Chain of custody and blockchain in the bioeconomy and the circular economy – General concepts
Series: Chain of custody and blockchain in the bioeconomy and the circular economy
- General concepts
Introduction
The future of chemicals and plastics is biobased and circular. Global brand owners are communicating their efforts to contribute to the transition of the bioeconomy and the circular economy by incorporating biobased and recycled content in their end-products. For instance, according to a report issued by Closed Loop Partners [1], 37 of the world’s largest consumer brands and retailers (like Coca-Cola, Danone and Nestlé) have made public commitments to use recycled plastics in their packaging within the next 10 years, requiring an increase of supply of 200–300%.
This series of posts intends to serve as a very brief introduction to some tools related to the traceability and transparency in the value chains that will facilitate the aforementioned transition in the short term. The two first posts furnish general insights about the chain of custody, mass balance and blockchain concepts as well as their application to the bioeconomy and the circular economy. The references contain detailed and valuable information. The third post presents a case study of the application of the mass balance model in a chemical company and the fourth one lists several of the most interesting examples unveiled in the last months.
Definitions
Chain of Custody (CoC)
- ISEAL Alliance [2]: “The custodial sequence that occurs as ownership or control of the material supply is transferred from one custodian to another in the supply chain.”
- ISCC [3]: “It is a general term for making a connection between sustainability information or claims regarding raw materials, intermediate and final products.”
CoC certification
- ISEAL Alliance [2]: “Confirmation of the chain of custody or traceability in the supply chain where a certificate is issued.”
- RSB [4]: “It is a mechanism that enables the tracking of certified material through the supply chain, ensuring that the sustainability practices certified at production can still be accounted for along the supply chain – from primary production through conversion, processing and trade to end use.”
CoC model
- ISEAL Alliance [2]: “The general term to describe the approach taken to demonstrate the link (physical or administrative) between the verified unit of production and the claim about the final product.”
CoC system
- ISEAL Alliance [2]: “The complete set of documents and mechanisms used to verify the traceability between the verified unit of production and the claim about the final product.”
Blockchain
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Blockchain technology is a tool to reduce audit inefficiency, create a single source of truth for CoC tracking and support sustainability data reporting.
Models
There are a range of different CoC models to describe the systems used to track the movement of products and their associated claims through a supply chain. Their common objective is to guarantee solid bookkeeping and to corroborate a link between in-going content (biobased, recycled…) and the finally out-going product. According to ISEAL Alliance, there are main four CoC models whose principles are summarised below (extended information on References [2,5]).
Figure 1. Four types of chain of custody models (taken from Reference [5])
Identity preservation (also called: hard IP, track and trace)
It is possible to physically track the product to its origin, ensuring unique traceability and physical separation of products from other sources along the supply chain.
Each batch, quantity or consignment of certified product is clearly separated in both physical product and in associated documentation from other certified or non-certified product throughout the supply chain.
The identity preservation model is only applicable in case the desired goods or components can be identified individually.
Segregation (also called: soft IP, bulk commodity)
Consists in the aggregation of volumes of products of identical origin or produced according to the same standards in one stock item.
Permits mixing of certified product: Different batches of certified physical product may be mixed only with other batches of physical product certified to the same standard, or two standards which recognize equivalence.
In the segregation model, materials from different sources can be mixed within a common category, but material categories are kept physically separate.
Mass balance
It is designed to track the total amount of the content in scope through the production system and ensure an appropriate allocation of this content to the finished goods based on auditable bookkeeping. Property conservation principle is set to ensure that the total certified output does not exceed its finally out-going product.
Mass balance is an overarching term for various slightly different types of chain of custody which involve balancing volume reconciliation.
Certificate trading (also called: book and claim, credit trading)
The certified product is completely disconnected from the certification data. The certified product evolves in separate flows from the certified supply. Credits or certificates are issued at the beginning of the supply chain by an independent body reflecting the sustainable content of supplies. The intended outcome is that outputs from one supply chain is associated with total credit claims corresponding to the certified input.
Certification and sustainability claims
All CoC models need standardization and be validated by an independent third-party certification scheme. The definition of the allocation rules and the types of claims is pivotal to gain credibility in the eyes of the markets. Certification helps to support trust that the feedstock origin does not violate social and environmental criteria. Feedstocks shall be responsibly sourced and shall be certified renewable by independent third-party certification bodies.
Such certification can be based on existing multi-stakeholder standards and/or legislation-based labels and schemes. Company claims on CoC should be made according to ISO 14020 standards series on environmental declaration and all relevant national regulations applicable to product environmental declaration and certification. The ISO 14020 series provides businesses with an internationally recognized and agreed set of benchmarks against which they can prepare their own environmental labels, claims and declarations.
Blockchain potential
Transparent supply chains are fundamental to ensuring product quality and meeting environmental standards. Effective traceability systems reinforce a maximum level of coordination between different partners of supply chains. However, interorganizational chains tend to be based on piecemeal information systems that hinder the transparency of the whole supply chain. Their sustainability is threatened by the diversity of players and lack of trust.
CoC, Supply Chain Management (SMC) and logistics are fields where blockchain technology shows to be advantageous since it creates a platform where every player may access and share information. Supply chain applications of blockchain, may involve a secure and innovative digitization of information and its transaction across players or simply the use of smart contracts to facilitate the financial side of the transaction of goods.
Blockchain facilitates valid and effective measurement of outcomes and performance of key SCM processes, promoting trust among suppliers and reducing the need for third parties. Blockchain properties have shown to provide a cost-efficient solution for managing complex supply chains and tough consumer and regulatory demands. Succeeding in building trust and transparency in sustainability can help trigger transformation of consumer behaviour.
The emergent sectors of biobased industries are still away from the blockchain umbrella. The difficulty to provide a certain level of trust between different players, in addition to the volatility of the market, acts as a barrier to this sector’s growth. The next step for blockchain technology is application at scale.
REFERENCES
[1] “Accelerating Circular Supply Chains for Plastics: A Landscape of Transformational Technologies that Stop Plastic Waste, Keep Materials in Play and Grow Markets”. Closed Loop Partners, 2020.
[2] “Chain of custody models and definitions”. ISEAL Alliance, September 2016.
[3] “ISCC 203 Traceability and Chain of Custody Version 3.0”. ISCC, August 2016.
[4] “What is chain of custody certification?”. Roundtable on Sustainable Biomaterial (RSB).
[5] Whitepaper "Enabling a circular economy for chemicals with the mass balance approach", CE100 network of the Ellen MacArthur Foundation, 2020.
[6] Euromoney: “What is Blockchain?”.
[7] International Organization for Standardization: “Environmental Labels”. June 2019.
[8] Francisco, Kristoffer & Swanson, Rodger. (2018). “The Supply Chain Has No Clothes: Technology Adoption of Blockchain for Supply Chain Transparency”. Logistics. 2. 2. 10.3390/logistics2010002.
[9] H. Treiblmaier: “The impact of the blockchain on the supply chain: a theory-based research framework and a call for action”. Supply Chain Management: An International Journal 23/6 (2018) 545–559. Emerald Publishing Limited [ISSN 1359-8546].
[10] Duarte Miguel Mello Loureiro Santos da Silva: “Blockchain as a service for bioeconomy agri-sector. An exploratory study of blockchain in the European bioeconomy”. Thesis. Faculdade de Ciências e Tecnologia, Universidade Nova de Lisboa. September 2018.
