Blockchain-enabled supply chain sustainability scheme hailed 'successful' by business giants
A blockchain-based experiment aimed at improving social and environmental practices in tea supply chains has proven successful, according to businesses having taken part, including Unilever and Sainsbury's.
Launched in December 2017 and convened by the University of Cambridge’s Institute for Sustainability Leadership (CISL), the scheme saw Unilever and Sainsbury’s trial a blockchain system that records price, produce and production information on tea farmers in Malawi.
Farmers taking part in the initiatives were offered a financial incentive in return for feeding social and ecological data into the blockchain system, called Trado.
These incentives were paid through the regular supply chain financing processes of the banks used by Unilever, Sainsbury’s and their key suppliers, while enabling a lower financing rate to be applied to working capital financing of suppliers. CISL claims this facet is significant, given that suppliers reportedly borrow money to cover their working capital needs at a higher cost than that of the buyer.
During the 18-month pilot, data from smallholders was found to help Unilever and Sansibury’s increase supply chain transparency. This transparency led to earlier pre-shipment financing for sustainability-linked incentives, lowering the cost of providing these incentives for the businesses and their banks alike.
In order to help other businesses reap the benefits of the system, CISL is making the Trado platform a framework for its implementation available on request.
The body claims that the Trado model could be used for any kind of commodity supply chain, to track data regarding issues ranging from deforestation and land management, to improving socio-economic conditions and fair distribution of incentive money.
In addition to Unilever and Sainsbury’s, CISL also garnered the support of banking firms Barclays, BNP Paribas, Rabobank and Standard Chartered for the Trado pilot.
“Collaboration between multinationals, financial institutions and fintech firms can harness new ways to ensure financial flows support fair and just policies and practices ready for a new financial system,” CISL’s senior programme manager Thomas Verhagen said.
“The Trado model has potential for replication across a wide range of topics and we hope the blueprint will encourage others to deliver its potential for social and environmental improvement.”
Unilever’s procurement operations lead for tea, Erwin Vroom, concurred, dubbing the pilot project a “critical step to building transparent sustainable supply chains”.
“Access to affordable working capital is a key problem for smallholder farmers,” Vroom said. “Making more affordable working capital available to smallholders will enable them to increase investments in their farms to enhance their productivity."
Unilever notably published a full list of its global tea suppliers for the first time, along with a new interactive map to help customers understand its supply chain processes, earlier this month.
The news from CISL follows a number of initiatives to incorporate blockchain into sustainability objectives by other global firms. In February, international food and drink firm Princes unveiled measures to make its supply chain practices more sustainable, including a pledge to use blockchain to ensure workers' rights are protected.
Blockchain is, similarly, gaining traction as a tool for sustainability improvements in the public sector. Bristol City Council is using the technology to reward its employees for leading low-carbon lifestyles, for example, while the Department for the Environment, Food and Rural Affairs (Defra) is exploring blockchain’s applications in the waste management and recycling space.
These signs all point to a blockchain boon in the not-too-distant future. Nonetheless, edie’s own research found that only one of 200 sustainability and energy professionals had already applied blockchain applications within their organisation just over a year ago, suggesting that progress may be slower than many futurologists have suggested.