Xinjiang Cotton: Blockchains Can Phase Forced Labor out of Global Supply Chains
In this Tuesday’s issue of The New York Times there was a piece on the pressure on companies to stop sourcing their cotton from forced labor in China’s Xinjiang province. The problem is that Xinjiang cotton accounts for nearly 20% of the world’s supply.
“Supply chains are long and opaque, and the journey from field to shelf involves cotton gins, mills, weaving or knitting, dyeing and finishing — all steps that may take place in different parts of China, or different countries,” said Leonie Barrie, an apparel analyst at GlobalData, a consulting company in London. “Even if a brand had no direct relationship with Chinese factories, they can’t completely rule out any links to Xinjiang’s cotton.”
Worse yet, with our incredibly complex global supply chains, it remains notoriously difficult to audit where raw materials are sourced. The famous essay, I, Pencil by Leonard E. Read does a good job in illustrating to a layman just how convoluted and byzantine the creation of a finished good is in a globalized economy.
If we want to truly solve the problem of removing forced labor as an input into our consumer goods — whether it be for geopolitical or ethical reasons — we need to move past words and online outrage. It’s time to call for firms to employ technologies at their disposal to make supply chains more transparent, and perhaps even for the federal government to mandate the phase in of these technologies.
I’m talking about blockchain-based supply chain management. For the same reason they can power digital currencies like Bitcoin where counterfeiting is impossible, blockchains enable firms to engage in immutable record keeping.
Projects like IBM Food Trust are already employing blockchains to create better food supply chains and rapidly speed up audits and recalls. These systems improve traceability of products and their inputs; this means it’s easier to track a bad batch of lettuce, and potentially also where the cotton in your H&M shirt was sourced from.
The technical details on how this works are interesting; you can learn more here. The main point is that the technology exists to improve supply chain transparency. Obviously for this to be effective, you would need not only multinational companies but the various vendors and distributors they work with to implement the systems. This is a herculean overhaul, and would amount to a totally new digital infrastructure for the global economy.
Many firms already have a market incentive to start pilot-testing these technologies. Walmart has already started using IBM’s blockchain, and is encouraging its suppliers to do the same. Notably, they have already utilized the technology within China to track pork through the supply chain and improve food safety.
It’s conceivable that clothing companies companies like H&M could start using the same systems. But since these companies technically profit off of forced labor, perhaps incentives from the federal government could be helpful. Biden could start the lip service at the very least — calling on multinational companies to implement blockchain supply chain management resonates with both his Build Back Better infrastructure initiatives (where infrastructure is understood to includes broadband and home care, why not blockchains?) as well as his administration’s promise to offer a front against China’s human rights abuses.
Perhaps down the line, we can even require that companies make portions of their blockchain records open to the public. This can facilitate both public oversight and accountability to consumers.
One can imagine a future where a consumer can scan a QR code on a supermarket chicken and see where it came from and where it was packaged for themselves on their smartphones; or scan a skirt and see whether one of the cotton suppliers on the chain has been flagged by either federal or civic watchdogs as being potentially associated with forced labor.
For those who believe this may constitute government overreach: we already mandate financial institutions to engage in sound book-keeping to comply with Federal Anti-Money Laundering and Know Your Customer regulations. Requiring multinational companies to use sound supply chain record keeping only makes sense in a globalized economy.
Robust government action may be able to facilitate the free market mechanisms that can regulate the economy — incentivize companies to be transparent with their practices so the rest of us can vote with our dollars. This infrastructure will be incredibly useful as we try to decarbonize our economy, transform the meat industry, and raise global labor standards (and stop using slaves.)
The possibilities are wide ranging. All that is certain is that blockchains provide a way to scale trust and accountability in a global economy where market expansion has outstripped both.
This post will appear on a new blog I’m working on launching, earlgreytoday.com