On behalf of Mitch Chait, CEO of greenfence, thanks to all who joined our session or spoke with us at the GFSI Conference 2018 in Tokyo! Responding to your requests, this blog post builds on the challenges and potential for blockchain in the food industry.
The global food supply-chain continues to buzz about blockchain – where all transactions are recorded with the implicit knowledge of every participant – to improve transparency and traceability between trading partners. Some organizations have begun test deployments, either internally or involving trusted partners, and early results in shallow supply chains such as produce have shown some successes: increased speed, improved traceability.
But the jury is out on blockchain’s ability to truly change the way the entire, hugely-complex food supply chain connects and communicates. At greenfence, we believe it’s all about how blockchain is deployed.
Carrot or stick?
The usefulness of any blockchain, or indeed any ledger or database that shares information, is directly tied to two fundamental factors – the completeness and accuracy of that information.
For a supply chain blockchain to be complete, there must be visibility to all participants end to end, one of the food industry’s most significant challenges. Current blockchain deployments are not solving this problem, and instead are very traditional: Downstream companies (brands, retailers) asking upstream suppliers (manufacturers, processors, growers) to participate. It’s simply a new supplier burden with limited benefit – it’s all stick and no carrot.
Further, it’s trivial to construct a supply chain blockchain filled with inaccurate, untrustworthy content e.g., about origin, certification, participants or outcomes. If all you want is a permanent record, then it’s not much of an incentive for participants to ensure the information they provide is accurate.
To get complete and accurate supply chain information, the supply chain must be incentivized to participate and record accurate information, traits inherent to a ‘pure’ blockchain. A carrot instead of a stick. It’s a lot trickier, because it involves things like value, reputation and trust, which are things that cause problems at the dinner table, much less a global industry with 2+ billion participants.
We’re not promoting greenfence’s blockchain solution in this paper. We’re simply sharing our insights with you to provide more perspective for your own evaluation of this new and rapidly changing technology.
Farm-to-fork - Really?
“Farm-to-fork” rolls off the tongue, so it’s easy to forget the fork might be in the mouth of a child eating an egg in Barcelona. Blockchain will not make it any easier to learn where the fork and child are located, the source of the ingredients in the chicken feed, or which hen laid the egg. If you think that’s a challenge, imagine this: there are nearly 2 billion farm workers around the world that need to participate for the industry to begin connecting the dots. These workers aren’t even tier N – if you truly want to know the DNA of food you need to connect the raw agro materials, agro-manufacturers and agro-suppliers. If blockchain isn’t just a fad, here’s what we believe needs to happen:
Embrace the true power of blockchain.
As we discussed in our morning session, there are 3 distinct pillars of blockchain: it must be self-funded, there must be no middlemen, and trust must be distributed. If you’re thinking of blockchain for scalable upstream and downstream visibility, transparency, and traceability, these pillars are essential for its success.
Everyone one needs more visibility into their supply chains, which means they need more information. Much of it resides with participants with little willingness or incentive to share it. The alignment of sharing supply chain information with incentives has always been a challenge, but a properly deployed blockchain enables a self-organizing economy that rewards those who share and those who utilize information to improve the health of the entire food system. We at greenfence call this the “Go - No Go” barrier to entry; greenfence first developed this as the universal foundation to build a universal blockchain.
All participants in the ecosystem benefit: farmers are incentivized to join and share trusted information, brands see two-way value creation, bad actors are minimized, and risks get mitigated. Shoppers are also incentivized to share information and in return improve loyalty.
What’s needed is an integrated, public blockchain. Private blockchains depend on costly intermediaries and are susceptible to conflicts of interest and compromised trust. They work best in controlled environments (internal operations and shallow supply chains) where stakeholders and standards are known. In the near term there will be many private blockchain implementations in the food industry, but the usefulness of the information therein will ultimately depend on the level of integration with a larger public ecosystem to share, at least, pre-competitive information. Today, the industry remains challenged to collaborate even at this level.
Everyone has the same problem: they often don’t know who is at the other end of any given supply chain. They’re not sure how, exactly, the shipment of materials arrived on their warehouse docks were produced, or even more, what the conditions were far upstream (e.g. inputs, food safety, sustainability, environmental). The need to know who’s trustworthy cannot reside in the hands of a few large organizations; support for reputation and trust must be intrinsic to the core blockchain protocol.
Don’t worry. None of this will happen overnight. Your competitor isn’t going to crush you with a private blockchain that increases speed and time-to-information among known partners. That was never the problem. The problem is incentivizing everyone – from pre-farm to beyond-fork - to participate and provide accurate information. If you’d like to know more, let us know and we’ll include you in future updates on our progress.
This post was written and contributed by:
Blockchain Solutions Leader