Several major banks, including Barclays and Standard Chartered, have joined a pilot using blockchain technology to improve the sustainability of global supply chains.
BNP Paribas and Rabobank also took part in the experiment, alongside supermarket Sainsbury's, Unilever, and the University of Cambridge Institute for Sustainability Leadership (CISL).
The so-called Trado model was piloted with smallholder tea farmers in Malawi who were offered a financial incentive in return for feeding social or ecological data into the blockchain.
There are around 500 million smallholder farmers producing 80% of the food consumed in developing countries. The Trado model aims to create a sustainability ‘data-for-benefits’ swap between a buyer and a seller in the supply chain using banks’ traditional supply chain financing.
This swap provides parties in the supply chain with reliable data about its sustainability properties, helping to reward first mile producers such as smallholder farmers for information on their production practices.
The partners argue that the Trado model could allow for access to data by many parties in a supply chain or across many supply chains, and the data could relate to any number of topics, for example deforestation, land management, biodiversity, socio-economic development, or verified distribution of Trado-generated benefits.
In exchange for the data, the buyer enables the provision of benefits by allowing a (lower) financing rate to be applied to working capital financing of the supplier. The transaction takes place using a bank’s regular supply chain financing process, meaning minimal disturbance to business.
Michiel Teunissen, head, innovation, TCF, Rabobank, says: "Trado shows how to translate traceability and sustainability data into real impact at smallholder level, motivating them to produce more sustainably. In our view that is the key to make supply chains more sustainable in a scalable way."