Blockchain against blood diamonds: how can technology tackle corruption?

Blockchain is best known as the technology behind Bitcoin, but it’s also being used to disrupt industries from finance to healthcare and as an emerging technology it has huge potential in the tech for good space to improve ethical consumption and transparent supply chains.

Blockchain is a decentralised public electronic ledger. It allows users to make transactions and create an unchangeable record of those transactions.

Each record (known as a ‘block’) is connected to a specific participant, time-stamped and linked to the previous block using cryptography.

The blockchain can only be updated by consensus between all participants in the system. Once new data is entered, it can never be erased.

Rather than being held in one central place, the data is stored globally on multiple servers and anyone on the network can see everyone else’s entries in real time — so no single entity has control of the network.

This means that the trading parties don’t need to trust each other, they just need to trust the process and technology behind it in order to trade without a middleman.

Because of its transparency and immutable attributes, blockchain is being explored as a way of improving the ethical and sustainable reporting in supply chain management.

One particular area where this is being explored as a high-potential, innovative new solution is regulation in the diamond trade — an industry well known for corruption within its supply chains.

Blood Diamonds, also known as conflict diamonds, are a major problem in the industry.

Militia, rebel groups or even government-backed troops often take physical control of mines in war zones and use them to fund violence and war. This was most prominent during the civil war in Sierra Leone, but it still occurs today in Africa and other parts of the world, leading to human rights abuses and violence against civilians.

Global Witness was one of the first organisations to make the link between diamonds and conflicts in Africa in a 1998 report.

In 2000 a meeting was held in Kimberley, South Africa between diamond-producing states to discuss ways to stop the trade and as a result, the United Nations General Assembly adopted a landmark resolution supporting the creation of a certification scheme for rough diamonds — known as the Kimberley Process.

The Kimberley Process is a verification method which certifies shipments of rough diamonds as ‘conflict-free’ if all the criteria is met, with the aim of removing blood diamonds from global circulation.

Member states of the Kimberley Process can only trade with other participants who have also met the minimum requirements of the scheme.

Under the process regulations, international shipments of rough diamonds must be transported in a tamper-proof container, accompanied by a government-validated, tamper-proof and uniquely numbered KP Certificate. Participating states must also establish national legislation, export, import and internal controls and commit to transparency and the exchange of statistical data to be a part of the Kimberley Process.

However the scheme has repeatedly faced criticism for being too limited in its definition of conflict diamonds, which means it does not address the broader range of risks to human rights in the industry, such as forced and child labour.

Another limitation is that the Kimberley Process only applies to rough diamonds and doesn’t certify individual jewellers — focusing instead on the start of the supply chain. Once a stone has been cut and polished, it is no longer covered by the scheme. This puts responsibility onto the consumer to ensure that their stones are ethically sourced.

Forged documents and corruption within supply chains have highlighted weaknesses within the process and allowed conflict diamonds to slip through the cracks into legitimate trade, and “persistent and unresolved concerns” led to Global Witness resigning as official observer of the Kimberley Process in 2011.

So could blockchain be the answer?

Blockchain technology could be used to establish a permanent, public record for each stone, recording both its origin and the entire chain of ownership transfer throughout its lifetime. Essentially, the blockchain could follow the diamond from mine to customer — making the entire lifecycle more efficient and secure.

This would replace the physical certificates currently used and reduce the risk of tampering and corruption. It could even include insurance information to provide data to law enforcement about stolen diamonds if needed.

Blockchain technology is regulated with highly sophisticated encryption so only those with permission (in this case those overseeing the mining, cutting, wholesale and retail of the diamonds) would be able to enter data, which would have to be approved by all participants.

This would give the strongest reassurance yet that stones which are certified as conflict free actually are.

The technology exists and is already being piloted within the diamond trade.

IBM have launched TrustChain™, a new collaboration with leading diamond and jewellery companies which will apply blockchain to the gold and diamond trade to track and authenticate diamonds, precious metals and jewellery at all stages of the global supply chain from mine to retailer.

The programme is at proof of concept stage and they are currently producing a set of six engagement rings that have been fully traced in the supply chain process.

De Beers, which mines, trades and markets over 30% of the world’s diamond supply, also announced a blockchain pilot project at the start of 2018, which aims to create the first blockchain ledger for tracing stones from mine to retail.

Blockchain technology has the potential to be extremely significant for ethical trade, not just in the diamond industry, but in establishing transparent supply chains across the world, from food, to fashion to precious stones and metals.

With the ability to track and connect supply chains from raw material sources through to factories, distribution and retail, Blockchain could provide true visibility and ethical accreditation.

And the potential doesn’t stop there. The concept could be applied to other issues like human and animal trafficking — with schemes already underway to improve the traceability of tuna and stop illegal and unsustainable fishing practices in the Pacific Islands.

Blockchain can be used to strengthen transparency and enable full traceability — two of the core concepts behind ethical supply chains. The technology is just getting started but it has huge potential to change the way business is done.

It’s time for us to lean into the potential of tech for good and start applying these innovative new solutions to global problems so that we can protect people, animals and the planet.