Supply Chain, Blockchain and Carbon Footprint
Block #0 : Genesis
Let’s clear things up a bit,
A supply chain represents a commodity-driven relationship between producers and consumers. Supply chains are mostly business to business transactions with the last phase being business to consumer. A supply chain is a network between a company and its suppliers to produce and distribute a specific product, and the supply chain represents the steps it takes to get the product or service to the customer.
From Karl Marx’s ‘Critique of Political Economy’, we can infer a crucial point about the commodities flowing in today’s supply chains. In many cases, the commodity is considered independent of its actual material worth. Material worth could be broken down into financial, environmental and labor costs associated with the commodity. Most participants in the supply chain care only about the financial costs related to the supply chain. We do not care about factors such as environmental destruction or the kind of labor being used to manufacture products.
Let’s consider the environmental impact. Carbon Disclosure Project (CDP) is an NGO that holds a comprehensive set of global corporate environmental data. One of their reports mentions that supply chains are responsible for 4 times the GHG emissions compared to the direct operations of a company. The term “carbon footprint” refers to the total amount of carbon dioxide (CO2) and other greenhouse gases emitted over the entire lifecycle of a product or service. Methodologies for measuring carbon footprints are still being developed, in part because debate continues over how much responsibility a company bears for all of the carbon released by its value chain. Careless management and malpractices in business can increase the carbon footprint of a chain:
In 2006, the Carbon Trust, a United Kingdom-based research and advisory group, discovered a “perverse incentive” in the sourcing of raw potatoes for manufacturing snack foods in Europe. Working with a major food manufacturer to study the carbon footprint of the potato chips it made, researchers found that because prices are set by weight, farmers were controlling humidification to produce moisture, heavier potatoes. Even within the strict specifications for moisture content set by food manufacturers, these few grams of extra water were significant. Moreover, the extra cooking needed to burn off that water accounted for an unexpectedly high percentage of the chips’ energy consumption.
So how can blockchain help? The blockchain is a trusted, distributed ledger of transactions that occur in a network. Blockchain provides features such as provenance, transparency and an immutable shared ledger. But there is a missing piece in the solution. That missing piece is the Internet of Things. Blockchain has a simple principle: “Garbage In Garbage Out”. The reliability of data going into the blockchain is a concern. There should be no space for any kind of error. An IoT endpoint can be trusted more than any human capturing the data. Thus integrating supply chain and blockchain and enabling it with IoT is a potential solution to improve the old system and fill the loopholes.
How can blockchain add value to the business? The most notable features of blockchain technology are:
Time efficiency: Transactions that take a few days could be made real-time.
Cost efficiency: Overheads and intermediate costs are reduced.
Risk reduction: Almost no risk of tampering, fraud, and cybercrime.
Increased trust: Due to the replicated ledger and consensus-based process
Most businesses are concerned about sharing their data with other participants. Permissioned blockchains could handle this concern and enable a layered architecture that controls the data that participants can access.
A supply chain ignores the process of acquiring raw material, how it is stored, etc. IoT devices can help get data regarding these issues. Let’s look at some use cases where this can help:
Delivery or Transport System:
Using IoT devices to track fuel consumption of vehicles and optimizing delivery routes.
Pharmaceutical temperature monitoring:
Temperature logging using NFC for cold chain compliance.
Recording energy consumption practices:
Logging whether renewable energy sources are being used. Lighting sources being used also has an impact. Switching to LEDs from incandescent bulbs can save on carbon consumption.
Analysis of waste produces and disposal techniques in the supply chain.
What’s more important than just recording the carbon footprint using a ledger is increasing investment in cleaner fuels and sustainable practices. These initiatives can contribute to evolving the existing supply chain management system into a more responsible system.
On a lighter note…
