Blockchain could be key to improving sustainable practices in the supply chain

By Dr Atanu Chaudhuri, August 2022

How can new technologies help businesses better their supply chains? Associate Professor Dr Atanu Chaudhuri shares why blockchain may be the answer. 

The theme of this year’s much delayed but vitally important World Economic Forum (WEF) in Davos was ‘History at a Turning Point: Government Policies and Business Strategies’. The event, which gathered more than 2,500 leaders from across global politics, industry, civic society, academia, arts and the media, placed a steady focus on two critical messages. 

One: There’s no more time to delay — to have any chance at meeting any of the 17 sustainable development goals (SDGs) by 2030, we must act now to reduce the impact our very existence has on our societies and ecosystems. 

Two: To be effective in our goals, the responsibility to take action must go beyond global governments and authorities to be shouldered by our industries, large and small. Businesses must be fully aware of how their operations affect the world around them and actively work to both lessen their footprint and work for the benefit of all.  

Regarding the second point, it’s well understood that this is easier said than done. Besides the additional strain of the past two years as the pandemic has upended typical business practice, researching and investing in sustainable business practices can be an unpredictable, costly and potentially ineffective activity.  

However, it could also be argued that our industries have never had more tools at their disposal to make the seemingly impossible happen. The advancements in new, smart, technologies have not only helped businesses significantly increase their capabilities and output, but at a fraction of the cost and a greater speed than a fully human workforce could achieve. 

These tools, which have so far mainly been used to provide better customer service, shape more effective products, and amass a greater profit, can also be used in a variety of ways to help organisations to review their practices, identify areas for concern, and make reliable predictions for the effectiveness of new practices. 

A key example of this, as identified by my own research, can be found in the application of blockchain technology in improving supply chains. It reveals how the technology can act as an enabler for improving social sustainability, increasing transparency and eliminating risks, and enabling companies to act in a more ethical manner. Often, global supply chains are subject to fraud, counterfeit products, child labour, and the risk of low quality. Worryingly, many of these issues can occur without the company at the end of the chain having any knowledge of them. And yet, they must be accountable for how their supply chains operate. 

The study, conducted with my colleague Professor Kieran Fernandes alongside Coventry University, Toulouse Business School and the Turkish German University, investigates how blockchain can be deployed to help companies become more vigilant about how their practices impact the world around them at every level, and reduce the potential risks they might face from unethical activities in the supply chain that they may be unaware of. 

In an age where it’s not only government bodies that are calling on industries to act more consciously and become more accountable, but also an increasingly socially aware customer base, blockchain provides companies with the ability to alleviate the above challenges. This is because the traceability that comes through blockchain use can ensure that fair practices are followed at every stage, thus minimising risk. 

To uncover our findings, interviews were conducted with the co-founders and CEOs of service providers providing blockchain solutions in diverse industries such as: coffee production, aviation spare parts, shipping fuel, and recycled plastics for consumer goods industries. The interview stage was a vital step in our work as it provided a first-hand perspective of how blockchain implementation was improving social sustainability and reducing risk in the supply chain. Then, to support these perspectives, we sourced additional information and evidence from the companies involved, concerning their operational practices and output. 

Whilst the responses we received from our initial investigations painted an initially rosy picture, there were a few key concerns identified which, if left unchallenged, could pose a significant hurdle to improving sustainability.  

While attempting to source examples of those who had successfully implemented blockchain to their supply chains, we found that the majority of service providers faced multiple challenges in doing so. 

As always when it comes to implementing new technology, the issues didn’t stem from the technology’s capability but rather the understanding of those attempting to harness it. The lack of understanding of the mechanisms needed for blockchain implementation to improve sustainability and risk management in supply chains meant that, for many, implementation will fail to live up to its promise.  

So how can we overcome such challenges? WEF has made it clear that we’re no longer in a position to wait. Action must be taken immediately. 

To that end, my research colleagues and I identified a number of steps that blockchain service providers can take to ensure the companies who use their services can fully understand how to best adopt and integrate them. 

Developing user-friendly interfaces, customised secure digital payment systems, and easily accessible technical support for suppliers are all simple but vital actions which would go a long way to ensure stakeholders across the supply chain can engage effectively. Furthermore, applying local-level knowledge and building relationships facilitates smoother adoption of the technology.  

And, when it works, there are multiple benefits. As well as company owners being more assured that their operations are efficient, sustainable and resilient, there are the added bonuses of being able to act for the greater good. 

By using blockchain, firms can also better mitigate supply chain risks at lower costs when compared to a traditional supply chain, where firms tend to hold higher stocks of inventory at an excessive capacity to compensate for possible disruptions along the line. As blockchain enables businesses to track and trace the complete movement of raw materials and products throughout the supply chain, it can help companies identify not only questionable practices but potential risks to progress and plan accordingly.  

The SDGs were established seven years ago, and we’re now eight years away from the set 2030 deadline — putting us firmly at the halfway mark of our progress. We know that we, as a global society, haven’t yet achieved enough and have a long way to go. It’s never been more important for organisations to prioritise working for good as well as for profit and put in place practices to help them work towards a greater contribution to these global goals. New technologies such as blockchain provide perhaps the first means for doing so that can suit both planet and profit.  

More information on Dr Chaudhuri's research interests.