20 June, 2018
A lack of transparency in the life cycle of goods on the supply chain has long been an issue for consumers, governments, and corporations alike. The advent of e-commerce has brought with it a burgeoning counterfeit industry that’s estimated to be worth around $461 billion worldwide. People are becoming increasingly aware of the potential harm that can result from counterfeit goods like pharmaceuticals and children’s toys—and when it comes to food, the farm-to-table movement also signals a growing demand for transparency.
The Food and Drug Administration (FDA) currently relies on supply chain recordkeeping via printouts and spreadsheets that can vary widely in clarity and accuracy. On top of that, food provenance is a complex issue, sometimes involving up to six or more actors in between farms and grocers. This leads to even more confusion when there is a crisis involving the many players in the supply chain.
In 2006, the FDA had to put out a warning against all spinach products in the midst of an E. Coli outbreak, since the origin and movement of contaminated spinach in the supply chain was unclear. No one could pinpoint exactly which spinach shipments were affected—and in addition to the $74 million in losses for the spinach industry, many people became seriously ill as a result. The Centers for Disease Control and Prevention (CDC) reported that over 48 million Americans fall victim to foodborne illness each year, with an annual death toll of around 3,000.
There are often less serious consequences for the lack of transparency in the food supply chain as well. Last year, the Washington Post reported that a 36-million pound shipment of soybeans had been falsely labeled with a USDA-certified “organic” sticker before entering the United States. The fake certification increased the shipment’s value by $4 million, and the soybeans had been sold to 21 million people before the distributor, Global Natural, released a statement saying that they had been provided with false certification documents.
More than half of U.S. commodities come from overseas, where regulations to meet the strict standards for various certifications may be lacking. Producers and distributors are also often incentivized to use cheaper methods and faked certifications to maximize profit. And retailers may have little incentive to report or investigate claims of fraud, because this inevitably stirs suspicion against whole groups of certified products.
Governments and major companies have begun to use blockchain as a measure to address growing concerns about traceability and transparency. For instance, the Central Bank of China announced this year that it will be experimenting with blockchain to track funds in humanitarian ventures. Blockchain’s public and immutable decentralized ledger model results in increased accountability in recordkeeping, which becomes a highly valuable asset when more and more players are involved.
Globalized trade and e-commerce have bloated the supply chain, and former measures to ensure accountability are no longer as effective. The bottom-heavy environment has made it difficult for a central authority to properly address widespread issues of corruption, mismanagement, and contamination.
Fortunately, data recorded on the blockchain is unchangeable, and each entry is verified by every other entity participating in the blockchain. A distributor receiving goods from a farm that uses non-organic pesticides or hormones wouldn’t be able to change the data to claim that their goods are certified organic. This type of corruption that occurs in internal logistics is thus eliminated with the now-shared accountability among numerous actors.
In a crisis, blockchain can offer transparency where formerly muddied recordkeeping would have seriously hindered investigations. Agencies like the FDA can use blockchain to triangulate the origin, movement, and destination of contaminated food all along the supply chain with considerably more efficiency than was previously possible when dealing with the different recordkeeping methods used by each entity. Not only can blockchain save resources due to its simplicity and accuracy, but it also prevents certain scenarios (like the contaminated spinach of 2006) where a warning is issued against an entire category of goods—which in turn can prevent massive losses for an entire industry.
Transparency is the future of food provenance. A recent study by Label Insight showed that 94 percent of surveyed consumers wanted more information about the food they were purchasing, 75 percent did not trust the current accuracy of labels, and 37 percent were willing to change brands if a competitor shared more information about their product. The survey also showed that “the vast majority of consumers value product transparency and consider a wide array of information about a particular product before making purchase decisions… [and] for the most part, consumers today do not trust the way brands are currently providing them with this crucial information.” A USDA-certified organic sticker is no longer cutting it.
Companies who want to remain competitive are going to have to adopt methods to grant consumers the knowledge they want. Once brands enhance their reputation with transparency and complete visibility—proving the reliability of their data—they will have a major edge over competitors. Blockchain can give consumers the accurate information they are hoping for, publicly and with built-in trust. Information about shipping dates, the origin of products, and all the stops along the way will be available to increasingly curious consumers who no longer trust aging storefront marketing techniques.
Blockchain is increasingly the subject of trials and is being adopted by those who operate in logistics as well as supply chains. Walmart has already begun using blockchain to track and keep records about the pork it imports from China—such as the sell-by date and processing information.
The CEO of FedEx, Fred Smith, has also stated that businesses who do not embrace using blockchain will “get left behind” in the global economy. Accordingly, FedEx joined a logistics-focused blockchain group earlier this year to explore how to use the technology within the shipping industry.
For our part, VeriToken aims to meet the high level of consumer and corporate demand for improved food provenance. Every stage of a product’s life cycle can be logged as a SKU on our blockchain platform that can also record SKUs and goods that are divided into smaller portions. And at the end of the supply chain, a QR code is included on the final product, instantly providing access to the entire log of the product—from cow to shredded cheese packaging.
Image via PublicDomainPictures.