Blockchain, a distributed ledger technology, is poised to transform the forest products industry by increasing transparency and streamlining documentation across the entire supply chain. The technology allows multiple stakeholders to confidently and securely share access to the same information, opening the door to new growth.
In fact, blockchain is a key enabler of “frictionless business,” where everything from transactions to supply chains become more effective and efficient through technology-enabled trust.1 This trust can play a key role in helping forest products companies create net-positive, win-win relationships—between suppliers, producers and end consumers—that are likely to reduce costs and boost revenue. For example, a liquid packaging board (LPB) producer can increase the value of their product by showing proof of packaging originating from sustainable forestry through procurement tracking by distributed ledger.
Case in point: companies in the industry currently find it complex and challenging to verify the origin and sustainability of forest products including tissue, packaging, sawn goods and more. Wood certification is managed by third-party organizations that are often costly, strict and irregular in their requirements.2 Third-party certifications add to the already-strict national forest legislations for certification. Furthermore, forest regulations differ by country, allowing certification processes to exacerbate uneven competition between countries and regions.
With environmental sustainability an imperative for our planet and the species it supports, it is critical to improve the practices surrounding wood certification. Today there are substantial volumes of illegal timber and wood fiber in circulation, and it is “washed” in forest products production and in the recycling stage of the wood-products life cycle. The consequences of illegal logging impact economies, societies, flora and fauna, and it can severely impact a forest-owners future market supply. Some estimate that the repercussions can cost host countries as much as $4,000/hectare in lost tax revenue, crippled ecosystems and societal conflict.3
By enabling blockchain—combined with artificial intelligence and emerging Industry X.0capabilities such as smart and connected products, services and plants—the forest products industry stands to benefit across the value chain.
This newfound visibility and traceability from forest to mill to consumer could lead to:
- Ubiquitous digital contracts, revolutionizing “the way contracts are prepared, transacted, amended, stored and complied with.”4
- Virtual and secure supplier portals where forest owners can share harvesting plans and forestry service providers can, in turn, provide value-add services to forest owners.
- Demand forecasting for harvesting activities, shared with loggers and trucking companies, ensuring the right workers and equipment are available in the forest when needed.
- Real-time information sharing of harvesting activities with government agencies and wood consumers, certifying sustainable practices.
- Shared and secure forest inventory information making it easier for forest owners to choose an optimal harvesting timeframe to maximize their yield (e.g., harvest younger wood for a pulp mill at a guaranteed price today or wait and sell to a saw mill in the future).
- Traceability through the supply chain enabling improved wood-quality control for mills.
- Blockchain combined with technologies like biomarkers, drones and virtual/augmented reality, allowing mills to fully understand their wood consumption and consequently improve production processes (e.g., using drone survey data to verify volume of wood harvested vs. volume that enters the mill gate).
- Management of fractional ownership of forestlands, improving the coordination of disparate groups for the greater good of forest industry health and sustainability, and strengthening regional competitiveness.
- Curbing of illegal logging practices by making certification processes easier with reduced administrative tasks and a streamlined flow of information across the value chain.
Many of these ideas will improve the bottom line and generate real value for forest products companies by reducing cost, increasing transparency and creating new streams of revenue. While blockchain solutions become increasingly viable and valuable as more participants adopt the technology, there is significant value to the early adopters that build the technology. As business models evolve and new ones are built, the early entrants will have the power (and responsibility) to set the rules. This could change the entire game plan in forest products, ideally leading it toward a sustainable future as a steward of the bio-economy, a cornerstone in the circular economy.
The use of blockchain is adaptable across the gamut of forest products—from packaging, tissue and graphical papers to sawn goods and biofuel. The spotlight on blockchain in the industry will grow brighter as the world returns to wood as a raw material for sustainable alternatives that can replace non-biodegradable materials that pollute our planet.
According to Accenture research, industry executives are excited about blockchain, with 60 percent indicating that blockchain and smart contracts will be critical to their organization over the next three years.5 We are excited about blockchain as well, particularly in forest products where the impact stands to truly change the game in the industry.
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1 ”Technology Vision 2018: Intelligent Enterprise Unleashed,” Accenture, 2018, https://www.accenture.com/us-en/insight-technology-trends-2018.
2 Johansson, Cristopher. ”Barriers to FSC certification for small forest owners in Sweden,” Swedish University of Agricultural Sciences, 2018,https://stud.epsilon.slu.se/13485/.
3 ”The Economic Impacts of Illegal Agro-Conversion on Tropical Forest Countries,” Forest Trends Information Brief, 2018, https://www.forest-trends.org/wp-content/uploads/2018/06/Info-Brief-Costs-of-Illegal-Agro-Conversion_Final.pdf.
4 Wilson, Andrew. ”Accenture’s IT Foray into Blockchain: Harnessing New Technology for Digital Contracting,” August 2, 2018, LinkedIn,https://www.linkedin.com/pulse/accentures-foray-blockchain-harnessing-new-technology-andrew-wilson/.
5 ”Technology Vision 2018: Intelligent Enterprise Unleashed,” Accenture, 2018, https://www.accenture.com/us-en/insight-technology-trends-2018.