By Ken Cottrill, Co-Founder and Research Principal
If knowledge is power, a blockchain system is a power grid that distributes knowledge to users. That knowledge can be leveraged to make supply chains more transparent.
As we describe in the Chain Business Insights eBook Blockchain in Smallholder Farming: Sowing the Seeds of Growth Blockchain in Smallholder Farming, transparency is a vital commodity in smallholder farming communities where growers have limited access to the global supply chains that deliver their crops to market. Blockchain can bring newfound visibility to these supply chains.
Visibility is what BlocRice aims to achieve in the organic rice supply chain. In addition to providing an insightful use case for blockchain in smallholder farming, BlocRice illustrates the multiple benefits that transparency can bestow on supply chains.
These benefits were described recently by Rogier Verschoor, a private sector advisor at poverty relief organization Oxfam and Joost Schuttelaar at Dutch consulting firm Schuttelaar & Partners. They talked about the application at a meeting of the food blockchain technology company The Fork: Blockchain for Food.
The BlocRice blockchain project is a collaboration between Schuttelarr & Partners, Oxfam Novib, rice cracker producer Sano Rice, rice exporter AmruRice and a farmers’ cooperative in the Cambodian village of Reaksmei.
Organic, grade A rice grown by the farmers is used to make premium-priced rice cakes. The supply chain starts with about 50 smallholder growers in the Reaksmei cooperative. These growers typically work small plots of land and are relatively unsophisticated in terms of the technology they deploy to operate their businesses. Other links in the supply chain include freight carriers and financial institutions.
Growers enter data into the blockchain via smartphones provided by Oxfam for the pilot project. Each grower receives a digital identity, which they use to sign transactions. Details such as shipment weights and prices are available through a web interface in both Cambodian and English.
To fulfill its mission to “improve social compliance,” the project team chose to use a public blockchain as the foundation for BlocRice, said Verschoor. However, commercial organizations prefer private blockchain models, and to accommodate them, an add-on module is available that meets Oxfam’s requirements.
The results of the pilot are encouraging. “We are not just harvesting rice but harvesting data about the social impact,” said Verschoor. The availability of transactional data in a trusted environment promotes supply chain transparency, which yields benefits on various fronts. Here are some examples.
More accountability. Since each trading partner has ready access to the latest transactional information, it’s much easier to hold individual parties accountable for their role in the supply chain. Accountability is especially important for smallholder farmers. Most of them “have not even seen a rice cake,” said Schuttelaar. Growers can verify whether their contractual terms are met.
Reduces middlemen costs. While certification organizations such as Fairtrade have achieved much in improving the integrity of global supply chains, new models are needed according to Verschoor. In addition to providing an alternative to these intermediaries, Blockchain-based systems could eliminate the cost of using third-party certification services.
Improves compliance. Companies are under increasing pressure to provide more detailed information about their products and to comply with labor and safety regulations. Systems such as BlocRice can make it easier for companies to identify potential risks. A more open information system also creates market pressure to supply green products, suggested Verschoor.
Ease the bureaucratic burden. The small-scale rice growers are expected to complete lengthy paperwork when selling their products. In addition to taking a lot of time, the task is also prone to error. BlocRice reduced the burden by digitizing the documentation.
The BlocRice consortium is preparing to launch the next phase of the project. The number of participant growers will be scaled up to around ten cooperatives. There are plans to make more data available. For example, marrying weather forecasts with data on rice varieties and farming practices would help smallholders to improve the accuracy of their yield and profitability forecasts. The introduction of more advanced scanning methods such as QR codes, is another possible refinement.
Importantly, the pilot has demonstrated the worth of a blockchain-based information system for small-scale growers such as Cambodian rice farmers. “We are convinced that this can work,” said Verschoor.