In the spotlight: sustainable management

Ecosystems converge: what your carrot’s journey from field to fork (and beyond) can tell us about the future of sustainability

Adrian Keller
Partner and Leader Audit for Blockchain, PwC Switzerland

PwC’s Andreas Eschbach tells the story of a carrot’s blockchain-tracked journey from field to plate to show how megatrends such as distributed ledgers, cybersecurity and fintech are already creating completely new ways of doing business sustainably. Then he invites us to imagine where the evolution of these converging developments might take us – and consider how the whole endeavour relies on building ecosystems that earn the trust of stakeholders.

This issue of Disclose is devoted to sustainability. It can be a bewildering topic. On the one hand we’re confronted with daily reports of catastrophic weather events, disease pandemics and the challenges of mass migration. On the other we’re encouraged to believe that new technologies will enable us to resolve these problems and come up with more sustainable ways of going about our business. How can we trust these claims? How can we trust our ability to deal with the issues?

Trust usually starts with understanding. One way of getting your head around the complex environmental, social and economic dimensions of sustainability is to see things in terms of ecosystems. In this article I use a concrete example – the carrot on your plate – to help us think about how a number of technology-based megatrends are driving the convergence of different economic, environmental and social ecosystems, and how this will transform the way sustainable businesses operate going forward.

What can the carrot tell us about the future of sustainability?

I invite you to take part in a little thought experiment. We’ll start out with something that already exists – blockchain platforms enabling agricultural produce to be tracked all the way from field to fork – to see how various ecosystems are increasingly overlapping with the help of technology. Then we’ll use a bit of imagination to think about where these developments might potentially lead.

Our story starts with the carrots grown by fictitious farmers in Switzerland’s Canton Aargau, Martin and Ingrid Wälti. The farm has been in Ingrid’s family for generations. Back in the 1980s they decided to go organic, and were one of the first establishments to be Bio Suisse-certified (with the well-known Bio Bud label). A couple of years ago they bought land from an adjoining farm that has until now been run to IP-Suisse integrated production standards. Their plan is to eventually bring this land up to the Bio Suisse organic standard as well.

The Wältis sell some of their carrots to a well-known Swiss retailer that operates a number of premium food halls. Some go further afield to markets in the EU. And believe it or not, part of the harvest even ends up in the United States, for example at a gourmet establishment in New York that specialises in producing and selling traditional Swiss delicacies such as Aargau carrot cake (remember, this is an imaginary example!).

Given that the Wältis sell their produce predominantly to high-end establishments trading on the organic status of their carrots, if they’re be trusted it’s crucial to be able to demonstrate a number of things − for example that their crop really is what it claims to be (Swiss organic); that it arrives fresh and won’t spoil after only a few days; and that it’s transported in a way that keeps the environmental impact to a minimum.

Blockchain to the rescue

This challenge has been a big preoccupation for Ingrid and Martin. They realise that the farm can only operate profitably – for them and their children, if they ultimately decide to take over the farm – if they retain their credibility as a premium producer. Over the last year or so they’ve been inspired by news that big food industry players, including French supermarkets, are successfully adopting blockchain technology allowing produce, including carrots, to be tracked from the farm to the supermarket shelves (see French retailer Auchan implements blockchain food traceability, Ledger Insights, 2019 or Carrefour says blockchain tracking boosting sales of some products, Reuters, 2019).

The tracking basically works like this: Each participant in the supply chain, including the seed producer, records details of their contribution to the process. This information is written to a private blockchain. At present there are several of these dedicated food blockchains available, for example the FoodChain platform from TE-FOOD.

These systems typically include an inventory management tool that enables local authorities to check the certificates issued by farms, a B2B app allowing farms and logistics companies to provide traceability data, and mobile apps that consumers can use to retrieve information. These mobile apps are already a hit with younger consumers keen to check out the environmental friendliness of the food they buy, and with shoppers in countries like China where QR codes are in incredibly widespread use.

The information is very granular. For example, once the Wältis adopt the system, each crate they produce will have a unique tag with specific information on those very carrots. It will be possible for consumers to tell, for example, whether the produce in a specific crate or package was grown on land with full Bio Suisse certification or with IP-Suisse accreditation – and what requirements it fulfils. The establishment in New York, for instance, will know precisely when the crop was harvested and how it was transported, and thus how long it’s likely to remain fresh. In the (unlikely) event of a food scare, it will be possible to trace instantly where the problem delivery came from, and recall or remove the tainted carrots from the shelves with pinpoint accuracy.

Getting the picture? In our specific example, a major technology megatrend – blockchain − is enabling a process of convergence that’s creating completely new ecosystems: distributed ledger technology (i.e. blockchain) is bringing together farmers, certification authorities, logistics providers, retailers, food manufacturers and consumers on a single platform. Each actor benefits from this unprecedented transparency. Farmers have detailed information on their product, its transport and the people consuming it; certifiers have additional input to assess whether their standards are being complied with; and consumers are able to make better informed decisions. It’s good news in terms of all three dimensions of sustainability: environmental (promotes credible organic farming and sustainable transport), social (reduces food waste) and economic (enables farmers, logistics providers and retailers to operate more efficiently and profitably).

What about the money?

Those of you familiar with the ways blockchain technology is already being harnessed in other industries might at this point be thinking about how our carrot example could evolve.

What about sustainable finance? The blockchain record of a carrot’s progress from field to fork contains rich information that could potentially inform the decisions of sustainable investors. Being able to present all this data from a single source in support of their sustainable credentials certainly won’t harm the Wältis if, at some point in the future, they’re trying to persuade investors to back further expansion plans. And it will come in useful for other players in the chain, for example the freight forwarders transporting the produce, if they’re required to report on the sustainability of their operations.

What about tokens? So far, players in the food industry have been reluctant to adopt the token component of distributed ledger technology (analogous to the cryptocurrencies attached to blockchains) because of the need for printed invoices at various stages of the supply chain. But surely it won’t be long before food blockchains also provide the option of direct payment by token.

How about tax, VAT and import charges? It’s not hard to see how the relevant charges could be assessed, levied and paid automatically for each individual consignment on the basis of the blockchain and associated tokens. A digitised, paper-free, automated system of this sort obviously has huge implications in terms of how the tax and customs authorities operate and how payments are calculated and transferred. This level of transparency spells disruption in all directions.

What about the cyber risks

But doesn’t this unprecedented transparency also entail risks? With all this information available on the blockchain (even if it’s not accessible to the broad public), shouldn’t the economic players along the supply chain be concerned that vital information on their business might end up in the hands of competitors? And what about the blockchain itself? Is it really as unalterable a record as its proponents claim? Or is it open to manipulation?

These questions underscore the importance of cybersecurity in all the latest developments. If any of the stakeholders has doubts about the security of the platform and access to the information it contains, this will seriously undermine trust in the entire ecosystem. Whatever modern ecosystem you look at, the common denominator is cyber-defence: if the aim is to create ecosystems that enable more sustainable business, people all along the chain have to trust in the integrity of the system.

To sum up: it’s all about trust in ecosystems

So it’s ultimately all about trust: trust in ourselves to come up with workable solutions, faith that we have the intelligence and creativity to adapt and respond to the incredibly complex human, environmental and business challenges we face; and people’s trust that new technologies and approaches to resolving these challenges will work in their interests. As you read the other articles in this issue of Disclose on different aspects of sustainability, I invite you to take a step back, remember our carrot, and consider how all these different ecosystems are coming together in the most unlikely but exciting ways. It’s an incredible journey we’re embarking on!

Contact us

Adrian Keller

Adrian Keller

Partner and Leader Audit for Blockchain, PwC Switzerland

Tel: +41 58 792 23 09