At a glance
When a supermarket has to recall a product, such as a food product that contains a contaminant or allergen, it typically prompts a national recall.
Every product, and sometimes related products, must be returned by consumers and removed from shelves in every supermarket.
This process is expensive and time-consuming for the retailer, and costly and brand-damaging for the producer.
Ingredients in an affected product often come from farms in a variety of locations. The contaminant or allergen has likely been introduced at just one of these farms, but without being able to identify exactly which one, all products must be recalled and destroyed.
Kurt Solarte, lead partner for digital and emerging technology at EY, says scenarios like this present an opportunity for a blockchain best-use case.
Supply chain sweet spot
A blockchain is a decentralised digital ledger that holds a record of all transactions permanently and immutably. Importantly, data in this secure ledger is transparent to all stakeholders.
In the case of a product recall, Solarte says, the evidence a blockchain provides can be safely and efficiently used to track down the products that the contaminant went into and where that batch was delivered. The recall might then be across just one or two stores, instead of thousands.
“For us, the sweet spot for blockchain technology in enterprises is in transactions where there are multiple parties and a shared business logic,” he says.
“In terms of supply chain, think about events like recent vegetable recalls that have happened in Victoria, Australia.
“They had to destroy entire sections of food because they couldn’t trace which farm the produce came from. They could only trace the issue back to the packaging factory.”
If the entire production and distribution process had been captured on a blockchain, then rather than destroying everything from that packaging centre, the contaminant could have been tracked back to a specific farm.
However, the costs of implementing such a system – and whether the benefits exceed the costs – may vary.
Other information, such as the assembly line the vegetables touched and the trucks they were transported on, could also have been identified to ensure any risk of cross-contamination was mitigated. The rest of the food products could have stayed in the supply chain, reducing waste.
EY Australia is working with an Australian supermarket and its supply chain to implement such a system, built on blockchain technology.
Internationally, EY has also helped develop a blockchain-based system for the Microsoft Xbox platform.
“On that blockchain, we do about 25,000 transactions a day,” Solarte says. “It sorts out rights management.
“The blockchain solution integrates closely with game creators to give Microsoft Xbox an infrastructure that helps them manage and reward game publishers and creators.
“A blockchain solution is excellent here because it is transparent. This technology allows people to be paid faster, and the transparency means litigation is far less likely. It reduces disputes about people not being paid the right amount because everyone can see what’s going on.”
Blockchain and energy trading
It was announced in 2022 that the China Energy Administration was investigating the use of power trading platforms based on blockchain technologies to increase trade between small independent power generation units and larger state and national networks.
How might this work?
“Essentially, right now, if you have solar panels installed, the only option really is to sell excess energy back to the grid,” says Professor Salil Kanhere, from the School of Computer Science and Engineering at the University of New South Wales in Sydney.
“In the future, wouldn’t it be good if you could sell this energy to your neighbour, or if you could place an electric vehicle charging station outside your house and sell energy that way?” Kanhere adds.
“This all requires a decentralised platform rather than one entity managing the whole system. That’s one area in which blockchain is being pitched as a potential solution because it enables decentralised, peer-to-peer trading.”
Patrick Viljoen, CPA Australia’s senior manager – ESG, says that decentralisation can be costly, however, and “base guidelines may be needed to avoid instances of price gouging”.
On a larger scale, the advance of renewable energy generation is going to require decentralised market systems that can operate in and around an increasing number of small-scale generators.
The resulting peer-to-peer types of transactions between smaller energy producers and consumers can be enabled via platforms built on blockchains, Kanhere says.
These same technologies can track varying levels of generation and consumption, identifying patterns and highlighting areas of potential efficiency gains. They can also be used to automate functions such as payment processes.
“When you have multiple producers and consumers, blockchain can be an excellent enabler,” Kanhere says. “Blockchain is certainly promising for these specific use cases.”
In the broader environmental, social and governance (ESG) market, carbon trading is just one ingredient.
“Organisations should focus on reducing their own carbon production through internal processes and their value chain,” says Viljoen.
Within the carbon market, there are numerous measures around carbon production, air quality, waste, water, social issues and more.
Amin Shokri, founder and CEO of EnviroCoin, says, “This market has grown substantially in the past couple of years”.
EnviroCoin is a developer of decentralised ESG infrastructure built on blockchain technology. “What we do is quite simple in this ecosystem,” Shokri says.
“There are three parties. There are project developers and asset holders who own assets such as wind farms that produce offsets. There are purchasers of offsets and solutions. Then, in the middle where nobody really focuses, there are organisations that verify and certify these assets.
“About 40 per cent of capital flow goes to verification and certification of assets. But in this area, there’s essentially no innovation,” Shokri says.
It is very expensive for entities in this space to conduct their verification processes, meaning a project typically needs to be worth more than A$1 million in revenue for it to be feasible, Shokri says.
Small businesses that perhaps hold solar assets or manage waste recycling centres simply cannot afford certification.
“It also takes a significant amount of time for these assets to be verified and certified, which again makes it unfeasible for the majority of smaller assets out there,” Shokri says.
“We saw a huge gap and knew there was a way we could fill it. Blockchain technology is a big part of that.”
EnviroCoin has developed what it calls a “proof of environment oracle protocol”, allowing any offset project to be verified quickly, efficiently and at a fraction of the cost.
The platform sits on top of a blockchain, with the protocol taking its data from off-chain sources from asset holders and consumers by using, for example, Internet of Things (IoT) in solar panels.
It takes data from the IoT, and that data is held on the blockchain, immutable and “trustless” – meaning that there is no central organisation such as a bank that needs to be trusted in the process.
“As a side benefit, it’s totally transparent,” Shokri says.
“The way data is verified by various entities at the moment has very little transparency. But in this ecosystem, everything is transparent and traceable.”
How AI impacts blockchain
The EnviroCoin platform is being developed with a high level of automated verification capability. The system knows the range within which a certain solar panel system, for example, can produce energy.
There are safeguards to ensure businesses do not claim to have more solar panels than they really do. Artificial intelligence utilises third-party data to spot any outliers, and therefore flag for further investigation any data that could be fraudulent.
Such a system of checks and balances is vital within the blockchain space, Solarte says. The chain may well be highly transparent, but that will not necessarily prevent people from entering bad data, intentionally or otherwise.
What will increasingly be needed is verification of the data by humans, Solarte says.
“Once you’ve put data in, you can’t really get rid of it or hide it,” he says. “But what I always like to remind people is that it’s still a system – garbage in, garbage out. It’s not fraud-proof – it’s just transparent.
“If I commit fraud, if I sell you something fake, and then we write that transaction in the blockchain, it will be there forever,” Solarte explains.
“Everyone can see it and maybe that makes it easier to prosecute me. But there’s nothing about the blockchain that stops me from writing lies into it, so if you’re using blockchain as ledger for something, you still need auditors.”
One concern has been the development of private or corporate blockchains. Part of the inspiration behind blockchain’s development was distrust in corporations. The beauty of blockchain is that it operates in a trustless environment.
Private or corporate blockchains, however, once again introduce the need for trust in a central entity.
“We think public, decentralised blockchains are going to win the day,” Solarte says, “And for the most part, when you look at total usage, public blockchains are winning the day. The private ones are slipping away.”
Blockchain implementation challenges
When an organisation, or a group of organisations working together, makes the decision to go down the blockchain path, what is involved?
Right now, Solarte says, there is no such thing as an off-the-shelf solution.
One of the challenges for the development team is the platform’s integration with other systems that are in use within and around the business.
Then, there are new systems that must be put in place. In the previous supermarket example, scanners might need to be installed at farm gates and other points to record data into the blockchain.
This might also involve retraining employees to ensure relevant scans, or data entry, are carried out correctly.
“Largely, blockchain is a good fit with supply chains because they are complex,” says Kanhere, who believes blockchain-as-a-service offerings could be available in the next three to five years.
“There are many different partners around the world who don’t necessarily trust each other fully. Blockchain has helped a lot of these businesses establish trust.
“If you can get all of them to agree on a model for the blockchain, and they’re willing to contribute data to it, it can be very useful for improving traceability, tracking, efficiencies and giving an overall view of how the supply chain is performing.”
Solarte says organisations only tend to discover the true power of such a solution once it is in play and they begin to experiment with other uses for the data it offers.
“A lot of first-use cases are about provenance,” he says. “But whenever you begin to insert technology into the flow, you start to see efficiencies pick up and you start to be able to track waste, and much more.
“Once you put blockchain in, you end up getting unexpected benefits.”