Blockchain technology is becoming an increasingly powerful tool in the area of supply chain risk management, bringing resilience and robustness to organizations.
Blockchain works very well in this regard because it allows the transfer of value between peers – whether assets, identity or information – without the need for a central intermediary.
One of the main representatives of blockchain solutions in the supply chain is
Paul Brody, global blockchain leader at EY. Brody oversees EY’s blockchain strategy and solutions and is a leading advocate for public blockchains and privacy technologies.
He recently published a book on the subject. Ethereum for Businesss. (Ethereum is a decentralized blockchain with smart contract functionality.) The book is a plain English guide to the world’s largest blockchain. Topics covered include data quality, efficiency, smart contracts, privacy, scalability, and supply chain management. It is aimed at executives who want to understand the potential of blockchain to solve real-world business problems.
Brody says of the book that it “targets the idea that blockchains are primarily about cryptocurrencies and finance.” He firmly believes that the public Ethereum blockchain “is the digital glue that connects commercial ecosystems.”
“No business is isolated,” he emphasizes, “and increasingly, the biggest challenge businesses face is synchronizing all of their business partners and relationships.”
Few areas of business are more complex and expansive in nature than the supply chain. Managing supply risk comes down to one thing: visibility. You cannot manage, measure or protect against what you cannot see.
Brody’s book contains compelling case studies and examples of blockchain at work in the supply chain. One of these case studies addresses an issue of urgent importance to today’s organizations: carbon tracking in supply chains.
“Regulators are working globally to start tracking and managing the carbon footprint,” says Brody. “The starting points are often cap-and-trade rules that require companies to manage their total carbon output with the aim of adopting more efficient processes. »
Brody points out that although the industrialized world is generally reducing its carbon emissions, significant challenges and gaps remain. Among the most important, he says, are:
- Migration of carbon-intensive industries, because governments fear that harsh measures against large GHG emitters will push them to relocate.
- Falsified emissions and credits. (Without global standards and inspection services, companies can hide their results or falsify carbon offsets.)
- Compensations and credits counted twice.
- Varying monitoring methodologies and definitions, which make it difficult to compare the total emissions of a particular product across geographic or industrial sectors.
- Siled national and industrial monitoring systems
Brody says that in terms of managing greenhouse gas (GHG) emissions, Ethereum has key features that can help, including tokenization. Tokenization in blockchain is the issuance of blockchain token, which are digital representations of real-world assets.
“Not only is tokenization a useful way to quantify and move assets or liabilities, but the smart contracts used to define tokens can be established to control which entities can create new tokens and how they can be moved,” explains Brody.
As a result, he says, it is possible to set up standardized issuance models and allow only compliant organizations to mint tokens.
“Each issuance or clearing token can be traced back to an original issuer,” he says. “This ensures that definitions are standardized and that only companies whose processes are inspected and verified can issue issuance or clearing tokens.
Brody points out that other blockchain features that can help solve GHG issues are:
- Tokenization of products and services related to emissions and offsets.
- Integration of external product emissions data into the blockchain, allowing their tracking worldwide.
- Data permanence, so that supplier carbon emissions reports, once written to the blockchain, will be stored forever, even after the supplier company leaves.
In the book, Brody also examines product traceability in the supply chain. Brody says product traceability is one of the first and best use cases for Ethereum because it is simple to implement.
“For most consumer products, the value proposition for traceability lies in fraud prevention and source verification,” he explains. “For many other markets, traceability provides additional authenticity and allows consumers to trace the history of a product.”
He adds: “The case for traceability becomes stronger as we look at products like pharmaceuticals, where counterfeiting is potentially a matter of life and death.
“In these cases, the ability to quickly trace bad batches of ingredients throughout the supply chain is invaluable. »
One of Brody’s case studies is Peroni Nastro Azzurro, the Italian brewery, which is one of the world’s largest users of blockchain traceability technology.
Almost all beer bottles manufactured and sold worldwide now feature a QR code for product traceability, located near the neck of the bottle.
“By scanning the QR code with your smartphone, you will access a personalized web page showing the history of the product and its agricultural origins,” explains Brody.