The Ethical Supply Chains Of Tomorrow Powered By Blockchain
A Case Study of the Benefits of Blockchain
Introduction
The United Nations estimated that in 2016 as many as 25 million people were subjugated to some form of forced labor.
While to many this seems like issues on the other side of the world that don’t affect them, the unfortunate reality is that far too often these child labor rings are involved with the same corporations that stock the shelves of our supermarkets all over the world.
The modern global market has made it extremely arduous and costly to track much of these commodities due to the number of exchanges that occur from ‘farm to fork’ if you will. The African markets of the chocolate and coffee trade are two instances where this veil of profiteering is ever-present. Rooted in colonial ties of raw material extraction, these incredibly lucrative and profitable farming networks distribute little if any wealth back to those at a grassroots level which has created a global demand for food to have transparency and security within its supply chain to uphold the rights of all those within the market.
The implementation of blockchains transparent and secure networks into these markets will transcend the level of accountability held in many of the markets that thrive upon extortion and exploitation.
The Cost of Chocolate
The present-day supply chains in the global economy are immense and give an opening for a veil to be put over the atrocities that are far too often happening at the grassroots level.
The Chocolate Industry sets a harrowing example of how major corporations have capitalized on the intractability that exists within modern supply chains. Western African countries like Ghana and the Ivory Coast supply as much as 70 percent of the chocolate sold worldwide. Corporate powerhouses like Hershey, Nestle, and Mars are just a few of the companies that have been directly tied to these dreadful markets.
With chocolate demand rising as the industry grows worldwide, so does with it the demand for cheap labor, with no overarching agencies to hold multinational corporations accountable, this cheap labor is found in the child labor camps in Western Africa.
The children that work these farms are enticed with false promises of fair pay just to be deceived into horrendous conditions and even rampant stories of human trafficking.
We Need More Than Just ‘Fair Trade’
With rising awareness of the issue of unethical labor practices within industries like the chocolate industry, fair trade emerged as a way for consumers to be able to see labeling upon their packaging that in theory guaranteed the ethics of products with them.
Upon researching these fair trade deals authors like Ndongo in his work “The Fair Trade Scandal: Marketing Poverty to Benefit the Rich” brings to light that these new fair trade labels are often misleading and have not helped the current situation in many of these underdeveloped countries. Firstly, he highlights the high costs of certifications that are limited in the first place to the farmers that grow produce.
While Western African countries rely on the coffee and cocoa trade, the fair trade organization is incredibly sparse with their certifications, countries like Ethiopia and Burundi received only 3 certifications each while having around a third of their export revenue dependent on the coffee trade.
All the while Latin American countries received as much as 83 percent of coffee certifications given. Additionally, Ndongos study of the fair trade organization found that little if any of the money made off of these products was redistributed back to the farmers which they profited off but seemed to deepen the corporate pockets by being able to charge twice as much for coffee labeled as “fair”.
The reality of the “Fair Trade” certifications is that it perpetuates the cycle of poverty by increasing the profitability of the product within developed countries while slashing the accessibility to the global market in underdeveloped countries.
Blockchains Alternative Solution
With international markets plagued with the harsh practices of child labor and human trafficking. Many companies are looking for a way that can assure their customers they can receive products that are free of foul play while providing their laborers with adequate working conditions and fair wages.
IBM and an agricultural transparency company, Farmer Connect, turned to the revolutionary technology that is blockchain to solve this problem. “Thank My Farmer” was their brainchild. One of the first notable companies testing out this technology first hand is the coffee brand ‘Kahawa 1893’. In their vision, upon the purchase of a standard bag of coffee grounds, a barcode is present that is intended to be scanned by the customer.
Once done it takes you to the Thank My Farmer app where you can see a detailed description of the journey that the exact bag of coffee purchased went on.
This is through the utilization of the processes of blockchain. The infographic below illustrates the transparency in the chain. As each step of the process is filled out, an addition is made to the blockchain across the network.
As the supply chain moves on the blockchain will act as an immutable record of all monitored conditions. By the time the product reaches the customer, it will have a complete record of all steps taken from the original steps of the raw material collection as far down to the supermarket it was sold in.
Referring back to the fair trade organization, while it has honorable intentions, is still a middle man that the consumer puts its trust in to assure the quality and safety of all participating members in the trade. Through blockchain, this process no longer has to be a test of faith but can be verified by the consumer personally in a transparent and trusted manner.
Inspiring and Innovative Business Models
Margaret Nyumbo’s story of starting her coffee company ‘Kawaha 1893’ exemplifies a picture of growing opportunities for farmers in underdeveloped countries and the shrinking of disparity between farmer and retailer with the assistance of blockchain. Native to Kenya, Margaret went on to get a degree from Harvard as well as receive employment from both the World Bank and Wall Street. It was during this time on Wall Street that she came up with the idea for a business that could bridge the gap of inequality for millions of farmers.
Her solution came in the form of blockchain. On every bag of Kahawa coffee a QR code that can be found that when scanned gives you the option to not only get a detailed record of all conditions in the supply chain but also the ability to tip your farmer directly. With historically many farmers losing the vast majority of profits to the hands of the supply chain this could revolutionize the opportunity given to small farmers in less developed regions. “If you pay 5 cents tip for each cup of coffee, it doubles the farmer’s income. Through traditional Fair Trade, for each $1 premium you pay, only 5 cents reaches the farmer with the rest lost to the supply chain,” said Nyamumbo.
Conclusion
Fairtrade in recent years has continued to increase in demand from consumers towards the companies from which they purchase their products. While historically efforts have been made to implement things like the fair trade agreement to get rid of the harsh farming practices proven by many large corporations, this has its own negatives in that it oftentimes does more harm than good to underdeveloped nations as they cannot afford the certifications processes that are needed to uphold a “fair trade” label.
Major tech companies have slowly started the process of integrating their supply chains into a blockchain-based system that can systematically record every transaction within the chain transparently and securely. This move towards a transparent record of all transactions made is the first step towards business entrepreneurs like Nyamumbo to set up business models directly supporting those at the grassroots level through things like ‘Kawaha 1893’ where consumers can directly tip their farmer through QR codes given on packaging thus increasing the funding received by small farmers and small businesses exponentially.
This increased access to finances leads to unprecedented opportunities for many caught within the cycle of poverty.
Questions for the future
As education of the transparency that exists within blockchain networks continues to grow worldwide, along with it will be the public pressure upon international corporations to adopt and adapt.
Not only offering a positive change to countless people in need but also a reduction in overall costs, the industries which rely on inhumanities hidden within the global supply chain will gradually become isolated. Blockchain-based supply chains suggest a possible systemic change empowering those at the grassroots levels of international production.
References
“Blockchain Bridges the Gap between Farmers and Consumers ‘Thank My Farmer’ App.” SABI Magazine — Tydskrif, vol. 12, no. 3, Feb. 2020, p. 13. EBSCOhost, doi:10.10520/EJC-1cc6240af2.
“Everything You Need to Know about the Mysterious Origins of Bitcoin, and the Many Alleged Identities of Its Creator.” The Business Insider (Blogs on Demand), Feb. 2021. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=edsggo&AN=edsgcl.653116344&site=eds-live&scope=site.
International Labor Organization. “40 Million in Modern Slavery and 152 Million in Child Labour around the World.” Modern Slavery and Child Labour: 40 Million in Modern Slavery and 152 Million in Child Labour around the World, 19 Sept. 2017, www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_574717/lang--en/index.htm.
Mistrati, Miki, and Romano, U. Roberto. The Dark Side of Chocolate. Performed by Mistrati, Miki (2010; Copenhagen: Bastard Film & TV). DVD.
Ndongo Sylla. The Fair Trade Scandal : Marketing Poverty to Benefit the Rich. Ohio University Press, 2014. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=nlebk&AN=693683&site=eds-live&scope=site.
Pradana, I.Gusti Made Teddy, et al. “Blockchain Modeling for Traceability Information System in Supply Chain of Coffee Agroindustry.” 2020 International Conference on Advanced Computer Science and Information Systems (ICACSIS), Advanced Computer Science and Information Systems (ICACSIS), 2020 International Conference On, Oct. 2020, pp. 217–224. EBSCOhost, doi:10.1109/ICACSIS51025.2020.9263214.
Salaam-Blyther, Tiaji, and Nicolas Cook. Child Labor in West Africa Cocoa Production : Issues and U.S. Policy. [Library of Congress public edition], Congressional Research Service, 2019. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=cat04042a&AN=app.b9809425&site=eds-live&scope=site.
The Dark Side of Chocolate. [Electronic Resource (Video)] : Child Trafficking and Illegal Child Labor in the Cocoa Industry. Infobase, 2010. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=cat04042a&AN=app.b7530640&site=eds-live&scope=site.
