Blue-chip companies and start-ups combine to launch fintech pilot for sustainable supply chains
Six international companies and banks and four fintech startups have announced new initiative that will test whether blockchain and other technologies can help unlock financial incentives that reward sustainability in supply chains.
The year-long project, which has secured private and public funding, will trial the concept by using a shared data system for tea farmers in Malawi that supply Unilever and UK-based supermarket Sainsbury’s.
The same system will also track the materials produced for the tea’s packaging, provided by global sustainable wood fibre products company, Sappi.
The cutting-edge technology has been developed by a collective of startups including blockchain-based supply chain services firm, Provenance, and Halotrade, which uses smart contracts and algorithms to convert supply chain data into preferential pricing terms in banks’ systems.
Landmapp will provide land rights documentation via mobile technology and FOCAFET Foundation will ensure open-source data standards are developed and used throughout.
The pilot, supported by UK aid through the Department for International Development (DFID), aims to test not only whether the technologies work together but also whether this application is commercially viable.
Key to the success will be whether the system can provide companies and banks with sustainability data that is material to their assessments of risk that they are not able to access through existing systems.
“This technology has the real potential to help banks access more detailed and more reliable information about social and environmental impacts in a secure way, throughout the entire supply chain,” said Marguerite Burghardt, Head of the Trade Finance Competence Center, BNP Paribas, one of three banking partners involved.
“This will enable financial institutions to broaden the scope of their financing offers and to propose financial incentives to their customer clients, based on their environmental and social standards.”
The partners, which also include Barclays and Standard Chartered, believe this application of blockchain and other technologies has the potential to be scaled up for a range of different global supply chains. If successful, it could ultimately benefit the 1.5bn families who depend on small-scale agriculture worldwide.
The University of Cambridge Institute for Sustainability Leadership (CISL) unveiled the project at the One Planet Summit organised by President Emmanuel Macron, two years after the Paris Accord set the agenda for global climate action.
The technology works by gathering and recording standardised information from farmers about their produce, including production quality and price, using virtual identifiers that are encoded on a blockchain.
This makes second and third tier supplier information available to all parties that can access that blockchain, making the supply – and its sustainability information – traceable and transparent.
In agreement with their corporate clients, financial institutions can then offer preferential terms or access to credit based on the evidence of sustainability supported by the blockchain. Through access to cheaper levels of working capital, smallholders will be able to increase investments in their farms to become more productive without needing to convert more land.
“Building on Provenance’s successful work using blockchain technology in supply chains, we aim to design and demonstrate the power of a collaborative ecosystem approach to tackling the Sustainable Development Goals, through linking preferential financing to verifiable sustainability claims and transparent supply chains,” said Jessi Baker, founder of UK-based fintech firm Provenance.
More than 10,000 Malawian tea farmers could be reached by the pilot alone, standing to make savings in accessing working capital.