bravenewcoin.com/news/sustainable-investing-in-blockchain-with-carbon-coins/