Blockchain technology continues to gain traction as a tool to engender consumer trust and transparency. The next steps in the blockchain journey, setting up governance and regulatory systems, raise some interesting questions: How do we make it fair, motivate organisations throughout the supply chain to participate, and protect privacy?
For me, the great thing about the GFSI Conference this year was the opportunity to experience at first hand the thirst for new and better ways of doing food safety to complement the traditional and, by and large, successful approaches. Being able to share the progress we are making with blockchain in the areas of consumer trust and transparency was a privilege, but I am the first to say, and have always said, that the new is not necessarily better than the old. We need to find the right tools, whatever their sources, to solve our problems. In this respect I believe that there are some circumstances in which a good old face-to-face audit visit by an experienced auditor will never be replaceable by technology. The human factor in ‘doing the right thing’ is by far the biggest issue we have to overcome as an industry.
So, when it comes to looking at how to set up governance and regulatory systems for blockchain ecosystems it raises some interesting questions. I believe that the advent of blockchain in the food industry provides us all with a major opportunity for a fundamental rethink on how to improve these vital systems.
On one level, blockchain is capable of creating a level of trust that was not previously possible. The purchasing customer can now almost literally see what they are getting with their meat – the farm, the farmer, the breed, the welfare. As the Economist says, “It offers a way for people who do not know or trust each other to create a record of who owns what that will compel the assent of everyone concerned. It is a new way of making and preserving truths.” And yet it is a fully automated, computerised system that records and shares an immutable record of activity and transactions without any human intervention. It comes back to the question of how we humans, flawed as we are, set up the systems in the first place.
So, there are fundamental challenges when designing and developing our blockchain systems: How do we make it fair for all participants? How do we make sure everyone benefits at every stage of the supply chain, so they are motivated to participate? How do we make sure that personal and private data does not end up in inappropriate hands? These are very human questions and ones with which the regulators are also grappling.
Blockchain has also been much touted as a fraud-proof system. I do not believe this and agree with Dominic Watkins of DWF Law when he says, “Blockchain will not replace other checks, but will help simplify record keeping. Similarly, it will not eliminate fraud. After all, the intention of fraud is to defeat any system. But what it will do is make fraud more challenging, as it is far easier to validate if products are truly legitimate.”
So at NSF International we are working on a set of principles to be developed and agreed by all those taking part, and also working on what the role of governance means. The more I have learned about blockchain the more convinced I have become that someone is going to have to have a governance role to try and ensure that the right information ends up with the right people. It’s interesting work and has at its heart the notion of fairness and everyone doing the right thing.
This is an idea central to GDPR (EU General Data Protection Regulation), the word on everyone’s lips at the GFSI Conference this year. Many people suggest that blockchain ecosystems fundamentally contravene the regulation because the data held is immutable and cannot be deleted. Moreover, because there is no one owner or controller and there are potentially many participants and beneficiaries, in effect each participant is their own data controller and data processor. Dominic Watkins is sanguine about this from a legal point of view: “GDPR has spawned a sequence of new industries, but it need not stop blockchain. Provided that proper permissions are in place then it is perfectly achievable to make these systems work. There is always a solution.” Some solutions are already emerging and this is a further issue with which we are grappling.
Another issue for regulation is the fact that blockchain systems potentially consist of many different parties in the supply chain, in different types of businesses, with different imperatives and in many cases collaborating across borders with different jurisdictions. How do we deal with that? As Professor Chris Hodges said at our own conference a few weeks ago, the old model of the single industry regulator wielding the big stick is no longer appropriate and in any case had long been shown to be less effective than new models of regulation, which are based around using a variety of different tools to move people toward the correct behaviours. These are the kinds of regulatory activities we will need to be examining in more detail for behaviour in blockchain ecosystems.
These are big questions. As NSF’s blockchain project gets fully underway – moving into the pilot this month – I am looking forward to working through to practical and honest solutions. No, really I am!
This post was written and contributed by:
NSF International’s Food Services, UK