Jun 21, 2023

Blockchain revolution: transforming supply chains and legal relationships in the agri-food and drink industry

For as long as humans have existed, we have traded; the extent, range and method of trade has developed and evolved throughout history as we have travelled to and discovered new lands and peoples. In the process, supply chains have been created, re-created and, as technology as developed, so have the methods and complexity of supply chains and supply-chain relationships.

This blog is the first in a series in which we explore how blockchain technology not only promises to – but is already – revolutionising the way in which trading partners manage their supply chains and commercial and legal relationships, and we consider how those parties can navigate the issues which arise out of this new technology.

What is the blockchain?

A blockchain is a distributed (shared) digital immutable ledger, where information is stored in ‘blocks’ which are connected together, and which facilitates the recording of transactions and tracking of assets. In recent years, blockchain technology has been most widely associated with the rise of digital assets, such as Bitcoin and Non-Fungible Tokens (“NFTs”).  

But blockchain technology has a much wider application and is already revolutionising supply chain management and relationships. Crucially, it is perfect for ensuring tracking, tracing and security of goods as they are transported, often via multiple carriers, to their end destination.

Blockchain solutions in the agri-food and drink industry

Blockchain technology has many applications in the agri-food and drink industry:

  1. Quality, safety and transparency: blockchain technology can be used to track the quality of products and monitor their safety by providing a transparent and traceable record of a products journey from farm (or factory) to table.
  2. Time and costs savings: that transparency can also help save time and lower costs by reducing intra-supply chain paperwork, assisting in inventory management and efficiency, and ensuring that products comply with the regulatory requirements of the jurisdictions that they are being transported from, through and to. This will reduce (and likely will ultimate eliminate) manual processes and checks of physical documents at ports of entry and exit and allow for real-time visibility and tracking of goods and products.
  3. Building and demonstrating ESG credentials: in turn, and as a result, all parties to the supply chain will be able to showcase their Environmental, Social and Governance (“ESG”) credentials, promoting sustainability and responsible practices.
  4. Efficient tracking and automation: supply-chain contracts, financing agreements, invoices and bills of lading which are stored “on-chain”, can easily be tracked by way of a digital identifier. This eliminates mistakes in data entry and automates information flows amongst multiple transacting parties. If a supplier uploads an order on the blockchain, this can be instantaneously reviewed by other parties in the production cycle. These include also banks and companies offering invoice financing or factoring services. It follows that, should the supplier need a working-capital loan, his request would be processed speedily and at a lower cost. Parties in a long-established trading relationship can even decide to automate this process outright by adopting smart contracts tailored to their needs.
  5. Enhanced accountability and consumer protection: blockchain technology enables the immutable recording of the provenance of, and safety checks undertaken on, all ingredients and final products. This enables the easy identification of the party or parties to the supply-chain on who liability may fall in the event that a regulatory/compliance issue or civil dispute arises. Ultimately, the technology provides enhanced accountability and protection of all parties to the supply chain, from producer to end-consumer.
  6. Intellectual property protection: lastly, blockchain offers agri-food and drink companies an enhanced solution to validate and protect their intellectual property rights (including quality attributed to certain products ). By storing these rights on the blockchain in the form of a digital asset (a process known as “tokenising”), it becomes harder for malicious actors to introduce counterfeited products in the supply chain. Food fraud would be drastically deterred and, with full transparency, the blockchain would protect the authenticity of products.

Future challenges

The biggest challenge for agri-food and drink companies will be transforming their processes and adopting streamlined solutions. Blockchain technology can help reduce costs and timings drastically, equipping such companies with the tools to revolutionise the world of food. The opportunities are there and waiting: the only question is, who will lead the way?

In our next blog, we will explore the ways in which parties to a supply chain can mitigate and minimise the risk of disputes arising between them, before discussing what you should do if you find yourself involved in such a dispute.

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