09 May The Planet is Choking, What Can Supply Chains Do? Event Follow – Up

INATBA’s Social Impact and Sustainability Working Group hosted the first in a series of events in collaboration with INATBA’s Governmental Advisory Body (GAB) on the topic of The Planet is Choking, What Can Supply Chains Do?, exploring how supply chains can incorporate innovation (in particular blockchain technology) into their processes to support climate action.

Attended by representatives of industry, governments and academia, the session was introduced by Massamba Thioye, who is leading the regulatory framework implementation within the UNFCCC Secretariat, is the Project Executive of the UN Climate Change Global Innovation Hub and the GAB member.

“Supply chains play an extremely important role when it comes to climate action, because the most transformative activities of climate action are targeting supply chains.”

Massamba pointed out that climate action on the sectoral level (e.g., reducing carbon footprint) is very important and needed, but is far from being enough to address the climate and sustainability challenge. In order to achieve the 1.5 degree goal, we need to go beyond this incremental change and try to implement climate action that will lead to more transformative change. “We can achieve this by going to the core human need that products and services are satisfying and ask ourselves whether we can develop climate action and leverage innovation in a way that would lead to development of new sustainable and carbon-friendly supply chains that can displace carbon-intensive supply chains,” he added. For example, we cannot ask ourselves only how to displace combustion cars with EVs, we need to challenge why we need to have a car in the first place. We need to design more compact, complete and interconnected cities so that most of the services and products that we need are at biking/walking/public transport distance. Each agent in the supply chain also needs to ask themselves what is their carbon contribution within that chain, i.e., is it actually supporting the climate goal.

He emphasised the challenge of getting access to primary data for life-cycle analysis. The development of blockchain and DLT brings solutions by focusing on the responsibility for emissions. At all moments across the whole supply chain, there must be someone who has responsibility for the emissions (as emissions are embedded within the product). Blockchain allows the development of a new framework that facilitates the measurement of the climate contribution of supply chains. Without proper calculation of the climate contribution of the supply chains, we won’t be able to measure the impact of the most transformative types of climate action that are disrupting supply chains by replacing them with new, more climate-friendly and sustainable supply chains.

The event continued with presentations of four speakers, representing the industry’s point of view.

In his presentation on “Supply Chain Digitization & Carbon Emission Traceability & Offset”, Dan Weinberger, CEO and Co-Founder of Canada-headquartered Morpheus Network, said that global supply chains are only as strong as their weakest link and gave an overview of the current situation in supply chains amid and post covid, inefficiency (of

back-ups) means more carbon being emitted to the atmosphere, with 80 % of emissions being part of the value chains. “You need to digitalise right from the farm level, from the raw material. Once we have that data from the original level all the way down the consumer and retail end, we can then leverage the data. This can be done with emerging, innovative technologies bridging to traditional supply chains.” Morpheus Network, as a supply chain, blockchain-agnostic automation platform addresses this need of digitising supply chains and building a world for effective, fairer and more sustainable commerce. Dan also added that technology will influence our future and therefore, we need to set a technology-neutral standard to report emissions and deploy a collaborative approach with organisations across the world. All this will happen with new technologies, carbon credits to neutralise impacts on the environment and cumulative solutions.

Denis Avrilionis, CEO of Luxembourg-based Compellio, focused on “Web3-enabled sustainable supply chains applied to product passports: The Product Circularity Data Sheet (PCDS) case”. He emphasised that currently only 8.6 % of the world is circular, therefore an urgent action needs to be taken to double global circularity to 17 % in order to make the world liveable. Compellio’s PCDS is addressing this specific topic. Denis agreed with previous speakers that society needs reliable data in order to get the circular properties of a product. But generation and handling of such data currently requires too many human and financial resources, thus slowing green transition. “The approach of PCDS is to have a unified reporting formats that increase transparency and effectiveness in data management. It’s also being standardised at the level of ISO.” Simply speaking, PCDS is a document with statements about the circularity properties of a product, which can be shared with all actors within the ecosystem. Compellio’s proposal is to use Web3 technology for this (blockchain and verifiable credentials) to guarantee authenticity of PCDS (immutability) and full traceability of origin.

Based out of Spain, the CEO of Polaris Network, Jorge Marcos Madrid focused his presentation on “Can blockchain contribute to the fight against climate change?”. Jorge presented their carbon capture project Forestre. Such a project needs to prove i) no double claims and ii) real carbon capture aligned with carbon credits claimed. He presented #NF3, the first tokenised GHG capture projects booster and carbon credit emission eco digital system, incorporating the NFT technology, which can provide unique digital representation of a real physical object/asset/living being. They also provide registered ownership of the represented entity and are tradable. This feature opens the gates to new functionalities and solutions to the problem we are facing. Each #NF3 will be a digital representation of a new planted tree within the Forestree project. “We are going to invest today and we are going to collect in 10, 15, 20 years. Now we have created a situation in which we start a forestry project and immediately can mint the NFTs that represent each tree that we have planted and we can put inside these potential possibilities of having income during the lifecycle of that project. (…) We can see the real value of that NFT today.”

Cengiz Kakil, the Business Analyst of Japanese company Fujitsu, presented their case study on “Botanical Water Technologies”. Cengiz explained that Botanical Water, the Australia-based company, created a solution to filtered water that would have gone to wasteland otherwise (e.g., in the food industry), which can save up to 3 trillion litres of water per year. The end product can be used either in retail (as a drinkable water), as an ingredient or as an impact water (offsetting water impact of other businesses). Fujitsu has

created the Botanical Water Exchange which allows buyers and sellers to exchange water in order to buy directly the water (ingredient, input water) or to offset the water in the business (impact water investment) to achieve water neutrality. Blockchain is a great tool to improve efficiency of the exchange and enhance trust. “Companies that want to offset water, they need the traceability…. need the world journey of the water to audit the procedure and to be able to rightfully claim that I am for instance water neutral.” Utilising blockchain, the exchange has verified and automated auditability, increased operational efficiency, heightened security model, transparency, traceability and finality He concluded that “Doing something meaningful can also be a good business.”

The speakers then joined in a discussion on topics including:

1. What are the current barriers to incorporating blockchain / DLT into supply chain processes? — For example: i) Integration of blockchain with Web2 legacy technology, especially in cases when we are tokenising and selling things (NFTs) on-chain which might change their state off-chain. ii) On the business side, we make decisions that might make an impact and we have to continuously keep all the accountability and the traceability of the economical value of what we are doing with the Web3 and on-chain part. iii) Environmental impact vs. straight commercial impact.
2. What can policy-makers do to support the industry in more easily incorporating blockchain/innovation into their supply chain processes to achieve the viable impact? — i) Between the moment something is announced and coming into effect, there is a huge delay, e.g. stimulus plan after the pandemic, which could be improved.
3. Why is regulation important for innovation and why isn’t it better to keep innovation grow outside of regulatory boundaries/limits? — i) We need to have a well-regulated framework, which can be pushed, but clients and customers need the assurance that they are doing all according to the regulation. ii) We need to have regulation with a top down approach because if companies run their business ad hoc without any regulation, we will end up with the opposite effect we want to reach. iii) We have to try out things, but in order to achieve scalability and critical mass, we have to have standards, which come through regulation.
4. Adding on barriers of the technologies: some technologies are built on and with different blockchain technologies. How are companies and enterprises going to overcome the hurdle of interoperability between different blockchains? — i) We have to be asset-centric, not blockchain-centric. Blockchains are silos because of their consensus mechanisms and in supply chains we have to break the silos. This is one of the cases where interoperability of blockchains is important.
5. Local vs. global supply chains and the importance of self-sustainability. Do you think COVID means a breakthrough for local and regional supply chains? — i) The main issue is not covid itself, but the shift in society, i.e., working from home. It completely changed the way we are consuming goods and services. We are consuming less services, buying more goods. With blockchain we can have more visibility, but blockchain will not make a new factory pop within a week. So it can help manage the crisis and transition in some way, but won’t be a solution to everything. ii) It takes time for companies to become resilient. There is a need for back-up solutions when the next catastrophe hits. We don’t have optimal systems in place just yet. But there is a large room for companies to grow.

The presentations and the following discussion proved that there are several hurdles within supply chain processes that still need addressing:

• Need for access to primary data
• Need for back-up resources and plans
• Need for digitalisation/efficiency
• Need for a technology-neutral standard to report emissions and deploy a collaborative approach with organisations across the world
• Current processes reliant on human and manual resources, therefore are costly
• Need for enhancing circularity in order to avoid waste
• Integration of blockchain with Web2 legacy technology
• Environmental impact vs. straight commercial impact.

Call for action:

INATBA will follow up with other events on these topics. For industry, join INATBA and its Social Impact and Sustainability Working Group and contribute to the discussion on those topics. For governments, if you are interested in the work the Governmental Advisory Body is doing, please contact bara.greplova@inatba.org.

The recording of the event is available to the INATBA members via the members portal.

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