BLOG


January 21, 2019
Circular Supply Chain: A Model Using Blockchain and Other Technologies to Reward Producers at the Beginning of the Supply Chain
By: David Treat

My kids love to ask me about my work and ask tough questions. One recurring favorite discussion topic is the work we’re doing around digital identity and its myriad applications to help people—like our latest research on sustainable agriculture and our work with ID2020. But a question they asked recently gave me pause: “what’s stopping you from just doing it?” I knew, “It’s complicated” would never cut it as an answer and, in the moment, I wondered if it needed to be complicated.

I’m driven and excited about what new technology innovation can unlock to help solve real challenges. And I work hard to balance that exuberance with the experience, insights, and reality from the experts in the field who live these challenges every day. Our ability to cut through the complexities and execute on real change through public/private partnerships is stronger than ever.

Interest in sustainability is accelerating as we better understand the link between our behaviors and the ecological and societal impacts. Green trade, which includes things like renewable energy, sustainable agriculture and manufacturing, and low-carbon transportation is rising in political and economic importance and is projected to be valued at well over US$2 trillion per year by 2020.2

In our ongoing efforts to understand and act on the root causes of our environmental challenges, we haven’t had much success in addressing a core part of the problem: how do you assure that the producers at the beginning of the sustainable supply chain receive a fair portion of the premium consumers pay for these goods and incentivize sustainable protocols?

Often, these supply chains start in rural, impoverished areas. Research shows nearly half the world lives on less than $5.50 a day.1 If presented with a choice between feeding their family—their very survival—and addressing environmental impact, there is no choice.

In the current model, smaller producers at the beginning of the supply chain don’t typically receive a fair share of the premium paid for sustainable goods by consumers at the end of the supply chain. There are simply too many participants in between that need to optimize their businesses.

In addition, as something moves from raw material to finished good, materials are split, combined, transferred, packaged, moved, repackaged, and turned into a final product. The producer has little visibility across the process, which makes it nearly impossible to assess the true value they’ve contributed, which makes it difficult to apply influence so that they can fairly participate in that value.

We think that there is a way to change this model, which we call circular supply chain, and are now accelerating our work to bring partners together to apply it. Our premise is that through the latest technical capabilities including blockchain, digital identity, biometrics, IoT, and others, we can create a means to directly link end consumers back to beginning producers by enabling consumers to give a “tip”—a financial contribution of their choice—when paying for certain products at a point of purchase.

By enabling end consumers to introduce net new money into the system that routes directly to producers, we think that we can address many of the key challenges around getting more money and value to producers at the beginning of the supply chain for their efforts and, ultimately, be rewarded for sustainable practices. The current supply chain doesn’t have to be changed per se, but will benefit from having more reliable information for the “first mile” of the journey as better data will be gathered from the start. Consumers can better understand the sources of the goods they buy and can take meaningful action to help encourage more of what they value.

We’re excited to highlight these efforts at the World Economic Forum Annual Meeting in Davos this week with key partners and continuing to drive forward for real change. Please join use as we build a truly effective public private/partnership so we can tell all children that this is not only possible, we’re doing it.

References:

1 Source: World Bank Press Release, October 17, 2018. Nearly Half the World Lives on Less than $5.50 a Day.
2 Source: Report shows a third of consumers prefer sustainable brands.

Popular Tags

    More blogs on this topic

      Archive