A blockchain-based solution to enable supply chain transparency for a Circular Economy.

Website: circularise.com

Founded date: 2016

Application: Plastics

Business Model:B2B

Country HQ: The Netherlands

Founders: Jordi de Vos & Mesbah Sabur

YOUR JOURNEY TO FUNDING

About 10 years ago, I started my studies in industrial product design at the Delft University of Technology. Within the first months, I started—together with my current co-founder Jordi de Vos—another startup, which was completely different from Circularise, but still based on software. That venture did not work out, but we learned a lot and figured out that we really liked being entrepreneurs. Later on, I started focusing a lot on circular economy as I found it a super fascinating topic. When I was writing my master’s thesis, I chose to make use of the entrepreneurship annotation of TU Delft, where you are allowed to write a thesis in an entrepreneurial framework. In this way, I could use the content of the thesis to start a company afterwards, and that’s exactly what we did. In my thesis, I started focusing on the problem of lack of transparency and data in the circular economy - that was the spark that gave birth to Circularise. 

“I started focusing on the problem of lack of transparency and data in the circular economy - that was the spark that gave birth to Circularise”

THE INNOVATION

You just mentioned the problem of lack of transparency and data in the circular economy sphere - what’s that all about? 

Today, if you are buying products, a lot of the time there is little understanding how those products were manufactured and what their material composition is. For instance, if you buy a laptop, it’s extremely difficult to find out what the composition of materials in that laptop is, and this has strong implications for the end-of-life of the product. Right now, a lot of end-of-life recycling processes and other processes are less efficient because of this lack of data. That is the main problem, but there are also other interconnected issues inside supply chains. If you are a materials supplier, for instance, it’s very hard to prove that your materials are sustainable, because there are many layers of suppliers in between you and the final brand. And, if you are a brand, the problem is that you don’t know exactly if the materials you are buying are actually sustainable, where they come from and what the exact material composition is.  

So, everybody experiences a lack of data sharing in supply chains, in one way or another. And we strongly believe that more transparency is going to equal more sustainability. As it happens, trust, privacy and confidentiality are major topics within transparency. And blockchain is a very suitable solution for that. 

“We strongly believe that more transparency is going to equal more sustainability”

How does your blockchain solution work in order to allow for data sharing and transparency within supply chains?

The chain of custody model is a mass balance system, where for every kg of material we create a digital kg on the blockchain. This is out-of-the-box - there is no other tracker or identifier into the product. We are currently exploring some use cases where the materials are actually connected with a physical identified inside the material, but for now that’s outside of our scope. The way it works is through the digital twin that we create on the blockchain, which can have certain claims that say that it has recycled content or has a certain environmental impact. And these claims can be third-party validated. 

As it is a mass balance system, for every kg of material that you buy, sell and process, you are also doing a similar action on the digital space. So, eventually, if you are a brand buying all kinds of materials for your products, they all have a digital version with claims that are third-party audited and certified. This creates the opportunity to build smart contracts on blockchain where it’s impossible to cheat. There is not a perfect system yet, and there are always things that might be wrong, but within the mass balance framework, it creates—by design—a self-correcting mechanism. 

APPLICATIONS

Right now, we are in several industries. All of them have plastics as a starting point, but then go into several use cases, whether that is consumer goods, automotive or fashion. We are gaining traction in the automotive space—especially with German and Japanese manufacturers—because they also want to understand where certain parts of their cars come from and whether the plastics used are sustainable. Basically, we are starting with a combination of raw material suppliers and polymers suppliers, and then it goes into all kinds of different industries, like fashion, automotive, etc. 

Recently, you have established a new plastic industry consortium together with Domo and Covestro. What are the objectives of this initiative?

We feel it’s very important to have this consortium because we understand that Circularise is just one company and for transparency solutions to be impactful at a large scale, literally everybody in the supply chain has to use them. And we think that transparency solutions in the circular economy space should be built in an open and participatory manner. That’s why we are developing an open protocol and, together with our partners, we are working towards an open standard. Then, Circularise can be one solution, but obviously not the only solution in the world. 

“We think that transparency solutions in the circular economy space should be built in an open and participatory manner”

An OEM (original equipment manufacturer) often has hundreds and even thousands of different suppliers. So, we are not going to tell them all of their suppliers need to use Circularise. We are saying that we are one of the solutions, but they can join the Circularise consortium in order to work together towards this open standard, where other companies can also join and work on the same standard. In this way, they don’t have a 100% lock-in with Circularise from day one. We are working towards an open protocol that can be taken as the standard in the industry. 

VALUE IN CIRCULAR ECONOMY TRANSITION

The highest value we create at the moment is between raw materials manufacturers and brand owners. As a raw materials producer, what we can bring to the table in an increase in the material value of their sustainability portfolio. These manufacturers, in fact, have certain sustainable materials but it’s very hard for them to prove that these materials are actually sustainable without having a solution like ours. With our solution, by being able to very efficiently and trustfully prove to everybody in the supply chain that their materials are sustainable, we can increase the value of those materials. 

When it comes to brand owners, it’s the other side of the medal. For them, we can make sure that they can prove that whatever they manufacture, all of their suppliers are sustainable. That means that they can achieve their sustainable targets in a more transparent way and secure their brand image when they make certain statements. Eventually, all of this is driven by governments and consumers demanding more sustainability. 

FUTURE PLANS

Right now, we are at a pilot/MVP stage. We just secured 1.5 million Euro from the European Commission, which will bring us towards a production-level environment. We are still looking for another 1 million Euro to top that off, and bring the product to the next stage. So, in about two years time, we expect to be fully operational with production running at scale. We believe that the product can be ready in about six to twelve months from now, and then another twelve months to be fully operational. As I said, right now we have a very strong focus on plastics, but that will be slowly shifting towards other markets besides plastics. 

How have you noticed the attitude of investors towards Circularise and, more generally, similar blockchain-based solutions evolve since you first started?

That’s a hard question to give an answer to, but we do see investors getting more and more interested in what we do. That’s also very much thanks to the traction we have been getting lately, with all the pilot projects and partnerships we have announced. I don’t know whether without COVID-19 this would have been better or different - that’s hard to say. But we do see the interest from investors getting better. At the same time, it’s a hard time for investors as well, so there is a lot of talk, but less action compared to pre-COVID times. We’ll have to see how things go, but so far it’s been going better and better for us. 

What about your team?

We just hired three more very smart guys, so right now we are with a team of ten! We are still looking for another three people, front-end developers, blockchain developers and one UX/UI designer. 

VISION FOR DECADE OF ACTION

I believe that—at the macro scale—we are really enabling the market of sustainable polymers to develop. This is an emerging market, and more and more companies are either investing in or developing some sort of solutions for recycled polymers. But without a tool like ours, the whole market will not really see a push, because there is not really a point in manufacturing something in a sustainable fashion if you can’t prove it. A lot of brands are hesitant to invest and really transition their portfolio to real sustainable alternatives without having the real proof. And, as a raw materials manufacturer, why would you invest a lot of money in a sustainable line of products, if there is not enough demand for it? We are creating that demand by proving it to the brands. So the whole market right now is emerging and we see ourselves as one of the core enablers of that market to really flourish and be a lot larger than it is today. 

“There is not really a point in manufacturing something in a sustainable fashion if you can’t prove it”

For us, it’s really important to bring across the message that we are not just focusing on transparency as a commercial model, but we are also trying to bring open standards for the whole industry. So we are calling on all actors in the industry, in whatever role they are, to come together and sit down with us to explore what this protocol should be. We are working towards a first version of the open protocol by summer 2021, so everybody is welcome to join us and work towards this shared objective!

December 2020