Authors: Holger Berg, Raik Kulinna, Carsten Stöcker, Susanne Guth-Orlowski, Ricky Thiermann, Natalie Porepp
Abstract This paper analyses the potential of novel digital information technology to enable the reliable provision of product information along the plastics supply chain. We investigate the possible contribution of a product passport equipped with decentralized identifiers and verifiable credentials to overcome information deficits and information asymmetry in the circular plastics economy. Through this, high-quality plastics recycling could be enabled on a larger scale than is possible today.
Plastics currently are among the most ambiguous and most debated materials. However, they are versatile, easy to produce and manufacture, and adaptable to many utilizations, the material’s ubiquity has turned it into a major problem to the environment. Hence, political and social pressure to halt this development has emerged and becomes more and more powerful. For example, the European Union’s Circular Economy Action Plan and the Single Use Plastics Directive have been embodiments of this.
Due to their advantages, plastics are often cheap and important enablers of other processes, for example in packaging. In this they are also often a rather ecologically sound solution protecting products (like food) or being less harmful (e.g., when compared to paper in some instances). It is the plastics waste that creates the environmental problems.
Meanwhile, many players in the supply chain, among them plastics producers, manufacturers, recyclers, retailers, research, etc. seek for solutions to create a functioning circular plastics economy. A resource efficient circular plastics economy can be characterized as keeping plastics products and materials as long in the economic cycle as possible i.e., as long as this provides an environmental advantage. To maintain its value, the material should always be brought to an application that retains as much of its qualities as possible. Therefore avoiding “downcycling” or cascadic use wherever possible. However, this is not an easy task. One of the challenges faced in this endeavor is information asymmetry and intransparency in the market for recycled plastics (recyclates). There is a persisting knowledge gap between plastic recyclers and producers of plastic products (manufacturers) which leads to underperforming markets and lower amounts of high value recycling than otherwise possible. As a result, many plastics are either burned or landfilled instead of recycled.
Overcoming this information asymmetry could create new markets and applications for plastics recyclate in a circular economy. The obvious prerequisite is to create, transform and transport the information required. A task that could be enabled by emerging digital technologies that help improving identification and traceability of plastics material, e.g. providing evidence on the specifications and qualities of a defined plastics batch.
This paper analyses the potential of novel digital information carriers to improve reliable provision of information along the plastics chain. We investigate the possible contribution of product passport implemented as decentralized identifiers and verifiable credentials to overcome information deficits and information asymmetry in the circular plastics economy. We test how these instruments could close the information gap by making information flows consistent and reliable along the supply chain. This way, the quality and origin of recycled plastic material can be made traceable and verifiable. Such passports may have therefore the potential to increase trust and transparency along the entire supply chain as well as create new forms of recycling.
The paper proceeds as follows: Chapter 2 discusses the problem and implications of information deficits to the establishment of a circular economy for plastics. Chapter 3 introduces strategies that have been idenified to overcome those deficits. The fourth chapter describes how the deficits can be addressed by establishing verifiable product information through decentralized identifiers and verifiable credentials. Chapter 5 illustrated how decentralized identifiers and verifiable credentials for plastic products can be applied to improve plastics recycling. The paper’s findings and future work are discussed in Chapter 6.
Until now, a circular plastics economy only partly exists. Especially so, since the high variety of plastics and high market intransparency makes recycling extremely demanding. It is hence not surprising, that the use of secondary plastics materials in European plastics manufacturing has remained relatively stable on a low level of around 13%* (Conversio 2020) , despite of intensive measures to create large scale plastics recycling over the past three decades. At the same time, the amount of plastics waste constantly rises and the demand and utilization of plastics is expected to continue rising in the foreseeable future (Material Economics). In consequence, it is expected that plastics waste and plastic-related pollution rise as well. The creation of transparent and reliable markets for plastics recyclate is thus of highest importance. However, high value recycling where e.g., plastics recyclates are being reemployed into their former use comes with high technological demands for purity of type (and often color). In many applications even small contaminations with other types of plastic may render a batch of recyclate unusable and therefore worthless.
Figure 1: The stylized plastics value chain
Figure 1 shows a stylized depiction of the plastics value chain, including the recycling process. At present, means to easily prove quality and composition of recyclate are rare. Recyclate markets are thus distorted. Reliable information on which material can be procured in which purity at what scale in which point of time are often hard or impossible to obtain, especially when large amounts of recyclate are required for a longer timeframe to secure ongoing and future production in mass markets. The use of plastics recyclate is therefore most often expensive when compared to primary material, which due to the production processes can be expected to be pure without much required measurement on the side of the plastics manufacturer. These problems have led actors in the plastics supply chain to look for alternative solutions in the search to create reliable flows of high-quality plastics recyclate.
One has been the integration of the whole circle within one company or group. In effect, such a solution implies using only plastics produced and recycled within the own company. In this approach the (almost) complete control and transparency over plastics materials and therefore the minimization of insecurity is created by the construction of a closed system. However, this comes with the disadvantage, that all other participants are exempted from the use of these specific plastics for the foreseeable future.
Another approach is the reduction of insecurity by utilization of recyclates that only stem from less risky and complex sources. This especially refers to secondary material produced from industrial plastic waste. As a rule, such waste streams are cleaner and purer in type. However, they only cover a small fraction of the plastics waste produced each year, and therefore do not tackle the environmental problems at hand. The much larger amounts of post-consumer plastic waste cannot be addressed in this way. This leads to inferior applications of such plastics, such as use as fuel surrogate in the production of cement and other materials, or to direct incineration. In many countries, landfilling of plastic waste is also still practiced. In effect, material of high potential value is lost forever.
Another successful way has been the introduction of take back schemes, e.g for PET-bottles in Germany. Such systems lead to very clean material streams as they only accept very distinct products and directly incentivize circularity. However, they are also complex and need to be well-managed. Such take back schemes for the large variety of existing plastics would be very demanding. However, these take-back-schemes are complex to establish and may not be suitable for each product, e.g., when plastics-made components are used for assembly in more complex and long-living products.
Currently, all these facts make plastics recycling an expensive and cumbersome endeavor for most plastics manufacturers that are willing to use recyclate, since missing information leads to high search and transaction costs as the right material must be found and meticulously tested in laboratories, before it can be used in production processes. Obviously, the measurement costs even grow with the volume of recyclate employed, since more testing is required either on the side of the supplier (most often a recycler) to demonstrate and assure quality or on the side of the user for the same reasons. In both cases, the costs of the recyclate increases and the attractiveness of recycling from a purely economic point of view decreases. Such costly information deficits regarding secondary plastics material currently concern almost every aspect of the market. In the past, especially insecurities and bad experience regarding the true quality of plastics recyclate have also created a lack of trust between the different actors in the plastics cycle and created strong reservations on the side of potential customers which further compromises plastics recycling.
3. An Interpretation from new institutional Economics: Stategies to overcome the Information Asymmetry
As has been shown, information deficits and asymmetries are a core problem of establishing functioning plastics recycling on a larger scale than today (Wilts/Berg 2017). In most instances, the risks associated with information deficits and information asymmetry are attributed to utility-optimizing behavior by the party with superior information. They are described in the form of hidden agenda, moral hazard etc. and can lead to adverse selection on the side of the buyer. The situation of the plastics supply chain as depicted above shows just this picture. Lack of information and unevenly distributed information leads to insecurities, mistakes and hence distrust which eventually creates dysfunctional markets.
Transaction costs are resulting from these risks caused by incomplete information and information asymmetry (Williamson, 1975). They result inter alia from the need to determine the value of a good or service in several dimensions such as measurement of quality (e.g., Barzel 1982), and from the need to properly enforce contracts (North, 1993).
Some classical norm strategies have been devised to overcome situations of incomplete information. Some of these are already in place in the plastics recycling markets:
- Integration: The integration of e.g., a supplier into a company’s own organization reduces risks by introducing direct dependency and control (Coase 1937). As has been pointed out above, this approach has already been put into practice in the plastics industry in some instances.
- Increasing the basis of information / signaling: Where the selling party provides clear hints or documentation e.g., on the quality of a material by supplying a buyer with results of laboratory tests for a certain batch of recyclates. Such a signal creates more trust and transparency but must be a hint rather than a complete mitigation action.
- Contractual solutions / warranties: Provision of warranties by the supplier mitigates the buyer’s risk and shifts it to the seller. This creates both more trust and stability in a market relationship, as the supplier is incentivized to additional care regarding the products he or she provides. However, it may be difficult after the manufacturing process to proof deficiencies in a certain batch and hence enforce a warranty. Moreover, since warranties only become effective once a damage is done, they are affiliated with high potential costs in terms of money and time and can also result in losses of material and therefore less resource efficiency.
- Monitoring: In this approach, the buyer is entitled to surveil the production process to achieve transparency. However, depending on the monitoring process established it too can be costly and difficult to maintain. Especially so when IP rights and know-how protection is involved.
Increasing effort to perform transactions and additional contractual complexity can thus lead to much higher transaction costs. Finding less costly ways to lower information asymmetries, to overcome the information deficits and to provide secure information would be a way forward to more functional markets.
Studies have shown that provision of data and use of digital instruments can improve circular economy practices. E.g., Kristofferson et al. (2020) explained how accumulation and analysis of data can enable resource efficient circular instruments. We argue that the same can be true for the compensation of transformation deficits and the reduction of transaction costs (see also Wilts/Berg 2017). Even today, most production steps and transactions are digitally documented but the data is not used for the circular economy. In terms of plastics recycling, it would be required to collect and share the following data:
- pureness of type,
- technical specifications of the recyclate (e.g., melt flow index) ideally measured and documented already in its production process,
- additives,
- color,
- availability of the recyclate supply (e.g., how much and when it is supplied),
- further qualitative aspects and certificates (e.g., if the recyclate conforms to food grade standards),
- results of laboratory tests (which laboratory, when tested, standards used, etc.).
Such data can then effectively compensate or eliminate information deficits and reduce transaction costs. It improves the transparency of the production process and creates new potential for the product and market design. Most of all, it can establish trust in a trustless web environment, where it can enable new markets and applications for recyclate and establish new market relations where partners do not know each other. One prerequisite however remains: The transaction costs for the documentation and provision of data must effectively lower the price of recyclate, as ceteris paribus no markets will be generated if the recyclate prices are still much higher than those for primary materials. In the following chapters we show how these processes can be enabled and the requirements met with the help of decentralized identifiers and verifiable credentials.
4. Solution Design for Electronic Product Information to overcome Information Asymmetry in the Plastics Life Cycle
An "identity [...] is the totality of peculiarities that characterize an entity, an object or an object and distinguish it as an individual from others." A digital identity therefore is a set of attributes that describes a special entity and is stored or processed in one or more IT systems. Identities for products or product groups are often referred to as product and material passports and in some cases also digital twin. The use case examined in this paper describes a new way of establishing a unique digital identity for a consumer product from the perspective of recycling. In a circular economy, information about the composition of the materials used and, in some cases, the origin of materials is required as part of the product passport. The current, investigated approaches for the implementa-tion of product passports are for example the circularity.ID of the circular.fashion UG, the CircularID Protocol by EON group, and the Product Circularity Data Sheet (PCDS) as part of the Luxembourg Circularity Dataset Standardization Initiative. It complements further standardization of data schemas for recycling materials for instance GreenBlue’s Recycled Material Standard Framework. Moreover, ReciChain is a first blockchain application for circular economy that explores the potential of trustworthy certificates of origin for the waste materials.
Digital identities appear in research for various use cases to build an efficient and competitive, secure, and trustworthy data infrastructure, such as required by the European Commission’s data strategy and GAIA-X. EU’s draft towards a more sustainable single market for business and consumers for instance notes: “a digital strategy for a sustainable market welcomes the announcement of a common database and of a ‘product passport’ to improve traceability and transparency”.
Since information in IT systems can be easily copied and changed from a technical point of view, creation of trust in such digital identity is one primary research subject. In the following, this paper proposes a decentralized concept for exchanging verifiable product and material information between market participants. It is proposing to use a decentralized public key infrastructure (dPKI) which allows to create digital identities for companies and products and to exchange trustful and digital product passport data among all players of the plastics industry. We will show how with the suggested approach all product information can be verified for origin, integrity and compliance which creates trust along the entire supply chain.
In addition, we show how decentralized, digital identities allow for interoperability between the various the various market participant roles and their divers business software systems.
Design goals1 of a system that that provides trusted electronic product information can be derived from initiatives about decentralized (personal) identities. We transfer those design goals to decentralized product identities, which shall be:
- Decentral. The system that issues product identities shall have no central component/intermediary to avoid the risks of a central, single point of failure or no central governance. Instead, the solution shall be decentralized to allow all market participants to add products and product information to the ecosystem.
- Controllable. Data owners shall have direct control over their personal data (self-sovereign identity) and the material or product information they provide.
- Private. The privacy of shared information must be guaranteed where needed, e.g. to protect business secrets. Legal requirements, especially around data protection, protection of property rights, and confidentiality according to business secrets need to be fulfilled.
- Secure. The product data provided must be correct. Its origin and integrity need to be verifiable, and the data needs to be stored safely from unauthorized access.
- Discoverable. All information about players, material and products needs to be discoverable for authorized parties. It must be possible to interact with the entities and owners of the data. For example, recyclate batch data needs to be clearly identifiable, so that a biunique identification can be made. Information shall travel with the material along the production process and shall be reusable in a consecutive recycling process.
- Interoperable. The solution needs to be built on standards to allow the largest possible degree of interoperability. Data schemas that describe the product need to be standardized, i.e., technical encoding and values and their semantics must be jointly understood and agreed by all market participants. Technical updates must also be possible that come with the extension and updating of underlying standards.
- Portable. The digital identities must remain permanent and must be usable in various systems and networks, thus implement the openness to various digital ecosystems.
- Simple. The solution must be simple and easy to access for market players.
- Extensible. The solution needs to easily extensible for additional market players and use cases (e.g., for calculation the carbon footprint of plastic virgin material) and ready for a broader, international use. Data from different sources (e.g., databases like PEF or SCIP) needs to be integrable.
4.3. Implementing an ecosystem for trusted electronic product information in the plastics life cycle
This Chapter addresses how the design goals of chapter 3.2 are met, especially in the context of Circular Economy.
The term self-sovereign identities (SSI) is a new value in various design goals compared to classic approaches. the term is most often used to describe the design goals for decentralized personal identities2. However, digital products have the same design goals and therefore SSI also drives the design for electronic product passes with the goal to enable the Circular Economy. Using SSI in the product context refers to the self-sovereignty for the product data owner, i.e., the direct control over product information by the manufacturer. Each company in the value chain owns the sovereignty data of their production process. Another example is the licensee of the packaging materials (acc. to German packaging law (‘Verpackungsgesetz’)), usually the retailer of the product, who generates and thus fully controls data about the product packaging.
The underlying technologies for self-sovereign product data registries are decentralized identifiers (DIDs) and verifiable credentials (VCs). In our example in Section 4, every company in the supply chain and every product/material needs a unique DID. DIDs are not created centrally by one organization but by the DID owner (also called subject) itself. Information that describes the company or the product DID further are issued by organizations or business partners in the form of electronically signed VCs. For example, a GS1 accredited company issues the verified manufacturer address, or an auditor issues the ISO 9001 certificate to the company DID or the manufacturer issues the plastic raw material code to the product DID. Decentralized Identifiers are often anchored with distributed ledger technologies, such as the Ethereum protocol, to allow a decentral, trustworthy storage of the DID documents. DID documents describe the DID subject and most importantly contain the public key for electronic signature validation.
DID excurse and example: In our example in Section 4, the product-DID looks as follows:
did:ethr:spherity:testnet:0x828efeeaab06dd9541992b791d78e5d96cd35323
DIDs have the same syntax as URLs, which are described in the Uniform Resource Identifier Standard once defined by Tim Berners-Lee et al. DIDs start with did defining the URI scheme, followed by the DID-Method ethr followed by the DID method specific identifier, here spherity:testnet:0x828efeeaab06dd9541992b791d78e5d96cd35323. The DID method describes how the DID document can be managed (e.g., created, found(resolved), updated or deleted). The beginning of the specific identifier points to the decentralized data registry (here: spherity:testnet) where the DID document is hosted/can be retrieved (here an Ethereum test network operated by Spherity). Finally, the long number is the actual identifier.
The combination of the DID Method, the data registry and the identifier ensure that the DID is globally unique and can also be used outside the registered, decentralized data registries.
With the above-mentioned verifiable credentials, the company, product, or material DIDs collect verifiable attributes about themselves which they can store in a so-called wallet. The more testimonies from trustworthy, verifiable issuers a DID has, the more trustworthy it gets. Only the DID subjects have control over their wallet. The wallet owners can decide which verifiable cre-dentials they want to present to whom and thus have control over their privacy.
DIDs and verifiable credentials (VCs) are standardized by the W3C. Everyone who implements those standards can participate at the decentralized ecosystem. The communication between wallets (e.g., to present or verify a VC) is standardized by the Decentralized Identity Foundation (DIF).
The combination of the technology above allows for an interoperable and extensible technological basis for decentralized identities of people, organizations, and things and their digital twins. identifiers
In the supply chain the product identity needs to move with the product along the value chain. For portability, decentralized identifiers and verifiable credentials can be coded and represented as standard 2D codes (such as QR Codes). This helps to transfer DIDs and VCs from the digital to the physical world.
The product DID spherity:testnet:0x828efeeaab06dd9541992b791d78e5d96cd35323 that we use in our example can be encoded into a 2D code. Figure 2 shows the respective encoding of the DID as a QR code. Using this code on product packaging can link from the physical product to the digital product passport.
Figure 2 QR code of the DID of the Consumer Product
To link back from the QR code to the digital product DID and its VCs an app needs to be built with the following logic: When the code is scanned by via a QR code reader, such as a mobile device, the application decodes the DID. The DID then links (resolves) automatically to the DID document. Amongst the public key, the DID document includes service endpoints or other locations where the VCs of the product DIDs are stored. For example, if a DID is registered on the Ethereum mainnet, then its DID Document can refer to functionality and data outside the Ethereum mainnet via the service endpoints. Behind the service endpoints all product passports are stored in (decentralized databases)
This is a different approach than the Holy Grail 2.03 initiative, that invisibly puts recycling information directly on the packaging which is readable by recycling machines. The drawback of this solution is that the information on the product itself is limited. Using an identifier that links to distributed data allows to attach more information about the product.
The access to the above-mentioned service endpoints can be regulated. That means that at this point an access control mechanism can be implemented to grant access to verifiable credentials (that store all information about the DIDs, here the product) only to authorized applications/users. This way it can be ensured that product information is secure and protected against unauthorized access.
The decentralization of the above explained concept makes the implementation approach simpler than classical centralized systems, because the central storage of data, the central development of software and the heavy integrations between large industry players become obsolete.
5. Case Study: Decentral, Digital Identities and verifiable Recycling Information for Plastic Products
This chapter describes a case study in the circular plastics economy. The first subchapter describes the use case and the general technical approach. The second subchapter shows the detailed steps to collect all information during the value chain based on DIDs and VCs. Subchapter 4.3. goes on a deeper technical level; it shows the examples of products passport attributes and code examples of DIDs and VCs
The following example describes the usage of decentralized identifiers for all market participants and physical products in the supply chain as well as the usage of verifiable credentials for the creation of a verifiable product passport. The use case focuses on a consumer good that contains plastic which is important for the circular plastics economy. Such verifiable passports are simplifying the sharing and retrieval of electronic information in a digitally supported circular economy. Examples for information in the product passport are the used plastic material, the recycling code, and the material’s proof of origin.
What is special about the decentralized identifiers is that each market participant has its own trusted identity and contributes data to the final product passports in a self-determined manner. This means that the data is not provided by intermediaries, but that each participant is responsible for their own contributed data. All authorized market participants can e.g., see the data provided by the manufacturer or the manufacturer can see the data provided by recycling company. The cryptographic signatures on the product passports allow all participants in a circular economy to verify who issued the product passport, if the product passport has been manipulated, and if the issuer was eligible to create the product passport.
One starting point for building trust in a circular economy is the creation of a decentral digital identity for all participants including waste management and recycling companies. This requires that all market participants along the plastic supply chain that want to contribute to a trusted product passport are equipped with a decentralized identity which is a DID that is connected to a private key and a corresponding DID Document that includes the public key (amongst other information).
With their private key, the market participants cryptographically sign the product information they provide, and that way create verifiable product passports stored in a material registry. Also, the product (or the product batch) receives a (passive) decentralized identity, so that it can be uniquely referred to and later lead the recycling enterprise to the material details. The use of identities per product batch mitigates the challenge of assigning unique identifiers for every single product although the product information stays the same.
Figure 3 shows how all market roles in the supply chain are equipped with decentralized, digital identifiers (managed by wallets) and how verifiable credentials, here in the form of a verifiable material and product passports, are created along the supply chain. All electronically signed passports are stored in decentralized databases, that we call the material/product (passport) registry. This registry is accessible to the authorized parties in the supply chain.
Figure 3: Functional Architecture: Physical Objects Flow and Data Flow with W3C Decentralized Identifiers and W3C Veri-fiable Credentials (Product Passport) for a Circular Plastics Economy
Other organizations can also add information to the registry by linking it directly to the manufacture DID or to the product DID. For example, a product sustainability certificate, like the German eco label “Blauer Engel” (sustainability passport), or a Product Ethics Passport, such as the “Fairtrade” certificate, can be registered for the manufactured product. Also, an auditor can add a proof-of-origin/quality certificate to the recycled material used in a circular economy-enabled product. This is again done, by issuing the respective information in form of a verifiable credential and adding it to the passport registry. These audit documents create further trust into market participant and the information they provide. The product passport of the consumer product is linked to the product/material passports from the various material suppliers. Material information only exists one time; all verifiable creden-tials about one product together form the complete product passport. Verifiable credentials can be stored in different decentralized legers as well as classic central databases. Linking is possible due to cross-system capability of decentralized identifiers.
To establish a system of trust, first all involved companies need to be equipped with a trustworthy decentralized identity, issued for example by a worldwide trusted institution such as a GLEIF (Global Legal Entity Identifier Foundation) issuer, e.g., the Bundesanzeiger or a GS1 accredited company. To increase the trust, companies can additionally request accreditation, for example by an auditor certifies ISO 9001 compliance of a company. In our example the Virgin Plastic Producer of Tier 1 – n and the manufacturer have such certificates which they store in their wallet and that they can show to industry partners on request. Other possibilities to shape a decentralized identifier is to get credentials from the chambers of industry and commerce, banks or credit rating agencies, public authorities (trade office), business networks such as SAP's ariba.com, and product-related non-profit organization like Fairtrade.
Now the product passport is produced: As a first step, as you can see in Figure 3, the virgin plastic producer at tier n creates a product passport and cryptographically signs it with its private key. An example for such a supplier in the plastic supply chain is the producer of plastic granules that delivers material to the tier 1 vendor. Then the tier 1 virgin plastic producer delivers the specific virgin plastics material to the manufacturer. An example is a classic vendor of packing material, such as the producer of plastic cups. This Virgin Plastic Producer issues a cryptographically signed product passport referring to he original tier n material, the transformation event and information about newly created tier 1 material e.g., the material identification code.
After the final production processes the product manufacturer issues a product passport including the final material identification code, and all other relevant information, e.g. information for the waste management and recycling company, and cryptographically signs it with its private key. At this point the decentralized identifier is printed on the product package in the form of a QR code or alternative technology.
In the next step the retailer is responsible for the product packaging. To distribute the product the retailer needs a Packaging Tax Certificate which has to be issued by the packaging licensor. The product directly, not the manufacturer, can receive a Product Sustainability Passport issued by the Ministry of Environment. All this information is linked to the product passport of the manufacturer, which remains the anchor for all information about a product and its suppliers. That means, the proposed concept allows transparency of the supply chain by linking all pass-ports that are created during the value chain to one product passport.
The product passport for consumer products will be linked in practice to a product batch of a mass consumer product. Since the product passport focuses on the product batch and only on the raw materials used from a circular economy perspective, the product passport can remain the same until the materials change. A new product/material passport needs to be issued once the product “ingredients” change or if the product passport of suppliers is changing. Such significant reduction of the number of product passports makes the proposed solution also suitable for mass products.
After the product has been distributed, used, and disposed by the consumer, it is disposed and collected by waste management companies. The waste management company reads the product identifier from the QR code on the product and uses it to retrieve the product pass. It can use the recycling information of the product passport of the original product and collect the material accordingly. It then issues a waste material product passport for a charge of collected material that includes all relevant information for the recycling enterprise.
The next final step enables a trusted and verifiable circular plastics economy. The recycling enterprise checks the product passport of the waste material and creates a recyclate. The more information is available the more waste can be used for classic recycling. We believe that through a better information flow along the supply chain, more material can be recycled, and new recycling methods can be developed. This can potentially lead new recycling business opportunities and is subject to future work. For the recyclate the enterprise issues a recycling material product passport and signs it with its private key. This material can now be used by the manufacturer instead of virgin plastic.
All information that has been issued as product passport or even as ISO 9001 certificate is verifiable. That way, a consumer can check the product sustainability pass, the manufacturer can check the recycled material product passport or the ISO 9001 certificate of a virgin plastic manufacturer, and the waste management company can check the Proof of Origin of the virgin plastic product. This technology enables a full supply chain transparence and allows for a compliance checks (e.g. to comply with the upcoming supply chain acts in Europe) within seconds.
The introduced technology allows on the one hand side to close the information gaps between market participants without the need of a data intermediary and on the other hand connect information from recycling industry with manufacturing information for a verifiable trustworthy circular economy.
This subchapter contains code examples that are visualized as #1 and #2 in Figure 3. The following Figure 4 is the code example for the product passport published by the product manufacturer i.e. the number 1 in Figure 3.
{
"@context": [
"https://www.w3.org/2018/credentials/v1",
"https://www.gs1.org/docs/gs1-smartsearch/gs1Voc_v1_3.jsonld"
“https://www.example.com/circular_vocab”
],
"type": [
"VerifiableCredential"
],
//this ID is the interoperable identifier for the product
"id": "did:ethr:spherity:testnet:0x828efeeaab06dd9541992b791d78e5d96cd35323",
"issuer": "did:ethr:spherity:testnet:0xb80f2d123c799090a16cd6e28d401e28b41dc8fc",
"issuanceDate": "2021-01-25T10:05:42.168Z",
//use case specific i.e. Circular Economy specific properties
"credentialSubject": {
"astm": "D7611",
"description": "Lorem ipsum dolor sit amet",
"ewc": "150102",
"gtin": "1234567",
"hs": "1006.30",
"identifier": "83627465",
"materials": "R_1.1.6",
"name": "ACME Joghurt",
"producedSince": "2015-01-01",
"recycledMaterialPass ": "did:ethr:spherity:testnet:0x372b7201d9b8235d6943dfe574a6d243a6612c2f",
"recyclingCode": "PP",
"type": "Product",
"id": "did:ethr:spherity:testnet:0x2b24bf07133bafb17d9521fbffb707ec06b6d34d"
},
//cryptographic proof of the values
"proof": {
"type": "EcdsaKoblitzSignature2016",
"creator": "did:ethr:spherity:testnet:0xb80f2d123c799090a16cd6e28d401e28b41dc8fc",
"created": "2021-01-25T10:05:42.168Z",
"nonce": "131538ed-7040-49e6-85f4-f575b09a1b72",
"domain": "https://spherity.io",
"signatureValue": "gpO8DPntft-hz45PrJ_OOURKUuCjB10MfqYOR3q7LZ0C1E0watIniaZSzbGY9B6APivzjc18QX_3uP7O6peHeQA"
}
}
Figure 4: W3C Verifiable Credential for Product Passport of a Consumer Product
The relevant data for the circular economy in the above code example are the material definitions (see element “credentialSubject”). Fundamentally new in this scientific work is the representation of the product passport in the format of a W3C verifiable credential and circular economy specific embedded data schemes as extensions. Since the data scheme for the use case and the properties desired by the market have not yet been standardized, we use the following example data:
- product name and product description.
- European Waste Catalogue (EWC) code for the classification in the waste collecting processes.
- Recycling Code a.k.a. ASTM International Resin Identification Coding (RIC) System
- American Society for Testing and Materials (ASTM) code.
- Global Trade Item Number (GTIN) code example of the GS1 system - colloquially also called product barcode.
- Harmonized (Commodity Description and Coding) System (HS) example.
- an example for a Recycled Material Standard (RMS) Framework inside the
material property
The values are examples and only for visualization purposes of the capabilities of this technology. Waste specific properties in the Verifiable Credential are the benefit of this proposal; multiple data scheme standards and multiple perspectives of the supply chain can be used in single product passports that all authorized market participants can access. Special properties such as color, plasticizers and additives could also be added here if that is requested by the recycling companies. The schema, further internationalization and globalization, and more specifics in the value are topics for further research. In principle, however, international material standards need to standardize this data vocabulary so that all players in the market (manufacturers, waste -, and recycling companies) have a common understanding of the data and its semantics. The paper industry has thus already developed an international standard with EN 643 for wastepaper qualities including grade-specific limits for unwanted materials. This standard could also be used to describe the recycling material quality.
As already described above, product passports for mass products do not vary in the individual products. Therefore, it makes sense to create a passport (and a product DID) per product batch. The product passport changes once new material has been used in production. Technically this can be implemented by issuing the product passport that is valid for all products between the time stamp of the first production (producedSince) and a subsequent product passport (see example in Figure 4).
Material recycling for packaging materials is a mass production process. Links between recycling material and collected products would be possible in theory but the required data volume and data confidentiality might argue against it. Therefore, a more practical option would be for recycling companies to issue new product passports and establish trust by linking it to the product passport of the waste collection companies. Waste collection companies are already required to share their collection quantities and prepare material balances today , so that when full coverage is achieved, the quantities of certified recycled material can then be plausibilized with the quantities of waste collected. Both approaches are conceivable for the certification of origin of recycling materials. A recommendation should be determined from further research.
Furthermore, the element recycledMaterialPass contains a DID that references to the recycling material product passport shown in Figure 6. Multiple references will be needed in practice. The recycling material product passport is cryptographically signed and therefore it can be verified by anyone. Further research is needed to analyze the required data of a product passport, which will then lead to new use cases, e.g. an increased usage and consumption of recycling materials or new recycling methods.
Figure 5 describes an example of the verifiable credential for the identity of the Product Manufacturer.
{
"@context": [
https://w3id.org/did/v1 ],
"id": "did:ethr:spherity:testnet:0xb80f2d123c799090a16cd6e28d401e28b41dc8fc",
"service": [ {
"type": "agent",
"serviceEndpoint": "https://spherity.api.wallet.eu.spherity.io/api/v1/inbox"
}],
"authentication": [ {
"type": "Secp256k1SignatureAuthentication2018",
"publicKey": [
"did:ethr:spherity:testnet:0xb80f2d123c799090a16cd6e28d401e28b41dc8fc#owner"] }],
"publicKey": [ {
"id": "did:ethr:spherity:testnet:0xb80f2d123c799090a16cd6e28d401e28b41dc8fc#owner",
"type": "Secp256k1VerificationKey2018",
"ethereumAddress": "0xb80f2d123c799090a16cd6e28d401e28b41dc8fc",
"owner": "did:ethr:spherity:testnet:0xb80f2d123c799090a16cd6e28d401e28b41dc8fc"
}
}
Figure 5: Product manufacturer DID Document
The example in Figure 5 does not include further company details but the W3C DID standard also allows to include legal company name and classic, externally defined identifiers such as the sales tax numbers, Data Universal Numbering System (DUNS) and other legal identifiers.
Figure 6 shows a simple code example of a W3C VC-based recycled material product passport that was filled and cryptographically signed by the recycling company.
{
"@context": [
"https://www.w3.org/2018/credentials/v1",
"https://www.gs1.org/docs/gs1-smartsearch/gs1Voc_v1_3.jsonld"
“https://www.example.com/circular_vocab”
],
"type": [
"VerifiableCredential"
],
"id": "did:ethr:spherity:testnet:0x372b7201d9b8235d6943dfe574a6d243a6612c2f",
"issuer": "did:ethr:spherity:testnet:0x477f65f366e34afadc1ef79d293b875a8812778a",
"issuanceDate": "2021-01-25T10:00:07.230Z",
// use case specific i.e. Circular Economy specific values
// Recycled Material Standard (RMS) Framework is use as on example
"credentialSubject": {
"materialGroup": "plastic",
"materialIDCode": "R_P1.1.6",
"materialType": "recovered PET",
"recyledStatus": "recycled",
"id": "did:ethr:spherity:testnet:0x5e6323230f4e144f967dc953be8aced1d936e3cf"
},
"proof": {
"type": "EcdsaKoblitzSignature2016",
"creator": "did:ethr:spherity:testnet:0x477f65f366e34afadc1ef79d293b875a8812778a",
"created": "2021-01-25T10:00:07.230Z",
"nonce": "46b2eb9c-3f3a-4d29-ada0-a3ce064bdb14",
"domain": "https://spherity.io",
"signatureValue": "uAnNESoIc6EyQEiO_oxvSpAkAcLb04ceAJPWiukCym12rX1sTMOgaK15qriNFDG3Bzhmy1ZL07VBpCvzI6WE8gE"
}
}
Figure 6: W3C Verifiable Credential for Recycled Material Passport
The section credentialSubject is domain specific in this W3C Verifiable Credential for recyclate materials. In this paper we are using the Recycled Material Standard (RMS) Framework to describe the recyclate4. In a further step, additional properties could be added also for 3rd party certifications such as the standardizations from ISO/TC 323 Circular Economy. The right data scheme and its domain specific properties for a full Circular Economy is not focus of this paper and requires further research and standardizations. The document itself has a cryptographic signature (see element “proof”) that ensures the immutability and therefore the trust in the information.
{
"@context": [
"https://w3id.org/did/v1"
],
"id": "did:ethr:spherity:testnet:0x477f65f366e34afadc1ef79d293b875a8812778a",
"service": [
{
"type": "agent",
"serviceEndpoint": "https://spherity.api.wallet.eu.spherity.io/api/v1/inbox"
}
],
"authentication": [
{
"type": "Secp256k1SignatureAuthentication2018",
"publicKey": [
"did:ethr:spherity:testnet:0x477f65f366e34afadc1ef79d293b875a8812778a#owner"
]
}
],
"publicKey": [
{
"id": "did:ethr:spherity:testnet:0x477f65f366e34afadc1ef79d293b875a8812778a#owner",
"type": "Secp256k1VerificationKey2018",
"ethereumAddress": "0x477f65f366e34afadc1ef79d293b875a8812778a",
"owner": "did:ethr:spherity:testnet:0x477f65f366e34afadc1ef79d293b875a8812778a"
}
]
}
Figure 7: DID Document of the recycling enterprise
The definition of required properties for a recycling company requires further research, however this identifier is used in the product passport for the recycling material in Figure 6.
The W3C verifiable credential standard includes state of the art cryptography to build trust into the issued credential. The proof section contains the a signature which proofs that the credential was not changed but also who issues and signed it. The trust in the digital identities and signatures of the market participants (Figure 5 and Figure 7) is an important topic to address, when using the introduced decentralized technology.
One variant to provide trust is to use the already established web domain’s reputation. W3C’s recent draft for a did:web Method Specification5 uses the established trust a of market participant’s websites. In this method, the X.509 certificate of a trusted domain, such as sap.com, secured by a central public key infrastructure (PKI) is leveraged to securely manage the DID document. In this method the DID document containing the public key is stored at the wellknown location of the domain (e.g. https://www.sap.com/.well-known/did.json). When a signature in the proof section of a credential is verifiable with the public key of that DID document, the verifier has a cryptographic proof that the credential has been issued by the controller of the domain (here sap.com). Now the verifier can trust the market participant’s decentralized entity and the verifiable credentials s/he issued and therefore trust the product passports. The did:web method can be used instead of the did:ethr method we described in Section 3 to anchor a DID.
This paper has investigated the potential of novel digital instruments to alleviate current market failure in the circular economy market for plastics induced by information deficit and its consequences. These instruments can be used to lower or eliminate the informational barriers and the lack of trust inherent to the market for secondary plastic material that at present hinder the emergence of a fully functional circular plastics industry.
We analyzed the technical approach using decentralized identifiers and verifiable credentials as means to provide a consistent and uninterrupted chain of documentation. Through such an uninterrupted chain for a given product or batch it can be traced and tracked validly and reliably. It can take alongside the information required to enable the reapplication of recycled plastics material which dependends on the qualities and capabilities of the material and the treatment it experienced in its production and consecutive use. Decentralized identifiers and verifiable credentials can therefore be seen as an enabling step towards product passports as envisioned by current circular economy-related research and political strategies.
We validated W3C standard-based decentralized product passports with this research paper on an experimental level. This technology currently exists on readiness level (TRL) 5and is thus in an advanced stage for productive adoption. To apply the technology in the circular plastics economy, the industry has to agree on a few basics:
- A common vocabulary needs to be developed by the market actors that fulfill the circular plastics economy use case. Also, the semantics of the vocabulary must be clearly defined for each attribute in a verifiable credential/product passport.
- It needs to be defined what actors may access which information of the product passport registry; what information should be public or private. According access control mechanisms need to be configured to protect e.g. trade secrets.
- It has to be decided what DID-methods to use for which market participants, e.g. did: web for large well-known companies in combination with did:ethr for smaller players.
- For each product, there needs to be a discussion of how large the batch size should be that is referred to in the product passport.
For the management of the circular plastics supply chain, the technology shown can provide a vessel for suppliers and manufacturers to not only signal but also demonstrate the value of a given type of plastics. Information stored in a product passport accompanied by a clear and incorruptible identity can create the market transparency that is currently lacking not only in the circular plastics economy, but also in many other fields. In effect, these technologies enable an automatized monitoring of the product use and markets. Consequently, transaction and search costs should decrease leading to more attractive markets through cheaper and safer use of plastic recyclates. Furthermore, the information gained can inform the plastics producers and manufacturers more deeply on the use and application of plastics in their respective markets. New recycling streams can be built on more and trustworthy information. Better-informed decisions on product and process design could be made leading to further improvements in resource and energy efficiency. However, some questions remain open. E.g., it needs to be decided who will manage, control and cover the introduction and management of such a system. Moreover, the related costs need to be distributed and as of now need to be fully calculated. But, since the introduction of the identifiers and the subsequent passport should start at the virgin material level, they will not be attributed to secondary material alone. Ideally, the costs should be covered with the purchase of primary material to reduce its price advantage.
Political decision makers on several levels have postulated the necessity of introducing product information systems such as passports to boost the chances of circular economy markets and business models. The European Commission has even announced the introduction of a battery passport by 2026. Given the current state of the economy and functioning of markets, it will be indeed a governmental task to commission the creation and basic operations of such systems to secure functionality, compliance with ecological requirements and access to the system for all companies and participants, especially SME’s. We suggest that the establishment of such systems should best be made on an international level, e.g. at least EU-wide. Different systems and standards dispersed over different nations will only create r new market dysfunctionalities. Hence, interoperability and data integration should be guaranteed at the highest geographical level possible. A further desideratum may be the inclusion of additional information required by the supply chain act (German: Lieferkettengesetz). This would make the product passport a single point of information for a given product or material.
Identities and passports may also provide governments with much better chances to monitor compliance themselves and to improve their understanding of circular markets. We hence suggest a dynamic system able to be adapted based on these findings or other new requirements.
Many analyses and assessments have pointed out the ecological potential of circular economy per se. Plastics recycling itself has the potential to considerable cut GHG-emissions to a large extent, but varying with the specific type of plastics. We hence see a huge advantage in digitally improving and even enabling plastics recyclate markets. However, with the introduction of and consecutive use of digital technologies, the danger of rebound effects emerges. The measures taken may create more environmental harm than they reduce. Hence, digital systems to support a resource and energy efficient circular economy need to be monitored for their energy and resource requirements.
1 See for instance EU 849/2010, in Germany Umweltstatistikgesetz (UStatG), for export/import EC 1013/200 but also stand ards like ISO 14040 ff. ↩
2 For example Rebooting Web-of-Trust initiative https://www.weboftrust.info/ ↩
3 https://www.gs1.eu/news/holy-grail-2-0-pioneering-digital-watermarks-for-smart-packaging-recycling-in-the-eu ↩
4 To prevent fraud, we are proposing to add some further data for plausibility checks such as the waste collection area (zip code or geo location). Such example properties are not included in this code example and should be analyzed in further research.↩
5 Including the previously discussed X.509 DID method https://github.com/WebOfTrustInfo/rwot9-prague/blob/master/topics-and-advance-readings/X.509-DID-Method.md and other currently discussed authentication concepts (see https://www.researchgate.net/publication/342027346_Distributed-Ledger-based_Authentication_with_Decentralized_Identifiers_and_Verifiable_Credentials) ↩