Human Rights: How Blockchain can help
With the future of digital currencies such as bitcoin dividing public and expert opinions, we are seeing the future of blockchain technology starting to be recognised for its potential to transform economic development models and societies into the next decade.
One promising application is for blockchain technology to address the challenges around accessing environmental, social and economic (ESG) data that is transparent and secure in real-time. This will allow for improved decision-making, alter entire supply chain systems, transform management and governance structures, as well as changing the nature of cooperation between public and private sectors.
Redesigning a new ESG data infrastructure
Sustainability reporting is now common practice among upwards of 5,000 of the world’s largest companies, according to the Global Reporting Initiative (GRI). Two-thirds of these companies report in line with the GRI Standards. However, most of the data remains in a static format, waiting to be unlocked.[i] With new regulatory and consumer pressures for greater transparency, companies are tasked with the collecting, storing and analysing data. Then using the results to inform internal decision-making towards more sustainable business practices and communicate the impact transparently to relevant stakeholders.
A blockchain is a tamper evident and tamper resistant digital ledger implemented in a distributed fashion (i.e., without a central repository) and usually without a central authority (i.e., a bank, company, or government). At its basic level, a blockchain enables a community of users to record transactions in a shared ledger within that community. Under the normal operation of the blockchain network no transaction can be changed once published. [ii] Blockchain technology’s distinct features offer unique value to companies for consuming customised ESG data. This includes better risk management and engagement in actions beyond compliance with a wider ecosystem of stakeholders.
To fully harness the power of blockchain technology for human rights due-diligence, dynamic partnerships and collective initiatives will be critical to collaborate on scalable solutions.
A real-time approach towards a more secure future
At Diginex, we are focused on establishing eMin, an ecosystem of blockchain solutions to address the exploitation of people in employment. In partnership with the Mekong Club, an anti-slavery NGO, we are engaging companies from the apparel, footwear and retail sectors to create greater transparency around working conditions and agency fees of migrant workers in global supply chains. [iii]
An essential feature of our approach is the design of a bottom-up system, in which vulnerable workers are empowered and given a voice. Blockchain-based reporting tools, such as grievance mechanisms, will allow for workers to directly report violations of human trafficking from when they start their journey in their country of origin, to employment sites. In future, eMin will also allow for workers to receive payments, record working hours, transmit remittances and share health and safety data in anonymous ways.
For this new data infrastructure to work successfully, we are engaging ecosystem actors to embed our blockchain solution into existing physical and social infrastructures, adapted to local contexts. This will enable issues of materiality to be shaped in dynamic ways and relevant actors to be pulled in real-time to respond and intervene on issues of concern.
Corporate performance on fair employment practices can be shared and validated by more efficient internal systems and shared across external networks with auditors and civil society throughout the year.
Business can rebuild trust by responding to consumer pressures for responsible recruitment practices and demonstrate fulfilment of anti-slavery regulations, such as France’s Corporate Duty of Vigilance Law, the UK Modern Slavery Act and the recent Australian Modern Slavery Act.
Finally, reporting data can be customised for the financial community to ensure corporate client portfolios are free from forced labour and mitigate risks in their investment portfolios. After all, the International Labour Organization (ILO) reports illegal profits from sexual exploitation and forced labour to be an estimated $150 billion dollars annually. [iv] Hence, the recognition that illicit funds generated from activities will likely emerge in the global financial system is prompting the financial sector to explore ways to tackle the issue.[v]
Design challenges to achieve scale
The use of blockchain technology is not a silver bullet. Data heavily depends on reliability to avoid ‘garbage in, garbage out’. In the context of eMin, this means making sure that workers are not pressured into consent, hence adequate levels of responsibility need to be assigned. It is further critical to ensure data reporting is context specific, incentives are being set appropriately across the value chain and operational limitations are being taken into account.
Finally, the concern of data transparency needs to be addressed, in particular in the light of the introduction of the European Union’s General Data Protection Regulation (GDPR), as many of the companies are headquartered in Europe, with operations in East Asia. With labour and human trafficking to be considered as sensitive, it will be critical to deciding what information will be run in permission-less networks versus permission networks, with limited access given to stakeholders to run ‘trusted’ nodes and encrypting the data on a platform. This might be a fundamentally new role to consider for international organisations, such as the United Nations, that have for decades acted as stewards of international governance and might be best placed to ensure ‘permissioned’ data is safeguarded in the most trusted way for generations to come.
With blockchain application’s for human rights monitoring on the horizon, the most meaningful advances will come from cross-sectoral collaborations and partnerships between blockchain providers and those with technical experience of human rights monitoring. Grounded in such partnerships, blockchain will prove its ability to create impact in ESG data management at true scale.
About the Author(s): Jessica Camus is Head of Partnerships and Impact at Diginex.
[i] Global Reporting Initiative (GRI). The Next Era of Corporate Disclosure Disclosure. Digital, Responsible, Interactive.(March 2016)
https://www.globalreporting.org/information/pages/reporting-2025.aspx
[ii] U.S. Department of Commerce. NISTIR 8202 Blockchain Technology Overview. (October 2018)
[iii] Diginex. Diginex Partners with The Mekong Club. (2018, August 27). https://www.diginex.com/en/2018/08/27/diginex-partners-with-the-mekong-club/
[iv] International Labour Organization (ILO). Profits and Poverty. The Economics of Forced Labour. (2014).
[v] Royal United Services Institute for Defense and Security Studies (RUSI), in collaboration with the Freedom Fund. Leaning In Advancing the Role of Finance in Modern Slavery. (December 2018).
https://rusi.org/publication/occasional-papers/leaning-advancing-role-finance-against-modern-slavery
