State Change #27 — Rebecca Migirov, Ethical Supply Chains Powered by Self Sovereign Identity
The relationship between manufacturers, materials suppliers, and materials producers in modern supply chains is used to obscure the use of slave labor to produce products we use everyday. Blockchain based solutions can be used to bring this information to the consumer.
In march of this year, Rebecca Migirov wrote what would become one of ConsenSys Media’s most popular posts: The Supply Circle: How Blockchain Technology Disintermediates the Supply Chain. In the past, establishing supply chain provenance, or the true origin of products has been extremely difficult. Using verifiable cryptographic ledgers like blockchains, it is trivial to trace the Fillet o’fish to the fisherman who caught her, or map the resources used to produce a cell phone. Spoiler: You may not like what you find.
Transcript
Arthur: You’re listening to State Change, an interview series inspired by the emerging decentralization phenomenon.
Arthur: Thanks for joining me on State Change, Rebecca.
Rebecca: Thanks for having me, Arthur. Your voice is so smooth with this microphone. Am I going to sound like that?
Arthur: No, you’re going to sound awful. To begin with, how about you just introduce yourself and explain what you do at ConsenSys?
0:41 Rebecca: Sure. My name is Rebecca Migirov. I head up communications at ConsenSys, so I oversee our corporate communications, as well as spoke communications. I help out with some PR strategy and market strategies for our spokes.
0:58 Arthur: So the subject I wanted to talk to you about today was supply chains, because one of the most read and most visible articles that was ever published on ConsenSys Media was your piece on the supply circle. I was wondering if you could outline that, actually. How about we start with you outlining that and then we dig into the nuts and bolts of it.
1:22 Rebecca: Sure, so the way I got into looking at it, first of all, was because I have a big passion for circular economies. I have a background in political economics. So that led me to seeing all these links in blockchain that could allow for more equitable economies to be formed, both locally and globally. And that got me thinking, what is one of the biggest problems that we face in having really transparent equitable financial and economic relationships with people (?), and that is the lack of transparent supply chain. And not just lack of transparent supply chain, but lack of any methods by which we can make it transparent. So what I ended up doing was deep diving into a bunch of the sectors where this is most evident, where this is trying to be addressed. So you have this movement in ethical fashion that’s going towards more environmentally friendly production, and also more humanitarian production. And you also have this happening in consumer electronics. There has been a lot of backlash to the coltan use in cellphones the way that’s mined in the DRC. So that sort of research led to thinking about, ‘okay, how can we actually create platforms that enable people to relate to each other economically in a way that they haven’t been before? And then circular economies came up, which is a concept that has been circulating for a while, and I started to think about, “what if you took the supply chain, and rather than making it just this chain and links of bolts, you created something that allowed for every single person in the supply chain from the final end consumer to the initial farmer of the materials, the raw goods that are used to create something, what if you made them able to interact with each other? And you allowed for this sort of backloop into the initial round of production by the consumer.
3:19 Arthur: So can you explain that again, just how that works?
3:22 Rebecca: Again, so this is sort of my own theoretical formulation of it. This doesn’t exist yet. The idea is, sort of, imagine having a farm in upstate New York, and you can see it as sort of as a CSA model but a little bit differently.
3:37 Arthur: What’s a CSA model?
3:38 Rebecca: Community Supported Agriculture — the way that works is that I will pay $250 at the beginning of the season for this fall’s crops and I’ll get a basket delivered to me, or I’ll pick it up every week. And I just pay for it in advance. And that supports the farmers farming prior to actually getting paid. So you can see it like that, but a little differently. Let’s say, I could take my phone, and I could log into an app, and I could see the history of the soil that my apple was grown, and I could see who was actually farming it, who harvested it, and by seeing that, I could not only know where my food comes from and show that it’s not only ethically produced, but the people who are producing it are ethically treated. I could also then, with my community members, potentially subsidize a grant or a loan for the farmer to try new more environmentally friendly farming practices, for example. So there’s a big push in the agricultural community, especially in organic agriculture, to reduce monoculture farming, which is where you only plant one crop. You can envision community members giving a farmer a grant to actually not plant just a wheat crop, which they can get a pretty big return for usually but to do a more diverse crop.
4:57 Arthur: So how do you actually track how the crop is being produced, and how do you bring that information to the consumer, and furthermore, how will these theoretical tools help prevent the abuses that we see in the Democratic Republic of Congo?
5:16 Rebecca: There are a couple of companies trying to address similar problems. So Provenance is one — they’re based in the UK. And they’ve been working with not the consumer side, but more a B2B version of this. So what they’ve done is, using the smart tags, they’ve allowed for, by scanning this tag you can see the history. And the people who are actually producing it are incentivized to participate in this process because they can catch a higher price for more ethical practices, there’s economic benefits for them.
5:55 Arthur: But wait, who cares about the ethics of fish? And what are the ethical questions that we’ve got to worry about?
6:01 Rebecca: That’s a really good question. I care about the ethics of fish. And lots of other millennials like me care about the ethics of fish. And this is sort of a turn we’re seeing in the way people think economically. Is that there has been a shift in public thought from just rapid consumption to more ethical consumption. So in the Southeast Asian fishing industry, for example, there’s a lot of slave labor and human trafficking that goes on. So as that’s become more and more evident, as we’ve learned more about that, people have become more concerned with how the people who are fishing the food they’re eating are treated. And not only that, you have a really major overfishing problem on the planet right now. So there is potentially a way, and again, very potentially, a way you can engage consumers more actively in the production cycle, but that’s only if you can economically incentivize the producers to participate, right. There’s sort of this two-way thing, and I don’t have the answer to it. There’s companies like Provenance, and Chronicled as well, who are trying to address this. Chronicled is doing this on a much more on consumer facing level, and doing it now with sneakers and inserting smart tags into luxury sneakers and allowing for that really transparent market where currently there is a really big counterfeit problem in the high-end sneaker market. And that’s for the actual consumers.
7:34 Arthur: Why the focus on electronic consumer goods? Why is that something that you’ve — that seems like kind of strange spot — if there is slavery in the Southeast Asian fish supply chain, why focus on electronic goods? What are the potential ethical abuses that are taking place there?
7:55 Rebecca: So, coltan, which is all over our electronic devices, that makes them work, is mined in the Democratic Republic of Congo. So the mines in the DRC are predominately worked by child slaves that are taken from their homes and enslaved by these major warlords in the DRC and companies like Apple, like Microsoft, like these massive producers of consumer electronics, they don’t deal with them directly. Usually, there’s subcontractor upon subcontractor upon subcontractor who is allowing for this very very obfuscated process through which coltan that is mined by child slaves ends up coming into all of our cell phones.
8:40 Arthur: And so what devices is coltan specifically used in? What kind of devices?
8:46 Rebecca: It’s used in cellphones, it’s used in laptops. It’s used in anything that connects the internet basically.
8:52 Arthur: Are there cell phones or laptops that don’t contain coltan?
8:55 Rebecca: No, not that I know of.
8:57 Arthur: So, you say like Apple and Microsoft, that’s like Samsung, LG
Rebecca: All of them.
Arthur: …pretty much any piece of consumer electronics that you have contributes to child slavery and the general chaos of the quote unquote Democratic Republic of Congo.
9:21 Rebecca: Yes, yes. And you know, the issue with this, aside from it being child slavery, is that these companies that are producing these phones and selling them to us in America, in Europe, they can sort of say, “Oh I don’t know, I get it from a subcontractor who’s the subcontractor of my contractor.” And that’s the way that major global supply chains now work. There’s subcontractors upon subcontractors, so most major companies can sort of say, “Oh, I had nothing to do with it, I didn’t know, because I don’t speak to this subcontractor of my subcontractor.” Nike did this in the early 90’s when this big scandal happened around their sneakers being produced by eleven year olds in Taiwan who were under very terrible conditions.
10:07 Arthur: So how can the tools that Ethereum gives us fix this problem?
10:13 Rebecca: From what I’ve seen thus far, and the kinds of things that are being built in the ecosystem, and from what I know about the technology, we can envision individuals who are a part of these supply chains — and I don’t mean the CEO of Nike. I mean the person who is actually mining the coltan, I mean the person who is actually doing the fishing — they can have this self-sovereign identity that they can then use to interact with these platforms where the things that they are producing, the things that they are fishing and creating, do go through the supply chain, and do go through this process, but it’s almost like an ethical requirement — a social requirement, for their bosses to make that transparent. So it’s not so much just the technology, it’s really about the social and economic imperative, an incentive that we give to the head of the fishing company in Indonesia to make transparent what is going on internally.
11:21 Arthur: So this sounds to me like you’d have a situation where, on the shelf, you would have two different cell phones, two different companies, let’s say. You have Apple which can say we can audit our supply chain all the way back to the individual who mined the coltan, and so you have the choice of having the definitely slavery-free electronics on the shelf next to the potentially-slavery-we-don’t-really-know produced electronics. So I guess that creates an ultra premium product category that is ethical.
And it’s not an even ultra premium. There’s a massive mark up on most of these products. So you shave a little bit off of that mark up and you can keep the product that is obviously ethical at the same price as the product that isn’t and what happens is that, if you’re not behaving ethically in this economy, then you don’t have a product anymore because no one is buying it. And from what I understand of the way that consumers are starting to think now, if you have two things and they’re exactly the same price, but one is ethical and organic and all of this, people are more likely to buy it. And that’s sort of a branding thing as well.
12:38 Arthur: Awesome, so what are our next steps? What are our actionables? What do we do from here to make all of this stuff a reality?
12:46 Rebecca: That’s a really good question. I think that the first thing we do is get a full understanding of the problem we’re addressing. I think that for the most part, our industry isn’t as engaged in these kinds of economic problems as we should be. So that’s, in my view, the first step. We talk about, in ConsenSys especially, about creating the future we want to live in and want to be in, and part of creating that future is understanding that our economics are going to look vastly different in forty years, whether we like it or not. No matter what, and that has nothing to do with what we’re doing right now, they are just going to look different. And we have the opportunity to actually decide what that different is. Because we’re building, in my opinion at least, we’re building this infrastructure for the future, we do have the opportunity to create a more ethical economic life for people. And I think the first step is understanding those problems. The first step is seeing how are people — for example, in the refugee crisis, what are really the core issues that refugees are facing? Whether it’s identity or access to jobs and access to education, something as simple as getting your educational records so you can prove to someone, yes you were a doctor in this country, is so difficult, even when you aren’t facing a refugee crisis. I think when we focus on these core infrastructure tools, like identity, we can start to build the infrastructure for having this circular economy and this supply circle. But that’s when we think about the tools we’re building, we have to think about this ethical economy.
14:34 Arthur: So do you have any links people should follow up on?
14:37 Rebecca: Yeah! There are a bunch in the article I wrote, but also I would recommend everyone to read both Provenance and Chronicled whitepapers. They’re super interesting and these are two companies that are addressing it from a consumer facing level right now.
14:52 Arthur: Great! Thanks a bunch. It’s been good having you on.
14:55 Rebecca: Thank you!
14:59 Arthur: Thanks for listening to State Change. Check out consensysmedia.net for more.
Content: Rebecca Migirov, Arthur Falls
