Why The Extraction Of Natural Resources Needs A Blockchain Solution
Extracting natural resources can be a dirty business.
At its worst, this process leaks toxic chemicals into the air and water, damaging ecosystems, poisoning communities, and worsening life for those who are employed in the industry.
There are countless examples, from mercury and cyanide pollution linked to gold extraction to the Berkeley Pit in Montana — an old mine now filled with lethal water.
And too often, the workers employed to extract natural resources are children, deprived of a childhood and the chance to grow up under safe conditions.
People are beginning to realize the implications of the extraction processes for everyday goods. For instance, the No Dirty Gold campaign was launched in 2004 with the intent of pressuring jewelry retailers to stop using “dirty gold.” So far, over 100 jewelry retailers have taken the pledge.
Ever since, pressure has continued building for companies to better police their supply chains.
If used correctly, blockchain technology will play a role in helping companies keep better tabs on their supply chains, and eventually reduce some of the most damaging effects of resource extraction.
A solution is necessary to decrease the illicit activity occurring in extraction.
The extraction of oil and gas, gold, heavy metals, diamonds, and even water all have serious security and human rights challenges in many parts of the world.
In some mining operations around the world, child labor is an issue of primary concern, according to David Luna, former President of the OECD Task Force on Countering Illicit Trade.
“A lot of these natural resources are mined by children. These are really young children who work incredibly long hours, who are often physically abused and sometimes sexually exploited. So, it creates a concern not only from a human rights standpoint but also from a political perspective. A lot of these resources are in conflict zones where their extraction helps to finance criminality and even insurgencies.”
As Luna points out, these issues don’t end and begin with the pollution emitted or the child laborers. They extend into many different parts of society. Officials are bribed to look the other way, and corruption becomes widespread. Supplies are diverted or illegally introduced into the supply chain as a result. Money is embezzled from those who rightfully deserve it. People lose faith in their governments and institutions.
When instability, insecurity, and distrust reign, they create conditions ripe for more exploitation and violence, continuing a devastating cycle.
Existing blockchain-based solutions can be adopted today or in the near future to combat illicit activities.
With so many unique issues to tackle, it’s important to begin small by working on problems that can be immediately solved.
Once smaller successes are achieved, it becomes easier to work on larger, complex issues. In time, blockchain may help reshape social structures and paradigms to reflect more favorably on laborers around the world.
But for now, an asset-centric approach is an effective way to deploy blockchain technology and make real improvements in supply chains.
Blockchain gives suppliers, manufacturers, distributors, and retailers the ability to create a physical-digital link between commodities or goods and their corresponding identities on blockchain. When both the origins and the entire chain of custody of a commodity are verified on a blockchain, it creates a more transparent, trustworthy network.
Blockchain also increases supply chain participant accountability. Smart contracts that automatically execute once a shipment has changed hands provide continuous record of who had the shipment and who received it. Gaps in the chain of custody are easily found and traced back to the parties responsible.
While not all parties causing gaps are bad actors, some of them are less than scrupulous about where their raw resources are coming from. Eliminating some of these middlemen — or providing them with incentives to work more ethically and transparently — is a possible solution as blockchain technology continues to be adopted by different industries.
Organizations are already using blockchain to take action.
These solutions aren’t just ideas anymore.
Concrete action is being taken by organizations like Slave Free Trade, a Geneva-based nonprofit. They’re using blockchain to certify certain products are free of slave labor so consumers can make better choices about what products and companies to support with their purchases.
Consumers are willing to treat this issue seriously — but they just need to be given the proper information.
The same applies to investors. For example, Responsible Gold is already using the blockchain to track gold from the mine to the vault. Working only with accredited mines, they’re assuring the gold investors are buying has been responsibly sourced.
As more people choose to buy and invest ethically, it will place pressure on companies to respond by cleaning up their supply chains and examine what methods are being used to obtain resources.
Reducing the widespread harm done to the planet and society by at times irresponsible and unscrupulous market actors, resource extraction will require a multi-pronged approach that takes into account human behavior and motivations, differences in cultures, and power dynamics around the world.
It won’t be easy, but it will be worth it.
