In today's digital world, companies are under pressure to be more transparent with their customers. This is especially true for supply chains, where customers want to know where their products are coming from and how they’re being made.
Ethical compliance is one area that customers are putting under the magnifying glass. In Xinjiang, for example, the Chinese government is using a massive surveillance program to track the movements of the Uyghur Muslims, detaining more than one million people in forced labor camps, according to reports by the State Department and Department of Labor, as well as independent media outlets and the United Nations. As a result, U.S. companies that source products from Xinjiang are finding themselves under increased scrutiny.
Customers understandably want to know their products aren’t being made in factories where human rights are being violated or lives are at risk. But companies often don't have the information needed to provide this level of transparency.
One way to address the problem of human rights violations within the supply chain is through the use of blockchain technology. Blockchain is a distributed ledger that allows for the secure and transparent sharing of data among multiple parties. Here are some promising applications of blockchain technology in the supply chain.
Digital ID. Blockchain can be used to create a "digital passport" for products, including information on where and how they were made. This tracing function can give customers assurance that they’re buying products from companies that share their values and are operating ethically. It can also help companies become more transparent, building trust with their customers.
Product quality and safety. In the past, there have been several major recalls of products found to be unsafe, such as baby formula and pet food. If manufacturers and retailers share data on ingredients and production processes, it can help to prevent such recalls from happening. And if a product does have to be recalled, the blockchain can allow for a quick and efficient response.
Nestlé is already experimenting with tracking Gerber baby food products on the blockchain. Ensuring the quality and safety of food products is one of the key benefits of supply chain transparency, particularly when it comes to tracing the origins of ingredients.
ESG transparency. If a company wants to qualify the sustainability of materials, it can use the blockchain to track their end-to-end supply chain. Such transparency ensures that the materials are coming from certified sustainable sources and being used in a responsible way. It also helps to prevent the use of unsustainable or unethically sourced materials.
Blockchain can be used to trace CO2 emissions and help companies offset their carbon footprint. By tracking emissions associated with the making of a product, it becomes possible to create a “carbon passport” for that product. It can show the amount of CO2 emissions generated during production, as well as steps taken to offset those emissions.
Intellectual property protection. According to the World Trademark Review, around 3.3% of world trade consists of counterfeit products. This costs the global economy an estimated $509 billion per year. Blockchain can help to reduce this amount by providing a tamper-proof ledger of product transactions.
When it comes to protecting IP, blockchain can be used to prevent piracy. Microsoft, for one, has published a white paper on a system named Argus, which it dubs the first public anti-piracy system.
Regulatory compliance. The U.S. Food and Drug Administration is exploring the use of blockchain to track pharmaceuticals. This can help to prevent counterfeits and ensure that drugs are being manufactured and distributed in accordance with FDA regulations.
The aviation industry is also looking at the possibility of using blockchain to track and manage aircraft parts, with the goal of ensuring that aircraft are in compliance with airworthiness directives.
Data privacy. A network of blockchains enabled by a zero-knowledge protocol lets applications verify information without revealing the information itself. This allows companies to share product data with customers without revealing sensitive information, such as the identities of the people involved in the supply chain or locations of their factories.
Ultimately, blockchain technology has the potential to revolutionize supply chains by making them more transparent and secure. It will enable companies to build trust with customers, protect human rights and comply with regulations. It will also help to ensure the quality and safety of products, protect the environment and fight piracy.
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