Building a Fair, Sustainable Coffee Supply Chain with Blockchain Technology
In 2017/18, 9.5 billion kilograms of coffee were sold globally (or, 158+ million 60kg bags, as it’s measured). There’s a non-zero chance that you’re having a coffee right now as you read this piece. According to Statista (chart below), the 2017/18 numbers for coffee sales were actually slightly down from the previous year, but, since 2003/4, coffee consumption has increased by more than 53 million kilograms.
Although fair trade practices have become more prevalent around the world, and in few instances more high-profile than coffee, there are still rampant issues of fraud, inefficiency, and unfair labor practices attached to the process of getting coffee from the tree to your cup.
What’s more, fair trade labels provide little in the way of detail of the provenance of the coffee, whether it was sourced ethically, and the route it took to your cup. Imagine scanning a QR code and being able to know, in seconds, that the money you’re spending on coffee is making its way back to the farmers who grow it, not farmed under poor human rights conditions, and has been certified every step of the way.
Imagine being able to know with near-absolute certainty that the coffee you’re drinking right now was farmed ethically, has been properly inspected, and was traded fairly. A blockchain-based coffee supply chain may provide the solution. In fact, it’s already being used in the industry.
Know Your Grind
The idea is straightforward: Use blockchain networks to both track the actual product moves through the supply chain, verifying each step transparently on a blockchain network, and using blockchain-based smart contracts to ease the friction around payments and agreements.
(Credit: Camilo Marulanda)
Yave is a Seattle-based company that provides blockchain-based transaction technology, and its CEO, Gustavo de Leon, also serves as Director of Coffee Partnerships at Agexport, in Guatemala. Here’s how he describes the advantages of blockchain in the coffee supply chain to Perfect Daily Grind:
“All parties will have the same copy of this ledger. All parties must give consensus before a new transaction is added to the shared ledger. Transactions recorded on the ledger can never be altered.”
Guatemala is a particularly interesting test environment for blockchain and coffee. The country is a top-10 global coffee producer, is forecast to produce nearly 200 million kilograms of coffee for the 2018/19 season, and has seen struggles in the industry due to falling prices. The pain has been particularly acute for small farmers.
Yave has been working with Finca Las Parásitas, a coffee farm in Guatemala where Ivonne Herrera works as a producer. She’s clearly on-board. In the same piece, she tells Perfect Daily Grind:
“One of the objectives of blockchain is to have that connection between consumer, farmer, distributor, and roaster. It is an opportunity for us farmers to provide a better cup of coffee, to be known, and for you to be able to recognize our coffee.”
It’s not just in Guatemala. Uganda, Africa’s largest coffee-producing country, is also taking steps to make its coffee industry more transparent and fair. A company at the forefront of this effort is Carico Café Connoisseur, which, in January 2019, completed its first blockchain-supported coffee shipment to South Africa. End users simply scan a QR code to see the provenance of their coffee – the whole chain – right back to the source.
Here’s how Carico Café Connoisseur CEO Mwambu Wanendeya describes the benefits to Reuters:
“The idea is to give the consumer an appreciation of what happens on the journey and also to ensure that there’s more linkages with the farmer. Traceability is important because people are increasingly concerned that … farmers get rewarded for their work.”
Blockchain: The Key to Coffee Supply Chain Transparency
As with so many other socially-conscious initiatives that have become mainstream, the rise of fair trade practices has been driven by consumers. It’s not an alien concept – people simply want to know where their products come from, if they are ethically sourced, and what that process means for all involved.
At present, the coffee supply chain tends to be a muddled mess of farmers and producers, co-ops, middle-men, and processors and distributors. Depending on the country or region, this can vary, but not many people would say that the global coffee trade suffers from too much transparency.
Let’s start at the beginning – in Brazil, the world’s largest coffee producer.. Our hypothetical coffee farm is the coffee-producing southern region of the country where farmers and their crews harvest a million kilograms of coffee annually. The beans are harvested, they go to the co-op and then the movement kicks off. Exporters and other intermediaries trade, sell, and otherwise set the coffee in motion around the world. You already know where this ends – a nice morning roast at your local cafe.
Here’s how IBM, one of the enterprise leaders in blockchain testing and adoption, describes the issues in the current incarnation of the coffee supply chain, and how blockchain can help fix it.
One of the biggest challenges facing this industry is the use of unethical labor practices. While retailers may not buy directly from blacklisted plantations, they lack the full ability to trace and verify the provenance of each bean. Even the largest coffee retailers in the global coffee market cannot guarantee the use of ethical labor practices in the plantations that supply their coffee. Why? Because they have limited upstream visibility within a complicated supply chain of middlemen, resellers and shippers.
By using blockchain for product tracking and transactions, all of these nodes in the coffee supply chain can work with the confidence that they understand the landscape in which they are operating – prices, sourcing, payments, provenance – everything. Indeed, blockchain offers a way to potentially eliminate inefficiencies and corruption in the supply chain, putting resources where they should be – in the hands of the people who deserve it. The ability to reliably confirm origin, quality, and labor practices could revolutionize this 20 billion dollar industry, and the benefits will be felt from farm to table.
Blockchain is Already Here
One organization leading the way with blockchain for supply chain operations is Provenance. The company offers support for blockchain-based provenance tracking and more – and it’s the platform the previously-mentioned Carico Café Connoisseur in Uganda uses for its verification processes. As they see it, blockchain-based verification is the future of supply chain operations.
(Image credit: Provenance.org)
With a distributed, verified ledger, there is no traditional chain of certification in which a product or transaction moves in a linear fashion between parties. Using blockchain, all parties on the network have visibility into the process at any point – and they can trust that the information is reliable and can be trusted.
The benefits are spread throughout the process, as consumers can rest assured the coffee they are brewing has been sourced ethically. And, everyone involved in the work it takes to get that coffee to your cup is accurately tracked, certified, and labelled.
Here’s how they describe the process for end-users:
By design, every transaction along a supply chain on the blockchain is fully auditable. By inspecting the blockchain, smartphone applications can aggregate and display information to customers in a real-time manner; furthermore, due to the strong integrity properties of the blockchain, this information can be genuinely trusted. A thoughtful user interface that sheds light on the digital journey of a product can empower better purchases by giving users a true choice that they can exercise.
Furthermore, with smart contracts enabled by blockchain, growers, producers, and sellers can set the terms on a distributed network of trusted parties. As beans grow, get harvested, roasted, and sold, both the movement of the product and the financial transactions are logged into a trusted, immutable ledger. This gives new meaning to the term “fair trade”, as that fairness is documented and can be verified instantly.
The fact of the matter is that blockchain provides the means by which the “fair trade” label can become exponentially more meaningful. While a monumental step forward, this certification still relies on an abstract idea of third-party verification that provides little in the way of detail for consumers. In 2018, Fairtrade products accounted for $9 billion in total value, an increase of 8% year-on-year, and bolstering this system can only benefit everyone involved.
Investor and tech industry mogul Marc Andreesen puts it best:
“Blockchain technology changes everything. The practical consequence […is…] for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.”
There are, of course, countless industries where such a system could service to demystify processes, product provenance, and so much more. In the end, blockchain is all about transparency, accountability, and immutability.
Next time you sit down for a cup of coffee, ask yourself, “Do I really know where this coffee came from?” It’s a question that you likely will not be able to answer….yet.