A blockchain is a digital, public ledger of transactions that are recorded publicly. A blockchain is constantly growing as ‘completed’ blocks are added to it with new sets of recordings. The blocks are added to the blockchain in a linear, chronological order.
The blockchain is the underlying ledger system in digital currencies such as bitcoin. Many large financial services firms are conducting research and development to explore and test potential applications. Most recently, the technology is capturing attention in sustainability circles.
Experts believe blockchains could play an integral role as an enabler of peer-to-peer trading of electricity across microgrids, as a mechanism for managing renewable energy investments and a myriad of other applications that point to a decentralized power grid. The blockchain is seen as another means of helping improve supply chain transparency.
More than a dozen food companies and retailers — including Walmart, Nestle, and Tyson Foods, and motivated by tech giant IBM — formed a consortium dedicated to using blockchain technology to gather better information on the origin and state of food.
The new taskforce is a combination of Unilever, British supermarket chain Sainsbury and packaging company Sappi, as well as three global financial services companies: BNP Paribas, Barclays, and Standard Chartered. Together, with several technology startups, the group will develop a system to track and verify contracts for farmers in Malawi that supply tea to Unilever and Sainsbury.
The initiative could reach up to 10,000 farmers providing preferential pricing for those who are focused on sustainable farming methods. The effort will finance farms that have committed to these practices.
This alliance is potentially important for the impoverished African country. After tobacco, tea is Malawi’s second biggest agricultural export, mostly to the United Kingdom.
This technology has the potential to help banks access more detailed and reliable information about the social and environmental impacts throughout the supply chain.
A United Kingdom project, backed with about $700,000 in private and public funding, including the U.K.’s Department for International Development, will develop an application to track: (a) the origins of some tea supplies used by Unilever (its brands include Lipton and Brooke Bond) and Sainsbury (which recently debuted a “Fairly Traded” label); and (b) the sustainable wood fibers in certain Sappi packaging used for the products.
One of Unilever’s goals is to source sustainably 100% (from its current level of about 60%) of raw agricultural products sustainably.
“This innovative new technology will help us increase sustainable sourcing, enhance the livelihoods of the smallholder farmers we work with around the world, and help to make sustainable agriculture mainstream,” said Keith Weed, chief marketing officer and head of sustainable business for Unilever, in a statement.
Jessi Baker, founder of London-based Provenance, told GreenBiz that one goal of the pilot project is to study ways that organizations and banks can help scale the Sustainable Development Goals more systematically. These improvements could be accomplished by better accommodating emerging new financial models, such as mobile banking, that are bubbling up in emerging economies. The project itself had its origins in research within the University of Cambridge Institute for Sustainability Leadership.
“We’re exploring how banks, plus corporates, plus startups can help attack the SDGs, and that segued into the beginnings of work we’ve done with Sainsbury’s and Unilever to form a much bigger project which is connecting provenance and trade finance, which is potentially a huge lever to supply chains become more transparent and sustainable,” Baker said. “While tea crops are the first focus — Unilever and Sainsbury’s share some of the same supply chain — the hope is to expand the test into other areas during the second half of the year-long pilot,” Baker continued.
Manuel Gonzalez, the North America head of startup innovation at Rabobank, described blockchain as a dramatic development for food supply-chain transparency since double-entry accounting. Provenance is part of the second cohort for the bank’s Terra accelerator program, which teams big companies such as Nestle and BASF with entrepreneurs to help them test their ideas for scale. Other companies are testing blockchains for innovative ideas. For example, Arc-Net, based in Belfast, Ireland, incorporates DNA data as part of the chain of custody. Ripe.io, a San Francisco-based company, is developing a system that combines sensors, the internet of things, and blockchain to collect data about food quality, safety, and origin.