Blockchain as a Key Technology for the Circular Built World

Enabling a circular economy in the built environment through blockchain

Author: Stefanie Behrendt, Co-founder at wegozero, Member of the Executive Board of FIBREE

You don’t have to fully understand blockchain to be able to use it, just like very few know how the internet works and still spend hours on it every day. However, understanding how blockchain can enable a circular economy in the built world can help to accelerate your ideas to transition towards sustainability in a heavily polluting industry.

“We are in a decade of digital transformation and data transparency, where trust has never been more crucial in the way we interact, communicate, and do business. Real estate is not immune to this transformation. Transparency is the keystone to future transaction efficiency and blockchain is an essential enabler of the process. It has the power to facilitate openness through smart contracts in property transactions, reduce costs and limit the potential for fraud. These are changes that do not shackle the sector but unite it.”, Eva Morales.

So, if you are one of those brave change-makers in the building industry and want to learn what solutions are out there to make your move towards a circular built environment easy, you are in the right spot.

Construction is responsible for almost half the mess

Let’s start with the status quo: the built environment is responsible for more than 40% of all greenhouse gas emissions globally — most of it caused by the extraction, production and transport of building materials. For circular and more sustainable solutions those building materials need to have an identity, so they can be traded, tracked and their carbon footprint can be traced.

Blockchain is shown to be a feasible technology in support of a circular economy in the built environment. Full material and energy traceability enables us to track the source of material extraction, make predictions for the recycling and reuse of goods and trade them through a secure and accessible information network.

But before we start, let’s have a deep dive into why circular solutions are inevitable for the built environment.

What is blockchain and why does it facilitate a circular built environment?

A blockchain is a digital information system that enables transparent, decentralized and trusted transactions. These can be financial transactions, but also digital signatures or the storage of data records.

In other words, an accumulation of “building blocks” that contain certain valuable information. Each transaction has a transaction ID (hash) and all of them are chained together. That means that traceability to the source of each transaction can be shown at any time.

“If the internet is considered the primary technology layer for the exchange of knowledge and information, blockchain technology can be considered a secondary layer that extends the first by enabling the secure exchange of value and the ability to permanently and verifiably store information about an asset. Both layers could help realise a truly Circular Economy.”, Kevin O’Grady.

Blockchain as an enabler in the circular economy

When it comes to a circular economy in the built environment, blockchain facilitates storing valuable data sets about a building’s life cycle. This can include data about building materials, energy consumption, carbon emissions, water usage, contracts with facility management companies and so much more. The possibilities are endless.

“In the very near future everything will depend on how we manage the limited resources in our built world. Building materials have to be reused and there needs to be a centrally accessible and decentralized register of all the valuable materials used. (…) this database will only be meaningfully managed on a sustainable blockchain”, says Sandor Horvath.

Blockchain can be seen as a decentralised software, not much different from any phone application we use, that favors the concepts of a circular economy and therefore supports sustainable approaches.

Isn’t blockchain consuming loads of energy ?

Blockchain is definitely consuming a large amount of energy. Nevertheless, it is not so much about how much it is consuming but more about how the consumed energy was generated by alternative energy sources, like wind, water or sun.

Besides that, the impact that blockchain can make in the built industry can not yet be predicted well due to a lack of a developed market. However, the way blockchain technology is able to cut through the noise and focus on the relevant information in a slow and data heavy industry like the real estate market is impactful. So the elimination of current energy consuming process steps due to blockchain implementation must also be taken into account to make the correct comparison. It can be seen as common sense that the impact it can make is bigger than continuing like we do today.

Why is blockchain relevant in the built environment?

The built world consists of multiple disciplines, stakeholders and materials that are traded through complex supply chain systems. To become ‘Paris proof’ in 2050, the real estate and construction industry not only needs to change its conventional sustainability approach, it also needs to significantly accelerate its pace to deliver its contribution in time. Releasing more sustainable impact with limited resources can be realised with smart and better orchestrated collaboration between all stakeholders.

It is less a matter of doing more of the same, but more of doing things way more efficiently together and avoiding spoiling of scarce resources. With more digital information available, but still too often in proprietary databases, reengineering of data-processes is needed to make information truly interoperable and available at the right moment for any stakeholder who needs to have it. And this is where we believe blockchain can be a very efficient tool. With a Blockchain-layer, trust, transparency and reliability to any digital file can be added automatically. Any software can then deal with large datasets and interconnect people on a neutral level. Comparison of the datasets on an environmental level and enabling all stakeholders making smarter decisions together is what makes blockchain a tool that creates benefits for the many. This environmental and social component contributes to creating better and healthier societies that are enabled to decide in a democratic way.

Why is circularity the future in the construction industry?

The construction industry is the largest industry worldwide and is also one of the biggest sources of pollution. Resources aren’t endless and we need to rethink our behavior to avoid spoiling them. To integrate the concepts of the circular economy in this sector is a must if our intention is to stay within planetary boundaries and revive our planet.

In the long run, our linear systems are not sustainable and our societies need to learn how to use materials and resources in more efficient ways. Currently 70% of all demolition waste goes to landfill. Imagine the impact of those materials if they could be reused, remanufactured or recycled.

“There is much to be gained here with more circular models. A building then suddenly becomes a temporary storage place for materials and if the specifications of these materials, including the disassembly instructions, are kept well, the materials can be reused in a new building without much loss of the original quality. And that pays off rather quickly. An example from our own practice illustrates this: Suppose a high-quality steel beam is disassembled and the technical specifications are no longer known. Then the steel is treated as ‘unknown quality’ and melted down to return as low-quality steel on the market. This leads not only to significant loss of value, but also to an enormous waste of energy and avoidable CO2 emissions and it contributes to increased scarcity of high-quality steel”, says Jo Bronckers.

In the circular economy, blockchain can be a valuable tool to smart concepts for reuse and recycling of materials by facilitating highly automated tracing and trading functionalities for seamless deployment at large scale.

How is blockchain changing the real estate industry?

Changing culture to circular systems in the built world happens when, instead of disposing of materials at the end of their lifecycle, they are being reused.
Besides this, a circular real estate industry requires conscious design and sustainable material selection. Reduction of energy consumption seems to be relevant as well; however, compared to the environmental impact building materials have, it is only a minor contributor to carbon emissions.
Nevertheless it may happen, the transition from our current linear system to a circular one is demanding, especially in the real estate industry, where there is little consciousness and almost no space for sustainable solutions. Blockchain enables a simplified implementation of this challenge.

What are the challenges moving towards a circular built world?

Transitionfrom linear to circular models does not happen overnight. Companies need to change whole business models and rethink their strategy while having a strong drive to make change happen.

“In real estate projects, in my opinion, there is a requirement that:
1. The materials that are already installed and would be interesting for reuse must be clearly identified: type, composition and quality must be checked
2. they must then be located: this works best if there is clear documentation of the materials used; Planning and database, possibly from BIM, would be very helpful.
3. The dismantling and recycling process must be economical compared to the construction of new materials”, Dr. Klemens Braunisch MRICS.

When it comes to transitioning to blockchain-based solutions, well structured databases are crucial. This goes far beyond BIM — the transition must be able to unlock the full lifecycle of a building for all stakeholders.

“Think about optimising supply chain planning, reducing costs caused by miscommunication between parties (failure costs), faster permit and financing processes, more efficient use of limited resources, and so on. 80% of the work that needs to be done is structuring processes and dataflows. I dare to say that the 20% that blockchain in the ideal situation then can add in a circular system will bring about 80% of the added value of the total solution. In my view, blockchain is therefore an important enabler for circular business models in construction, provided a number of important preconditions are met.”, Jo Bronckers.

Nevertheless, there are many obstacles to overcome.

Obstacles when moving towards a circular built world

• Success is still measured by GDP
• The circular building market is not developed yet
• Business models are outdated, crucial information gets lost
• Admin or legal barriers make it difficult to progress
• Non-collusive collaboration
• Incentives seldom encourage to change
• 10–15% of the building material wasted during construction
• 54% of all demolition materials are landfilled
• And many more

What are the benefits of using blockchain in the circular built environment?

Blockchain is first and foremost an enabler that facilitates trust and transparency to information. This is important to improve communication across networks to realise clear targets by all contributors in multiparty collaborations, therefore cutting through the noise in a heavily polluting industry.

• Smart contract energy deployment
• Fraud-free emission management
• Affordable, durable, shareable buildings
• Better green finance, low enforcement costs

A circular economy requires taking a holistic view, in other words a decentralised network that is able to keep databases fresh, increase connectivity and remove traceability barriers to enable a circular built environment. Therefore, the main benefits of using blockchain in the circular built environment are as follows:

• Trust & transparency: everyone that is part of the network can see and trace all transactions made on the blockchain.
• Accessibility: a blockchain network is accessible to everyone at any time and shows transactions in real time.
• Co-creation: blockchain enables cost sharing and facilitates collaboration.
• Security: blockchain is a highly secure system that is very difficult to crack.

How can blockchain-based solutions in the field of construction be applied in practice?

Blockchain technology can enable tracing back to the source of the material, as well as facilitating the prediction of recycling and reuse rates of materials and their trade in the construction industry. It is referred to as a neutral system that is not tied to the owner of the materials and can also be used in the long term to evaluate the building life cycle.

In practice, this means that a brick can be traced back from the construction site to the source of the material and thus its carbon footprint can be calculated.

“By 2030, 50% of all materials in the construction industry will be reclaimed, i.e. either directly or via high-quality recycling. The current rate is 1%, i.e. until then we will still have major challenges to build an ecosystem.”, Dominik Campanella.

Building this ecosystem can be facilitated if all stakeholders of building projects use decentralised systems like blockchain. Nevertheless, we have a long way to go. The industry is still in its infancy.

“Building material companies like Holcim want to move to more circular models as quickly and as impactful (sic) as possible, and need to embrace the tools available today for transparency and collaboration in the built environment. Material passports and CDW marketplaces represent an important step into a circular future which can later on be migrated to more advanced technologies like the blockchain. Right now, even simple tools like marketplaces or local chat groups can represent a first step that every local building material company can take.”, Philipp Leutiger.

As Arup, a sustainability consultancy firm, explains, blockchain can also be seen as an additional layer to the internet. Also called Web 3.0: If the internet is considered the primary technology layer for the exchange of knowledge and information, blockchain technology can be considered a secondary layer that extends the first by enabling the secure exchange of value and the ability to permanently and verifiably store information about an asset. Both layers could help realise a truly Circular Economy.

Conclusion

What starts with a WhatsApp group on a construction site to exchange local building materials can grow to a circular built world that is supported by blockchain-based solutions. Nevertheless, better than building is simply not building.

“Every square meter not built is the best square meter.”, Janina Nieper.

Success is still measured by GDP. But what about preserving and enhancing natural capital? Rapidly falling technology costs can change business models and enable us to live within planetary boundaries.

Time for a mindset shift in the building industry! Time for reinvention, resilience & regeneration!

1 Eva Morales, University of Cambridge, Programme Leader — Circular Economy and Sustainability Strategies and Founder at Circular Advisors
2 Kevin O’Grady — Associate Director, Arup and Chief Executive Officer at Urban.MASS Ltd
3 Jo Bronckers, FIBREE Board Member and expert in the field of circular construction.
4 Dr. Klemens Braunisch MRICS — Head of Real Estate Management at FHWien WKW University of Applied Sciences for Management and Communication
5 Dominik Campanella, Co-Founder Concular & restado
6 Sandor Horvath, Lab engineer, lecturer and PhD student at East Bavarian Technical University of Regensburg
7 Philipp Leutiger, Chief Digital Officer at Holcim
8 Janina Nieper,Circular Architect & Designer at D/DOCK & Furnify and Founder of Circular Economy Club Amsterdam