Can the “Internet of Value by Blockchain (IoVB)” project be the new environmentally and socially sustainable form of supply chain management?
It’s not just for fintech companies…
Guardtime, ISID, and SIVIRA – one Estonian company and two Japanese companies launched a project in October of 2016[1] to use blockchain technology as a way to promote visibility and transparency to the end consumers of the quality of locally grown fruits and vegetables. This project, based in Aya Town of Miyazaki prefecture, focused on making visible the whole supply chain of locally grown produce in accordance with an existing procedure the town abides by to comply with a law set in 1988 regarding the quality standards of naturally grown produce.
The procedure, or protocol that Aya town had in place was to categorize the produce into three ranks – gold, silver and bronze – after inspecting them with strict standards regarding health, safety, environmental impact among other factors. However, the reality was that end consumers only saw the results of this categorization – a mark on the price tag which indicated whether the specific product was ranked gold, silver or bronze. To help consumers understand the actual process, standards and which factors are taken into account for this process of categorizing products, the IoVB project turned to blockchain technology. They allocated each product a unique ID from which consumers could search their website to see what kind of fertilizers were used, what kind of soil it was grown in, and the what other factors were taken into account to decide the ultimate quality of the specific product.
Why blockchain?
In easy-to-understand terms for most of us non-engineers, blockchain is a relatively new technology – something crudely explained as a decentralized supercomputer which can store a database of transactions and processes. It cannot be easily overwritten, as any new data (or blocks) are added onto the original block of the information creating a chain of blocks. Due to these characteristics, it has been stated as the new form of technology to secure digital information where storing a whole string of supply chain data is possible and can be assumed that it has not been tampered with – therefore creating a trusted and reliable source for which consumers can refer to when making conscious purchasing decisions[2].
Short-term implications
Armed with this new knowledge, the most aware consumers will turn to the most reliable and sustainable producers. This newly accessible information and the shift in consumer behavior of highly aware consumers may well drive previously indifferent consumers to absorb this information and follow the aware consumers in making ethical decisions. At this point, the market pressure will drive producers to react as explained below.
Long-term implications
Until recently, as can be seen with the Aya town story, consumers were in the dark when it came to how fruits and vegetables were grown and under what standards they were categorized into the segments they end up being allocated in. With the visibility that the blockchain creates, there is no doubt that all players in the supply side of such supply chains will be ‘forced’ to produce, pack, carry the products in an ethical and environmentally sustainable manner. If such a system is put in place, organic farmers and suppliers will no longer be able to ‘hide’ just how organic their produce really is. (If you are interested in this debate, read “The Omnivore’s Dilemma”, a book by Michael Pollan). Even non-organic producers will be forced to revise any processes or chemicals that they use which could affect the consumers’ purchasing decisions in this increasingly information-based world where consumers are ever demanding more transparency.
[1] ISID website, https://www.isid.co.jp/news/release/2016/1019.html
[2] For more on Blockchain Technology, see http://www.businessinsider.sg/what-is-blockchain-2016-3/?r=US&IR=T#04gC2z2UB6s4FXQT.97
I like how this post discusses the broader implications of block chain and how it can be used in unconventional industries. It leads to me wonder what other industries it can be applied to? And how can it be improved so that it can easily be applied to a variety of different sectors? Food / Agriculture is an important example because it is necessary for our daily existence. However, I don’t believe that the average consumer is sophisticated enough to make sense of all of the information made available to them through this system; my guess is that there would need to be a significant investment in consumer education to make this worthwhile or a value add from a consumer perspective.