Communicating about substances along the value chain: what’s the latest?
If our society is to move to a circular economy, we will need to have more information about what consumer and industrial goods are made up of so that waste managers could decide what can be safely recycled and where certain substances need to be removed first. At the same time consumers are also increasingly demanding more information about the safety of products and their “ingredients” as well the information about where all these parts are coming from. More transparency about products in value chains is therefore not a “nice to have” but a “must have” in a circular economy.
While there is a consensus among industry, policymakers and civil society about the need to bring more transparency, there is no common approach as to how to do this. In addition to technology, two important considerations need to be taken into account: first, companies need to protect their know-how and confidential business information (CBI) when transmitting data about substances along the value chain; secondly, as certain products can be in use for decades, data needs to be safely stored for many years.
All this means there is no easy solution to this problem. Yet there are several value chains which have successfully launched pilot projects to track down and report about substances in their products.
At a recent workshop organised by Cefic “How to address transparency in the value chain?” we asked a representative of the European Commission, the automotive industry and chemical industry, building, and toy sectors to speak about their experience. So, what can these value chains teach us? Could a so-called “digital product passport” be a solution? What is the role of blockchain in bringing transparency?
Automotive industry: a global pioneer in information sharing
Each vehicle is a complex system made up of thousands of parts and car makers routinely work with more than 3,000 various suppliers delivering vehicle components just for one car. This makes it absolutely necessary for car manufacturers to know what substances are used and their regulatory status. The car industry has therefore got a head start over others in designing a system to trace substances in their value chain. In fact, they’ve been doing this for the last 20 years through an International Material Data System (IMDS), a global data repository that contains information on materials. The material manufacturer includes information in the system and sends this on to the customer who adds more information. Finally, it goes to the car manufacturer. When data is confidential, it is clustered under the ‘Confidential Substances Function’, with the golden rule that no substances that are harmful for human health or the environment are hidden away under that general header.
Use of blockchain allows to track environmental footprint
Toys and construction sectors are currently using customized blockchain based tracking systems that also allow them to assess the environmental impact of their products by tracking how much water and energy has been used to manufacture a specific article. Each party involved along the chain can only provide the data for the material they provide. The data is encrypted and can be decrypted if needed.
Chemicals industry pilot projects involve blockchain and encryption
Dow and Solvay are also using blockchain to transfer information on chemicals in the value chain. The two companies are currently running two separate pilot projects with a blockchain platform to facilitate recycling of polyurethane foam from mattresses (Dow) and polyamide fiber in sportswear (Solvay). The platform they use is based on two technologies, blockchain and encryption. Blockchain does not centralise data, like a third party would, it distributes it. This allows the owner of the data to manage the governance. Encryption protects confidential data. The data compiled (“the digital product passport”) consists of the chemical composition, safety, and sustainability attributes, like the sourcing of materials. The data owner can decide to lock or unlock certain information.
European Commission is working on a Digital Product Passport
The Chemicals Strategy for Sustainability seeks to promote cooperation and sharing of information across sectors and the value chain, and the European Commission is currently considering the idea of a Digital Product Passport, which allows a product to be traced back to its origins.
The Digital Product Passport would set requirements for the minimum amount of information to be shared. Since it is a matter of finding the right balance between transparency and protecting confidentiality of business information, it is yet to be defined whether data should be accessible on a need-to-know basis or with open access. Another challenge is exploring the best way to link information to a unique identifier.
Among the options, there is the possibility of a decentralised system or a data space in collaboration with European Commission’s DG CNECT, explained Michele Galatola, a Policy Officer from the European Commission’s DG GROW during the workshop.
Cefic members recommend a sectoral approach in designing a Digital Product Passport
Cefic members support the need for more transparency around substances of concern and are looking at practical ways to provide such information on a need-to-know basis, building on new digital technologies (e.g. blockchain), while preserving suppliers’ “know-how”.
Cefic has identified a set of recommendations for the development of a digital product passport:
- Establish sectoral approaches for priority material streamsbased on potential health and/or environmental impact, and/or based on their relevance in contributing towards achieving circular economy targets. Stakeholders in the value chain do not have the same data needs so data access should be modulated to deliver only the useful /needed data.
- Build on the experience from value chains (e.g. SCIP database discussions) and existing initiatives related to piloting new digital technologies (e.g. ChemChain and Circularise). We consider that SCIP database should undergo an evaluation process before adding data sharing obligations on other hazardous substances. In fact, initial reporting from the value chain identifies the implementation of SCIP as very complex and challenging for article manufacturers, due to the different origin of the substances, many of which come from third-countries. The real question to assess is whether it delivers the added value it was meant to deliver.
- Develop standardised requirements regarding the communication on relevant chemicals in products (see for instance the approach adopted by the Proactive Alliance of which Cefic is an active member).
- Develop a mechanism (or process) and assess corresponding technologies of protecting confidential business information when passing on substance data along the value chain to meet the objective of the CEAP (Circular Economy Action Plan) and increase recycling rates while preserving companies’ know-how, which is equally important for competitiveness of the EU industry.
To conclude, the chemical industry is committed to providing all the relevant information to ensure a safe and sustainable use of chemicals by consumers and workers in a circular economy and to achieve safe and high-quality recycled products, while ensuring CBI is protected.
In addition, we are committed to testing available and new technologies to identify a smooth and efficient way of transferring information in the value chain.