How digital identities could bring us closer to a circular economy
This article is adapted from GreenBiz's weekly newsletter, Circular Weekly, running Fridays. Subscribe here.
What role can tracking and traceability play in enabling a more circular economy? Earlier this month, at the GreenBiz 20 conference, I had the chance to discuss the state of technology, the future of connected goods and the potential — and the pitfalls — of traceability within more efficient and circular systems.
I was joined on stage by Kate Daly, managing director of the Center for the Circular Economy at Closed Loop Partners, and Deon Stander, vice president and general manager of retail branding and information solutions for Avery Dennison. The following conversation has been edited for length and clarity.
Lauren Phipps: What will the future of supply chain tracking and product traceability look like?
Deon Stander: We believe that every physical item in the future will have a digital identity. Because of the digital identity, we’re able to connect brands and retailers with individuals through that physical product. And that physical product in itself — because it has a digital identity — will be able to provide information throughout its journey, from the start all the way through to its use at the consumer level, and ultimately to its disposal or reuse in the future.
That information is going to be able to provide a new opportunity for us to do things we’ve never been able to do in the past. It’s going to allow us to create communities of individuals as they utilize products. It’s going to be able to allow us to reduce the amount of waste that we have through the supply chain, and it’s going to be able to allow consumers to be able to look at the products, find a way to reuse or recycle them and in the future make better use of the net environmental impact that we have across the supply chain.
Phipps: How does this vision map to the aspiration of a circular economy?
Kate Daly: The transition from our current, linear, take-make-waste system, to one that is circular, is so complex and interconnected. Technologies that enable digital identity and material passports are going to be critical to be able to track these materials so that waste remains as a resource and remains in play. We feel a huge sense of urgency around this. If we use apparel as a case study, the issues of overproduction and the inefficiencies in those business models are really contributing to a huge amount of negative impact.
Currently, the apparel industry produces 100 billion articles of apparel each year for our planet of 7.5 billion people. Thirty percent of that material is never sold, and 85 percent of it ends up in a landfill. There’s huge economic implications for that.
One example is in New York City where I live; the sanitation department spends $60 million each year carting textiles to landfills. There are the cost efficiencies to municipalities from this waste, and certainly to the brands themselves who can introduce more efficiencies. We see that the current waste and inefficiency is actually an opportunity for innovation, and technology needs to play a role there.
Phipps: Let’s get more specific. Avery Dennison has a partnership with Ralph Lauren to tackle this problem; what does it entail?
Stander: We’ve been able to take a typical tag and label that they use on their clothing and make it a digital label in the sense that it has a digital identity. At the source, we attach the label at the garment manufacturer, and that allows them to do three things: understand where the product is coming from in the supply chain, add information to that label stored in its digital identity about how and where the product is made and the provenance of the product, and through the supply chain, utilize that to drive higher levels of inventory accuracy. The end piece of it, which they are still now working on, is how they use that label with that item of clothing to engage directly to the consumer on a one-to-one basis.
Every item of clothing is uniquely identified. Not at an SKU level — a blazer is the same across a hundred units — but this one is uniquely identified and associated with that consumer should they opt into it. It then allows a conversation to identify the benefits of the product, when it needs to be reused, resold or repurposed, or indeed the next time the consumer goes to the store to look for the next item of clothing.
Because we now have access to the data at the point of retail, and understand how to source it more efficiently, the whole apparel industry is gearing itself to being much more of a demand-driven industry.
That allows us to have significantly reduced inventory at the end of the supply chain, not having to be sold at the end of life or just disposed into the landfill.
[Editor's note: Ralph Lauren is using digital labels only for supply chain innovation at the moment, and not to track transparency and not to engage consumers on recycling practices.]
Daly: Counterfeiting is another huge challenge for the apparel industry. There is an opportunity for technologies that both help solve for a loss issue like this, and also allow the waste facilities downstream to identify the material composition of an article of clothing. Knowing when an article of clothing is 100 percent cotton or a poly blend is critical to understanding how it can be reused or reincorporated into the textile stream.
Phipps: What other applications are you seeing for this technology beyond apparel?
Daly: Technology needs to serve multiple purposes and you have to track the innovation not just to the efficiency and to solving the current problems but also to solving the problems of the future.
One example where we’ve seen technologies like these as an enabler of solving multiple problems is Algramo, a delivery system of home goods like detergent or shampoo. You’d be able to take a container and refill whatever quantity you need of those goods. It’s solving for you not needing to use a single-serve plastic bottle, you can use a reusable container, but at the same time, it solves for the fact that many people cannot afford to buy in bulk.
That’s led to the sale of sachets of single-serve homecare products, and those sachets are a tremendous part of the litter problem and getting plastic into our waterways in Southeast Asia. By being able to trace and offer customer incentives and the digital identification that comes with bringing back a reusable, you’re also enabling a variety of income levels to participate in buying that product and reducing impacts across the board.
Phipps: What words of advice would you give to companies newer to the topic, and thinking about increasing the traceability of their supply chains?
Daly: There are always unintended consequences when we put innovation first. Our premise is that it’s really collaboration that comes first and helps guide that innovation. These are technologies that everyone should be aware of and start assessing the applications. But we would encourage a collective approach, de-risking these technologies together so that there's more alignment and less diversification as they flow downstream.
Stander: Start now and build the experience, learn from that and then collaborate across the industry to maximize further technology development.
Watch the entire interview, as well as the rest of the GreenBiz 20 plenaries, here.