Sylvain Charlebois is professor in food distribution and policy and dean of the Faculty of Management, Dalhousie University.
There has been a lot of noise on cryptocurrencies and bitcoin of late. While some suggest cryptocurrencies are a fraud, others believe them to be the next economic revolution. Bitcoin has brought to light the interesting concept of blockchain technology, which offers great potential for the agri-food sector. Yet it is far from being the panacea for diverse issues affecting the industry – at least not yet.
Simply put, blockchain technology is a way of storing and sharing information across a network of users in an open virtual space. Blockchain technology allows for users to look at all transactions simultaneously and in real time. In food, for example, a retailer would know with whom his supplier has dealt. Additionally, since transactions are not stored in any single location, the information is almost impossible to hack.
For consumers, blockchain technology could make a difference. By reading a simple QR code with a smartphone, data such as an animal’s date of birth, use of antibiotics, vaccinations, and where the livestock was harvested can easily be conveyed to the consumer.
Blockchain could bring a new level of transparency to a supply chain. It also empowers the entire chain to be more responsive to any food-safety disasters. Large companies such as Nestle and Unilever are considering blockchain technologies for that reason. Wal-Mart, which sells 20 per cent of all food in the U.S., has just completed two blockchain pilot projects. Before using the technology, Wal-Mart conducted a traceback test on mangoes in one of its stores. It took six days, 18 hours, and 26 minutes to trace the fruit back to its original farm.
By using blockchain, Wal-Mart can provide all the information the consumer wants in 2.2 seconds. During an outbreak of a food-related health scare, six days is an eternity. A company can save lives by acting quickly. Blockchain also allows specific products to be traced at any given time, which would help in the reduction of food waste. For instance, contaminated products can be traced easily and quickly, while safe foods would remain on the shelves and not in landfills.
Blockchain will allow everyone to be paid more quickly, from farm to plate. Farmers could sell more quickly and be properly compensated as market data would be readily available and validated. The technology could represent a legitimate option for farmers who feel compelled to rely on marketing boards to sell their commodities. The use of blockchain could prevent price coercion and retroactive payments, both of which we have seen across the food-supply chain. Blockchain technologies could “Uberize” the agri-food sector by eliminating middlemen and lowering transaction fees. This can lead to fairer pricing and even help smaller outfits desperate to get more market attention.
However, it will work only if the data at the source is accurate, and current practices in the industry are still prone to human error. Much of the compliance data is audited by trusted third parties and stored either on paper or in a centralized database. These databases are highly vulnerable to informational inaccuracies, hacking, high operating costs and intentional errors motivated by corruption and fraudulent behaviour. Blockchain operates anonymously, so mistakes would be traceable to individual culprits. Considering recent food fraud scandals seen in Canada and elsewhere, this feature is not trivial. Blockchain technology provides a method with which records are kept permanently. Most importantly, though, it facilitates data sharing between disparate actors in a food value chain. Many retailers have sold fraudulent food products unknowingly. With the use of blockchain, those days could come to an end.
Our current traceability systems need work, and blockchain technology could be the evolution they need. Given its architecture, blockchain offers an affordable solution to both small and medium-sized enterprises (SMEs) and large organizations. However, there are noteworthy limitations. The amount of information that can be processed is limited. Since everything is out there, several contracts between organizations would need to be secured for some level of confidentiality to be retained. A balance between confidentiality and transparency would need to be struck. The agri-food arena is filled with secrets. The manner in which blockchain technology is currently being deployed would be problematic for many food companies. For many, blockchain is just a solution looking for a problem.
Nevertheless, the most important challenge remains participation. All parties must adopt the technology in order for it to work. In food distribution, not all companies are equal, and some can exercise their power more than others. A successful integration of the blockchain requires the engagement of all participating organizations. Wal-Mart’s blockchain will likely be successful because it’s Wal-Mart. But thousands of companies have the same clout.
Industry leaders should embrace blockchain as an opportunity and become part of the digitalization strategy currently affecting the entire food industry. As such, transparency, productivity, competitiveness and sustainability of the agri-food sector could be enhanced. Nonetheless, research should look at how to generate evidence-based blockchain solutions to democratize data for the entire system before we get too excited.