At a Glance
Technology never ceases to amaze me, the fact that I can speak into my wrist and my watch can provide me with a plethora of information or action my requests is somewhat magical.
In the realm of sustainability, it holds boundless opportunities but one in particular is blockchain technology.
In an age of waning consumer trust and scepticism surrounding supply chains and brand authenticity, blockchain acts as a broker of trust to address the trust deficit and demands for radical transparency and traceability across value chains.
This S & S decoded feature seeks to deconstruct the need for blockchain to enhance transparency to drive sustainable development. It uncovers the mechanisms behind how it works, the benefits, the challenges and the most common methods used across industries. By providing examples of blockchain in action, I have sought to illustrate the power of the technology as an instrument to better the planet, people and drive both tangible and intangible value for companies.
In true S & S style, here are some facts to contextualise the contemporary blockchain and transparency situation:
Did you know that..
- The global blockchain technology market was estimated by Statista to be worth $339.5 million in 2017, and is forecast to grow to $2.3 billion by 2021.
- Many CEO’s, particularly in the luxury fashion industry anticipate the need for transparency, ‘91% of corporate experts say transparency increases shopper trust’
- 8 out of 10 UK shoppers want to know where their food comes from
A study by marketing agency Merkle & Levo in 2018 revealed that:
- 86% of surveyed consumers think transparency from businesses is now more important than ever
- 53% would consider purchases from brands that were more transparent on social media
- 85% said they will remain brand loyal during a time of brand crisis if they are more transparent overall
- 1/3 said they would purchase more if brands CEO’s were transparent on social media and had a more visible public profile
- Over 40% of millennial women know their favourite brands origin story, founder, affiliations etc
- 57% of women say their purchase decisions are driven by brands values/stance around them
You may have heard the term bounced around with crypto currencies, seen a documentary on it, but what exactly is blockchain?
The technology creates a peer to peer network of trade along value chains to provide a history of transactions for a single product across its supply chain. It has previously been described as ‘digital decentralised, distributed and public ledger’.
Explained simply, it is quite like a read only locked spreadsheet with all the information needed which all users across the chain can access. The digital information is the block and when all added together it becomes a link within the chain and the system (spreadsheet) updates with no one able to alter this information. This data on the blockchain is determined by consensus, which is a defined convention for how to execute and administer the business logic (e.g. the current level of stock or the origin of a particular certificate), it comes not from a single particular authority but rather by independently applying common rules and publishing data openly. There is NO hiding!
It unifies multiple parties in production who may have little trust in each other and facilitates the discovery of the current state of system. This could be the current stock level of a particular garment, the input of materials into a dress (think zip, buttons, thread), the farming for ingredients of a soup, etc.
This makes industries, organisations and supply chains more transparent through monitoring a company’s operations and tracing factory as well as labour patterns.
Blockchain technology enables a complete connection of a supply chain from end to end to increase transparency. It allows the entire value chain to be audited and provides us with real time information on the products input and output. For instance, it now allows companies to better track discarded waste from clothing to identify recycling/repurposing opportunities.
Which ways are you most likely to use blockchain?
- Tracking products moving through the supply chain
- Sharing information with suppliers
- Tracking payment information inc. purchase orders
- Sharing information with customers
- Managing trade documentation
- Verifying and monitoring suppliers
- Managing supply chain risks
- Demand and supply planning and management
- Inventory management
- Managing freight transportation
- Managing product returns
What are the benefits of blockchain technology? (by no means an exhaustive list)
- Increases instant traceability (eg by placing RFID tags on garments) RFID = (Radio Frequency ID).
- Improves inventory management and stock handling.
- Allows for automated recycling
- Captures broad digital information, enabling retailers to utilise analytics to create circular insights
- Aids designers to protect their intellectual property, as products can be traced along value chains, counterfeits are less likely to be produced. This is of fundamental importance and there is a record number of new innovated materials being patented in the fashion industry that embrace sustainability and circular practices.
- It can be used by brands to enhance their storytelling to drive revenue. Knowing the origin and labour behind the label is increasingly important for consumers. Accessing information about each process promotes sustainable standards and benchmarks organisations against those who refuse to disclose or avidly greenwash.
- It enhances the value of craftsmanship.
- By providing a history of transactions such as crypto currencies/smart contracts it importantly enhances crucial reporting in finance, CSR, supply chains, factory auditing
What is the sustainability impact of blockchain?
- The automated sorting of inputs (i.e. textile components) creates efficient recycling and reduces waste. A common example is the ability to separate clothes from polyester ones.
- As it improves logistics and inventory management, this allows for better planning of collections, resulting in reduced GHG emissions, less waste and retailers do not produce redundant items.
- By improving traceability and transparency for material and social elements, we can see factory conditions where a component is made, thus any circumstances that flag warnings can be addressed.
- The increase of disclosed information to the end consumer creates the platform for purchasers to make educated and informed buying decisions.
Some contemporary challenges of block chain are listed below:
- With technology comes the issues of security and privacy, users should always be aware of risks that come with data sharing as in any instance, ensuring digital trust.
- Scalability of blockchain operations.
- It is still fairly unregulated, there are no certifications/standards thus it takes those currently in the industry to be held responsible and accountable.
- The technology can be relatively costly for businesses especially those that are smaller. However note that the short term investment will yield long term value (both tangible and intangible).
You can also watch this explanation
Examples of companies using blockchain to better sustainability
As the trajectory of this supporting technology accelerates and disperses amongst organisations, I thought it important to share the work of what is being done!
Provenance & their various partners
This organisation enables brands to increase sales and value by building trust through transparency and ensuring each product has an opportunity to have a more positive and purposeful purchase! Founded by the inspirational Jessi Baker, the company was created from her own frustrations surrounding the lack of information on the things we buy.
Provenance works with over 200 companies, both large and small, from Unilever, Sainsbury’s to the Soil Association Organic, Cult Beauty and the Co Op! You can read about their case studies here.
Of note is their work with fashion brands including Martine Jarlgaard who utilised blockchain to produce a collection with smart labels in 2017. This meant that when people scanned the tags, they were able to view each step of the production process, including time stamps, factory location, etc.
More recently, is the hugely exciting collaboration with online luxury beauty retailer Cult Beauty. This partnership allows users to view clean label ingredients, ethical certification logos, such as Fairtrade or non-GMO, to indicate that ingredients have been sustainably sourced based on explicit and established standards.
Below you can watch a video of Jessi Baker explaining work that companies such as Provenance are doing to revolutionise the blockchain game!
This company also creates accountability throughout supply chains through its platform. It has partnered with the C&A Foundation, Fashion for Good and the Organic Cotton Accelerator to experiment with a pilot that uses blockchain to trace organic cotton. Bext 360 focus their attention on supply chains surrounding coffee, seafood, timber, minerals and palm oil to provide a traceable fingerprint and liberate supply chains from opacity and inefficiency. They look at the Grade to analyse the product and assign an industry standard quality. They then capture the weight of the product being sold through a Bluetooth Internet of Things connection. This enables them to instantly pay farmers based on quality and weight, then inputting data into traceability software.
Within the fashion industry, block chain is embraced by various market players in the mass and luxury sector as well as suppliers within the value chain. Queen of Raw is one of my favourite cases. It has used the technology to foster a marketplace to buy unused fabrics online. This company addresses the colossal challenge that faces the fashion industry of surplus fabrics, for example did you know that $120 billion worth of excess materials lie in warehouses around the world?! They rescue the fabrics, making the materials readily available and save 700 gallons of water per yard purchased! BOOM!
Blockchain enables other fashion technology firms or apps such as the ethical rating platform Good on You to provide us, the end consumers with as much information as possible for smart purchasing. They use the detailed disclosure provided by the technology to share the most precise information on the products impact on planet, people and animals.
Blockchain is becoming popular in the food industry in regards to shipping products, tracing shelf life and farming history. For example, Ambrosus offers blockchain services for emerging food start-ups and billion-dollar brands! The firm uses high-tech sensors and the technology to record the entire history of food and pharmaceutical products. They have the mission to set the global standard for decentralised supply chain management and provide quality assurance.
Most importantly blockchain can be used by the food industry to address food waste!! You can read more from S & S about food waste here.
There is a burgeoning appetite for blockchain in the energy sector which is expected to grow to $3 billion by 2025. Blockchain adoption in the energy sector will decentralise power from the grid amidst risks surrounding security of networks and will be furthered by increased digitalisation of the energy industry. Blockchain in the energy market will increase efficiencies, flexibilities and reduce lead times.
Luxury diamond provider De Beers has invested in utilising blockchain technology to integrate traceability and transparency into its practices. Their mission was to cover the full diamond value chain from mine to end consumer and increase confidence in final product, increase trade efficiencies and allow for greater visibility for diamond lenders. The technology has altered the ability to track the carats of the beloved rocks from only above 10.8 carats now to 5-10.8!
Another fantastic way blockchain is being used is through philanthropy. BitGive uses blockchain and bitcoin technology to create a donation platform for non-profits to provide transparency and accountability to donors by sharing financial information and direct project results in real time! Another company is AidCoin who, in a similar fashion have developed blockchain solutions to increase the trust within the charity sector by making donations traceable and efficient!
The enhanced decision making capabilities for both retailers, procurers and purchasers has catapulted this technology as a favoured instrument to enhance an organisation’s ethical and sustainability strategies in mass and luxury markets. Now, more than ever, we wish to look beyond the label and require information surrounding the provenance of our purchases. Blockchain as a tool utilised by multiple players in a value chain addresses the trust deficit to forward sustainable development through decision making.
Through connecting stakeholders entrenched in 3rd/4th/5th tier networks, it illuminates discrepancies in human rights, subcontracted labour and environmental practices thus furthering our movement towards addressing the UN’s Sustainable Development Goals.
Full disclosure however is daunting for many reluctant executives of companies but the demand for transparency by consumers should drive the initial investment into blockchain technologies in the recognition that transparency is an instrument for dramatic change. By enhancing the visibility, risks can be mitigated and chains can be strengthened to create long term value for all stakeholders.