Blockchain, or distributed ledger technology, is an emerging digital technology that has the potential to make a considerable positive impact on the chemical sector. It was identified as one of the critical digital technologies to be mastered and implemented in Europe in Cefic’s recent Mid-Century Vision document ‘Molecule Managers’.
This article is the second in a series to highlight the prospects of digital transformation and its important role to solve societal challenges towards sustainable solutions.
The potential and benefits of blockchain
Blockchain and other digital ledger technologies can record transactions between multiple parties in a secure and tamper-evident way to create a unique source of verified and trusted data. The transactions might include asset, material or financial transfers or contract data. For chemical companies, product sales, shipments, payment flows, bank and intercompany reconciliations, or product property data and quality certifications are areas that lend themselves to the application of blockchain.
Blockchain offers numerous potential benefits to the chemical industry by increasing traceability, safety and security, and improving compliance while lowering transaction costs. “Blockchain and distributed ledgers promise a radical improvement in transparency and traceability of individual molecules throughout their life cycle and along multiple value chains. This sort of technology can enable the circular economy and grow recycling opportunities,” says Dr. Martin Winter, Innovation Manager at Cefic.
As the technology lets participants trace transactions across multiple steps, this can also lead to insights that can be used to better predict market changes and develop more customer-oriented products and services. It can also lead to improved organisational planning and operational excellence based on the near real-time observation of demand patterns across the value chain.
The technology also offers cost reduction opportunities by diminishing or eliminating multiple manual verification steps. Blockchain could make it possible to reduce fees, minimise foreign-exchange risks using direct and trusted payments between chemical companies, or facilitate a trusted exchange of data about product properties, for example under REACH or to comply with customs regulations.
“A better understanding of how customers use products can lead to more needs-based innovations and the development of tailored applications, potentially leading to a new wave of innovation and growth,” explains Winter. “A deeper understanding of how chemical products add value in customer systems could enable new value-based, performance-based or even chemical leasing-based revenue models.”
Blockchain can also help in the implementation of other digital technologies such as Artificial Intelligence (AI). “For example, results obtained through machine learning could be captured on a blockchain providing a tamper-evident record that partners can use to verify the integrity of the data, and ultimately understand and trust how AI-based decisions are being made,” concludes Winter.
A work in progress
One sustainability challenge that the technology will need to overcome is its own high energy use. Early applications of blockchain such as Bitcoin mining have been associated with high power usage with some estimates putting the Bitcoin network’s power consumption on a par with a country the size of Denmark. New blockchain methodologies and networks are working to reduce energy consumption.
The new SusChem Strategic Innovation and Research Agenda (SIRA), to be published in November, will elaborate a portfolio of detailed research and innovation priorities across the digital technologies, including blockchain, to support a sustainable European chemical sector.