How blockchain is used to build trust in value chains

Distributed ledger technologies, such as blockchain, in which immutable copies of ledger entries are shared with all stakeholders, are used to improve the speed at which members and entire supply chains can react to changes. In addition, the transparency of the entire value chain is enhanced, as verification can be carried out at each stage of conversion or value creation.

Transparency and visibility into a supply chain will build trust, which, in turn, will increase the speed at which supply chain processes can be completed, says co-founder of technology analytics organization Edge of NFT, Dr. Eathan Janney.

“When there is little trust between people or companies, relationships move very slowly because there is uncertainty about what the other party is responsible for and what to expect from the other party. The converse is that when we build trust and know the parts and what to expect, what can be achieved is amazing,” he explains.

Blockchain brings transparency across value chains, as each member can see how each process in the value chain is being converted to the next step in near real time, says financial services firm Standard Bank, Ledger Technology distributed and responsible for the blockchain Ian Putter.

“These processes and steps can be mapped to measure characteristics such as sustainability. Standard Bank’s sustainable agriculture team uses these systems to identify and invest in sustainable farmers,” he says.

Standard Bank and the Blockchain Research Institute Africa are working to support the development of communities of trust across industries and across supply chains using appropriate digital technologies, such as blockchain.

“Beyond investment support, blockchains serve to build trust in communities and formalize the support that members of a community give to each other. For example, the sharing of agricultural equipment, the delivery of agricultural products to a centralized distribution point, and spot checks to verify the quality of products can all be captured and shared on a blockchain, which will help improve community performance. agriculture and supply chain,” he says.

Blockchains facilitate the involvement of many witnesses and thus build trust. There are significant opportunities for communities to use decentralized and distributed ledger technologies to drive and build trust among members of an industry ecosystem, as well as with external stakeholders and investors, Putter says.

“Blockchain is a transformative technology that underpins the way the world interacts and transacts. The catalytic properties of blockchain will be notable and beneficial to Africa. technologies such as blockchain, provide communities with the independence needed to undertake strategic initiatives.

Transparency brings trust from the bottom up, and with the establishment of trust, communities can help themselves, he adds.

Supply chain transparency

In addition, blockchains are also used to build trust between industries, such as the blockchain developed by professional services firm KPMG for the sugarcane industry in Queensland, Australia.

“The Queensland sugar cane industry has recognized that a breach of trust threatens the future of the industry and aims to demonstrate the sustainability credentials of sugar produced in Queensland. The blockchain-based system is used across the entire ecosystem, from initial farm certification to cultivation, transportation, refining and export processes,” says Richard Threlfall, Global Head of KPMG Impact.

“The industry came together and put all of their data in one place which they then made public. This helps drive consumer behavior by providing insights into the impact and sustainability of the sector,” he adds.

This initiative was not government led, but rather industry driven responding to customer and consumer demands to prove what is the impact of sugarcane cultivation on biodiversity, what are its carbon emissions and what it does to prevent harm in its operations, he points out.

Locally, the founder and CEO of solar energy finance platform Sun Exchange Abraham Cambridge claims that blockchain technology can be applied throughout the solar power supply chain, including for logistics and shipment tracking.

Once operational, the performance of the solar power plant can be tracked and recorded on a blockchain to enable transparent visualization of financial performance with an immutable record, he notes.

Additionally, some Sun Exchange projects include distribution infrastructure and these are funded through the company’s standard model, which uses the Bitcoin payment rail. However, large-scale transmission projects in Southern Africa are often plagued with challenges, including those related to corruption.

“If governments allow it, the transparency provided by blockchain-based payments and transactions would be hugely beneficial to the region and could go a long way to spurring and accelerating development,” notes Cambridge.

National Treasury of South Africa, in response to questions from Engineering News and Mining Weeklysays he sees the use of digital technologies as an important enabler to improve procurement, which is an important lever to drive economic growth and a tool to advance the country’s socio-economic goals.

“The use of technology is essential to increase competition, transparency, efficiency and fairness. Governance and compliance play a critical role in procurement processes and technology will help reduce fraud, enable trend analysis and ensure value for money, as well as identify red flags and irregularities in public procurement processes,” the Treasury said.

Meanwhile, 81% of companies globally are involved in blockchain initiatives, piloting or using blockchain systems, up from around 10% in 2017, points out multinational information technology firm IBM Consulting Web 3.0 and partner sustainability executive Shyam Nagarajan.

“(Blockchain) technology has matured. The value derived from its use is significant and it no longer presents a risk. Trust in the technology and the results of its use have led to its adoption,” he notes.

Investment driver

“Consumers say they want to know how a product is made, and investors are also increasingly demanding to see how their money contributes to environmental, social and governance metrics,” says the service company co-founder and CEO. Investing Proof of Impact. Flower Heyns.

Research by the UK government, Proof of Impact and leading impact investing organizations indicated that funders with combined resources of around $100 trillion, equivalent to around a third of global assets, want to see what their money is for, she strengths.

“While investors generally operate on a basis of risk-adjusted returns, if they have the opportunity to see how their money contributes to industries, communities and societies, they will choose to do so. There is a category of demand for investors saying they need to see proof of company claims and actions or they won’t invest,” she points out.

In addition, good resource management is an indicator of good performance. Therefore, companies will not be sustainably profitable unless they operate their businesses on these performance and sustainability data points, Heyns points out.

“However, the blockchain itself does not clean the data; it only stores data. This is why there is a need for third-party verification which can be facilitated by sharing data, such as utility bills. [to verify electricity use] and measurements of machinery used in processes, to validate a company’s claims that it actually improves efficiency or reduces environmental impact,” she points out.

Once validated, these claims can be distributed to blockchain stakeholders, or displayed publicly to provide proof and instill confidence in a company’s activities, potentially allowing companies to directly attract investment or provide the proof of the materiality of their actions to investors, stakeholders and consumers, she adds.

“Governance is increasingly essential for companies. Businesses need a strong governance framework, from a process perspective, and then need to use technology behind the scenes to help achieve those goals in a transparent, process-based way and so they can see the realization of their measures”, confirms open-source blockchain solutions company CasperLabs business development MD Joel Curado.

For example, the utility Energias de Portugal is improving its position in the Dow Jones Sustainability Index by converting to renewable energy and using a blockchain-based system to guarantee the renewable origin of the electricity it sells.

Similarly, the use of blockchain by the medical and pharmaceutical diagnostics company Roche focuses on raw materials and understanding the life cycle of its products so that it can transmit this information to its employees and external stakeholders. , illustrates Curado.

•Janney, Threlfall, Nagarajan, Heyns and Curado spoke at the Blockchain Hub Davos 2022 event in May.