Sustainable Supply Chain Using Blockchain Technology

“A tiny African nation controls China, India, USA and almost the entire world”.

On its face, this statement seems to be a perfect example of the figure of speech – hyperbole. However, as bland as the phrase “the devil lies in the details” may sound, the devil does lie in the details here.

Let us go back in history to the 18th century.

Recount From History

In 1802, Alexander von Humboldt, a Prussian explorer, stumbled upon “guano,” the excrement of sea birds and bats and its magical use in Peru to make the barren lands fruitful.

 

Figure 1 - Chincha Islands where guano was found in abundance. Mining was done on-site, and ships transported it to Europe

The subsequent events would be of no surprise to anyone. Alexander von Humboldt brought the guano samples to Europe, where its fertilising efficacy was scientifically established. Sure enough, colonisation, imperialism, wars followed in pursuit of this holy grail, which would help revitalise the fallow European fields to feed the burgeoning population.

                            Figure 2 - Advertisement for guano, 1884

A hundred years later, a German chemist, Fritz Haber, successfully synthesised Ammonia in a lab. This invention is widely hailed as the basis of fertiliser production and helps feed nearly half of the world population.

Figure 3 - a) Fritz-Haber (1868–1934); b) Apparatus for the synthesis of Ammonia by Haber and Le Rossignol (1909)

Another shot in the arm against world hunger was provided by Norman Borlaug, who dedicated his life to genetically modified seeds, which could improve productivity and feed the world.

Figure 4 - Norman Borlaug - The man who fed the world

The use of science and technology in sustaining the planet’s people is not novel but rather historical.

What Is Sustainability? Why Should One Think of It?

A simple understanding of sustainability as given by the United Nations Brundtland Commission is - “Sustainability can be described as meeting the needs of the present generation without compromising the ability of future generations to meet their needs.” A famous Hindi phrase, “Roti, kapda, makaan”, translates to “food, cloth, and shelter,” an erstwhile definition of sustainability, has evolved. A sustainable world now is underpinned by three pillars of environment, economy, and society, providing a more holistic view. (Often referred to as 3P – People, planet, and profit)

Figure 5 - Pillars of Sustainability

Sustainability is a philosophy, and the general-purpose for most people boils down to the kind of future being left for subsequent generations.

Climate change – “The threat” to sustainability

The first step in designing solutions for a problem is understanding the problem comprehensively. Recent reports such as the IPCC point to an emerging and potent threat to sustainable future - climate change, evidently from human activities.

Figure 6 - Key findings of IPCC

Let us explore the supply chains of two commonly used commodities.

If one were to guess which one among a computer and a banana has a more significant carbon footprint? Many of us would assume a computer. Let us have a closer look.

                            Figure 7 - Carbon footprint of a banana

Research by MIT found that one banana delivered to Boston has a footprint of 118 grams of CO2. As harmless as it looks, bananas become a grave concern when the volume is considered.

           Figure 8 – Climate impact of products and Sources of carbon emission

In the current, interconnected world, most products are consumed at places different from where they are produced. Similarly, raw materials are sourced and transported by intermodal transportation from various regions globally. Transportation, therefore, contributes significantly, along with energy generation, industry and agriculture, to greenhouse gas emissions.

Nearly all of the carbon footprint of companies is generated from the supply chain and is often produced by suppliers on the other side of the globe.

E-commerce has significantly gained prominence in the recent past and is set to snowball. Shippers usually promise quick deliveries – one or two days and transfer this burden to logistic companies, which may further sub-contract to carriers. Many responsible organisations are dedicated to lowering their carbon footprint but, in reality, do not necessarily have a say over how their products are shipped and hence have no control over their carbon emissions.

Some of the critical challenges in implementing low carbon supply-chains are:

1. Tracking Carbon emissions – complex and costly process.

2. Cost of measuring carbon – high costs and coordination required

3. Lack of standardisation – no globally recognised methodology

4. Regulation, low government involvement

Hence, the carbon footprint today is not measured instead estimated.

What if the shipper could see what route was taken, what truck was used, where did the shipment go?

Block-chain, an immutable and distributed ledger, makes this possible and is helping companies measure and control the actual carbon footprint of their supply chain by providing accurate, reliable, and standardised information for carbon emission calculation for each partner in the value chain. A report by Infosys says, “The blockchain technology can readily transform the individual efforts of the companies into a network of effort with the primary goal of overall carbon footprint reduction of the final product”.

Figure 9 - Infosys model of Carbon emission reduction using blockchain

The above figure shows a model to calculate the carbon emission from the manufacture of mobile effectively. For example, efficient allocation of resources based on real-time and accurate data collected from various processes can help avoid unnecessary transportation. It also enables supply chain partners to collaborate effectively and coordinate activities such as shipping and transportation, thereby reducing the carbon footprint.

Additionally, using blockchain and smart contracts, several environmental protection initiatives can be incorporated by monitoring key parameters such as energy consumption and emissions. Blockchain enables firms to determine the raw materials, transportation, warehousing, and other processes that use non-renewable sources of energy and eliminate them, thereby unlocking the potential of environmentally sustainable manufacturing.

Blockchain can provide accurate information about emissions by different supply chain links, thereby easing the identification of improvement areas concerning carbon goals.

The social and human aspect

Gold, Tin, Tantalum, Tungsten, Cobalt. What do these metals have in common?

They are the building blocks of our I.T. hardware, fueling our high-tech economy. However, there is an uncanny disconnect from the world where these metals are mined by children, men, and women who labour under sub-human conditions. I.T. hardware organisations and consumers generally have no visibility beyond the first-tier suppliers.

Mica is used as an ingredient for the reflective finish in lipstick, blush, etc., most of the Mica produced in India, which is a leading producer, is sourced from illegal mines, where children, due to their shorter frames, go into mines, risking their health, and lives, forgoing education, for livelihood. The global beauty industry may turn a blind eye, knowingly or unknowingly, to this sourcing practice, and consumers are doubtful to know the same.

Figure 10 - Mica mining in Jharkhand by kids

Blockchain technology, by design, enhances visibility and transparency across the supply chain, which can be used to counter human rights abuses, child labour, and corruption. Consumers and companies would no longer ignore the wrongs associated with sourcing fundamental raw materials.

Blockchains have been successfully used in making the delivery of aid, financial, and material more agile and productive, eliminating the delays caused by paperwork, bureaucracy, etc., during the humanitarian crisis in conflict zones such as Syria. The key issue with the distribution of financial aid in war-torn areas is the dependence on financial institutions, which are unreliable or too small to process significant payments from World Bank.

Figure 11 - A Syrian woman in Jordan’s Azraq refugee campuses iris scan technology to access her World Food Program electronic food voucher

Building Blocks is one such program where cash from the U.N. World Food program is stored in a refugee beneficiary’s account. The transactions are recorded on the blockchain; the biometric information is paired with a bank account, allowing refugees to buy food from local shops by scanning their eyes, thereby enabling easier disbursal of essential food.

Block-chain-enabled food supply chains enable manufacturers to respond quickly to recall or food quality-related issues. This helps reduce the impact, i.e., the spread of food-borne illnesses. Companies like Walmart, Nestle, Uniliver have leveraged blockchain to guarantee food safety by tracking and tracing provenance.

Economic Sustainability

Blockchain deployment in supply chains can improve operating and cost efficiency, help market disintermediation – removal of intermediaries, and provide value creation opportunities, as illustrated in the following table.

Figure 12 - Economic sustainability using blockchain

In addition, blockchain reinforces an organisation’s sustainability claim with transparency and visibility, the extent of which may provide a positive signal to supply chain partners such as investors and consumers and may unlock economic advantages such as high-value perception of service or product offered.

Blockchain - A promising exemplar for supply chain sustainability

Blockchain integrates beautifully with other emerging technologies like smart contracts, IoT, and ML and unleashes new dimensions to supply chain sustainability on all three fronts: environment, society, and economy. It is a tool, an enabler having immense scope and efficacy inapplicability, which organisations can leverage to address multiple challenges, especially sustainability. However, it is no silver bullet that can reverse the underlying problems on its own, and decision-makers should use blockchain appropriately.

Any fertiliser comprises nitrogen, phosphorous, and potassium, the latter two being non-renewable. Morocco holds nearly 70% of the world’s phosphate reserves and thus has sway in the raw material supply chain, which implies sway over crop yields and sustaining world population, hence, world control.

Figure 13 - Global phosphate reserves

Authored By: Vishal Maurya


References:

1. https://www.researchgate.net/figure/a-Fritz-Haber-1868-1934-b-Apparatus-for-the-synthesis-of-ammonia-from-nitrogen-and_fig3_279317175

2. https://www.mcgill.ca/sustainability/files/sustainability/what-is-sustainability.pdf

3. https://www.google.com/search?q=guano+discovery&rlz=1C1RLNS_enIN970IN970&oq=guano&aqs=chrome.0.69i59j69i57j0i512l4j69i60j69i61.946j0j4&sourceid=chrome&ie=UTF-8

4. https://www.youtube.com/watch?v=GztRh8isKKc

5. https://climate.nasa.gov/climate_resources/26/graphic-the-ipccs-four-key-findings/

6. https://www.carbonbrief.org/in-depth-qa-the-ipccs-sixth-assessment-report-on-climate-science

7. https://www.unpri.org/news-and-press/the-ipcc-special-report-on-15c-key-takeaways-for-pri-signatories-/3818.article

8. https://www.universityofcalifornia.edu/longform/where-do-greenhouse-gas-emissions-come

9. https://iopscience.iop.org/article/10.1088/1757-899X/703/1/012001/pdf#:~:text=The%20use%20of%20blockchain%20can,transportation%20in%20more%20appropriate%20shipping.

10. https://www.researchgate.net/publication/342513673_Blockchain_and_supply_chain_sustainability

11. https://www.infosys.com/oracle/white-papers/documents/carbon-supply-chain-blockchain-technology.pdf

12. https://www.ibm.com/case-studies/energy-blockchain-labs-inc

13. https://www.youtube.com/watch?v=xD0OJEBepF8

14. https://www.researchgate.net/publication/342513673_Blockchain_and_supply_chain_sustainability/link/5ef8bac4299bf18816edf42d/download

15. https://borgenproject.org/mining-for-mica/

16. https://www.refinery29.com/en-us/2019/05/229746/mica-in-makeup-mining-child-labor-india-controversy

17. https://www.technologyreview.com/2018/04/12/143410/inside-the-jordan-refugee-camp-that-runs-on-blockchain/

18. https://www.wfpusa.org/articles/blockchain-tech-helps-refugees-grocery-shop-in-conflict-zones/

19. https://www.thebalance.com/how-bitcoin-and-blockchain-is-changing-crowdfunding-4173837

20. https://www.bbvaopenmind.com/en/economy/business/how-blockchain-is-revolutionizing-crowdfunding/

21. https://normative.io/insight/calculate-supply-chain-carbon-footprint/

22. https://www.theatlantic.com/science/archive/2016/11/the-desert-rock-that-feeds-the-world/508853/