Smart contracts & blockchain technology have enabled a wide range of new digital pathways, as they … [+] allow different parties to a transaction to determine and measure certain parameters in a quick, seamless and transparent way.Getty Images
Blockchain technology and smart contracts have opened up a whole new world of digital possibilities. At their most basic, smart contracts use precoded instructions to trigger outputs given certain inputs. Sophisticated smart contracts will even automate some or all outputs once the trigger event is set in motion.
The technology can even allow notification of all parties in the contract ensuring transparent transactions in real time. And while it may seem like an effective “set and forget” solution in cumbersome contract law, setting up smart contracts requires careful analysis and coding from the start to make the contract effective.
The uses of smart contracts are plentiful but let’s consider its role in creating transparent and traceable supply chains.
Supply chain management has been in the spotlight since the global pandemic demonstrated how fragile many of our supply chains truly are. It has also demonstrated how globally reliant many industries are because various raw or elemental parts of a finished product come from different areas of the world.
With the invasion of Ukraine, supply chains are again being thought about as countries move to apply sanctions against Russia including Russian-made products. Without transparent supply chains, how do we know what we are boycotting?
The global diamond industry has well-established trade corridors including in and out of Russia where one of the largest diamond mines in the world – Alrosa – is partially owned by the Russian Government. Today’s conscious consumers are able to educate themselves on these facts and use their purchasing power to demand retailers provide options that are conflict free.
Leonard di Caprio highlighted blood diamonds in spectacular fashion. Fast forward to 2022 where social media users can now easily and directly broadcast their views, thoughts, information and misinformation about products and brands. The business imperative of transparent supply chains is evident in being able to respond to, confirm and refute false claims.
Here’s where smart contract-enabled transparent supply chains become genius. Just as Scope 3 Greenhouse Gas emissions (GHG) reporting looks at the total picture upstream and downstream for an organisation, a fully transparent supply chain from provenance to end use shows these streams as well.
To use our diamond example in this context: Scope 1 diamonds would be directly mined in Russia. Scope 2 diamonds would pass through Russia on their way to market – for example, cutting and polishing. Scope 3 diamonds would be able to demonstrate the complete journey and give transparency allowing end consumers to make up their minds.
In this scenario, the supply chain would also expose the upstream and downstream supply mechanisms such as major trading centres, the diamond bourses in Belgium, India and the UAE. Here consumers would be able to make a choice not just on their specific diamond but also see if it was part of a trade that included Russian diamonds. Accountability, like blockchain technology. becomes distributed.
Some diamond retailers, notably Brilliant Earth and Taylor and Hart both of whom have blockchain enabled provenance of stock, have already shown their stance by taking all Russian-mined stones off their sales platforms perhaps signalling wider consumer sentiment, or even getting ahead of hard sanctions. Others may be left behind because they simply do not have the provenance data available.
Furthermore, “get out of jail” clauses in sanctions – like Belgium is pushing for with regards to diamonds, or workarounds – like India seeking to establish with a rupee payment system for trade with Russia rise to the surface and people can see clearly the chain of custody along the supply chain. With transparent supply chains, the world is watching.
In a digital, Web 3, MetaCommerce world, it could be as easy as toggling a filter to strain out certain elements, at certain times.
We’d all prefer to live in a world free from the spectre of war. In the meantime, when we see world events seemingly spiralling out of control, we ask ourselves: what can I do? Just as there are many ways to provide direct aid to those in Ukraine right now, there are also many ways we can be conscious – and smart – consumers.