Is blockchain technology sustainable

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Blockchain technology in supply chains - what opportunities does it offer for sustainable development?

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Krings, Katharina / Jakob Schwab
Analyzes and statements 19/2020

Bonn: German Development Institute / German Development Institute (DIE)

DOI: 10.23661 / as19.2020

Engl. Edition u.d.T .:
Blockchain technology in supply chains - what are the opportunities
(Briefing Paper 2/2021)

In addition to the attention that blockchain technology (BT) received through its use in cryptocurrencies, another field of application has developed for BT, somewhat unnoticed by the public: that in the supply chain. Supply chains have become increasingly fragmented and global in recent years, with the result that products often go through countless production steps from raw material extraction to sale, which are carried out by companies in different countries. Ensuring the quality and sustainability of production in the preceding steps represents a great challenge for many subsequent production steps - and ultimately also for the end user. BT promises great progress in this context. Put simply, the blockchain enables data in a network to be verified, stored in a forgery-proof and traceable manner and made visible to all participants in the network.
The possible advantages of BT are on the one hand on the side of the consumer, who can trace the origin of the products. That makes sustainable consumption easier. Second, they are on the side of the producers when parts of their supply chains are automated and they can prove their product quality and origin in a cost-effective manner. Third, the hope is that BT will make supply chains more inclusive for small and medium-sized suppliers, especially in developing countries. BT can more easily create trust in the intermediate goods you have supplied and thus break down barriers to entry. Taken together, the BT could therefore help to make consumption and production more ecological, socially just and inclusive and thus promote sustainable development.
So far, very large companies in particular have invested in pilot projects. Some products can now be checked in real time by both companies and end users for their production method and origin. However, while the BT securely stores entered data and "chains" it together, the technology as such cannot yet ensure the correctness of the entered data. This remaining uncertainty in the digital-to-analog link can be strengthened by connecting it to other technologies, such as the Internet of Things (IoT). Compliance with labor, environmental or animal welfare standards, for example, can still largely only be checked by means of independent analog audits. A use of the BT therefore brings potentially comprehensive advantages, especially in sectors in which the digital-analog link can be successfully bridged, such as in the food sector or with particularly high-quality raw materials.
For the use of the BT by small suppliers in developing countries, the necessary conditions for digital education, equipment and infrastructure are often not given. This is where national and international development policies should start so that BT solutions can develop their advantages for inclusive production. General technological standards can also help to counteract the formation of monopolies in technology development by multinational corporations. In this way, politics could help to reconcile the interests of consumers and producers with those of small and medium-sized enterprises (SMEs) in the supply chain.

 

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