Could supply chain professionals use the blockchain to make their logistics processes sustainable? While this technology’s role in supply networks is relatively new, its potential is already apparent.
Blockchain’s Role in Sustainable Supply Chains
Traceability has become critical in the last decade. However, monitoring supply chains with conventional technologies is time-consuming and expensive, so many professionals lack visibility into their extended supply networks. With blockchain technology, they can build transparent and sustainable logistics processes.
The blockchain is a network of digital blocks containing a timestamp and digital signature. They are arranged via hashing — a complex mathematical function that converts input into a fixed-length encrypted output — to form a chain. This creates a sort of digital fingerprint for data, ensuring it remains tamper-proof.
The unique thing about this distributed ledger is that it is immutable — no one can change information after it has been entered into the chain. Consensus mechanisms ensure all nodes are in agreement at all times, so all involved parties can observe changes as soon as they happen. The system remains up around the clock, so they can view records, logs or receipts anytime. There’s no need to request documents and wait days for a response.
Supply chain professionals can use a smart contract to automate the execution of agreements or workflows based on specific predetermined conditions. This way, they can work out contracts, trade funds and share data. For example, if a driver misses a certain percentage of deliveries, it can trigger escalation protocols, initiating an audit. There is no need to involve intermediaries.
Automatic smart contract verification eliminates the need for intermediaries, streamlining supply chain operations. Since it requires no geographic or time-based restrictions, logistics companies avoid bottlenecks. Ultimately, this technology lowers transaction expenses, enabling timely communication and processing.
Examples of Blockchain-Enabled Logistics Networks
Energy supply networks have emerged as solar panels’ accessibility has increased. Traditionally, the average homeowner could only sell unused energy back to the grid. With blockchain technology, this one-to-one transaction style becomes decentralized, enabling peer-to-peer trading of renewable electricity.
In a self-consumption model, the end user does not need the intermediary — the utility company in this case — because they are largely self-sufficient. The blockchain furthers their independence, helping them track electricity generation, consumption and storage without interacting with a utility company. This approach supports sustainability by generating data-driven insights and making renewable energy more accessible.
In retail supply networks, shipments often come from overseas. While conventional tracking technologies help, they are not nearly granular enough. For reference, in the fiscal year 2023, 65.9% of all seizures from China made by the United States Customs and Border Protection agency contained counterfeits.
The blockchain can help companies track and monitor shipments regardless of location, improving recordkeeping and fostering trust between parties. Transactions happen faster and more efficiently, improving sustainability. Retailers can even use block data as a selling point, telling customers precisely where their food products come from.
Deploying a blockchain-enabled logistics network in the agriculture sector would have similar results. Business leaders, customers and regulators could track food product shipments as they move from field to table — or to facilities to be converted into animal feed or biofuels. More importantly, parties could track labor.
While no scaled systematic assessment exists, research suggests that 62% of forced labor in the food supply stems from domestic production or processing. In an age where any customer can scan a barcode to see a distributed ledger of the person who picked a tomato, the plant that canned it and the truck it was shipped on, problems like this will not happen.
Benefits of Using Blockchain to Facilitate Transparency
The blockchain facilitates transparency throughout the extended supply network, allowing professionals to monitor carbon emissions, reduce resource waste, streamline shipping or prevent counterfeits from entering supply chains. Collectively, these improvements contribute to a sustainable logistics process.
The broader implications are just as important. Granular traceability made possible by a blockchain-enabled supply chain helps companies eliminate forced labor, provide customers with detailed insights and automatically audit their third-party vendors. In other words, this technology could foster social, economic and environmental sustainability.
Business leaders should consider the blockchain a fundamentally valuable tool. After all, it provides a wealth of accurate, detailed data points that are accessible in real time. They can use it to improve inventory management, anticipate disruptions or audit vendors. Already, this technology has helped companies improve supply chain management efficiency.
At the very least, improving traceability fosters trust between suppliers, manufacturers, warehouse workers and carriers because it holds each party accountable, facilitates communication and prevents tampering. This level of transparency can help them build effective long-term relationships.
Addressing Blockchain’s Environmental Concerns
While a blockchain-enabled supply chain can improve sustainability, professionals must understand that the environmental impact of distributed ledger technology is not entirely positive. Computing resources — and therefore energy — are required to verify transactions and create new blocks, generating greenhouse gasses.
For instance, proof of work networks — transaction validation systems that close one block so another can be opened — are secure but energy-intensive. By some estimates, they have a carbon footprint equivalent to that of a gas-powered sedan driving hundreds of miles. If left unaddressed, they could offset any sustainability gains.
The silver lining is that the adverse environmental effects of blockchain are well-researched. Decision-makers won’t have to do much work or invest many resources to determine which pain points they need to address. Either way, proactive action is necessary if they want to use this technology to reduce their organization’s carbon footprint.
Implementing a Blockchain-Enabled Supply Network
Business leaders should start small to work out any kinks before fully committing to distributed ledger technology. For instance, focusing efforts on a single warehouse or a handful of routes may be wise. Staggered implementation is one of the best approaches for companies with strict budgets or a lack of relevant research.
Could supply chain professionals use the blockchain to make their logistics processes sustainable? While this technology’s role in supply networks is relatively new, its potential is already apparent.
Blockchain’s Role in Sustainable Supply Chains
Traceability has become critical in the last decade. However, monitoring supply chains with conventional technologies is time-consuming and expensive, so many professionals lack visibility into their extended supply networks. With blockchain technology, they can build transparent and sustainable logistics processes.
The blockchain is a network of digital blocks containing a timestamp and digital signature. They are arranged via hashing — a complex mathematical function that converts input into a fixed-length encrypted output — to form a chain. This creates a sort of digital fingerprint for data, ensuring it remains tamper-proof.
The unique thing about this distributed ledger is that it is immutable — no one can change information after it has been entered into the chain. Consensus mechanisms ensure all nodes are in agreement at all times, so all involved parties can observe changes as soon as they happen. The system remains up around the clock, so they can view records, logs or receipts anytime. There’s no need to request documents and wait days for a response.
Supply chain professionals can use a smart contract to automate the execution of agreements or workflows based on specific predetermined conditions. This way, they can work out contracts, trade funds and share data. For example, if a driver misses a certain percentage of deliveries, it can trigger escalation protocols, initiating an audit. There is no need to involve intermediaries.
Automatic smart contract verification eliminates the need for intermediaries, streamlining supply chain operations. Since it requires no geographic or time-based restrictions, logistics companies avoid bottlenecks. Ultimately, this technology lowers transaction expenses, enabling timely communication and processing.
Examples of Blockchain-Enabled Logistics Networks
Energy supply networks have emerged as solar panels’ accessibility has increased. Traditionally, the average homeowner could only sell unused energy back to the grid. With blockchain technology, this one-to-one transaction style becomes decentralized, enabling peer-to-peer trading of renewable electricity.
In a self-consumption model, the end user does not need the intermediary — the utility company in this case — because they are largely self-sufficient. The blockchain furthers their independence, helping them track electricity generation, consumption and storage without interacting with a utility company. This approach supports sustainability by generating data-driven insights and making renewable energy more accessible.
In retail supply networks, shipments often come from overseas. While conventional tracking technologies help, they are not nearly granular enough. For reference, in the fiscal year 2023, 65.9% of all seizures from China made by the United States Customs and Border Protection agency contained counterfeits.
The blockchain can help companies track and monitor shipments regardless of location, improving recordkeeping and fostering trust between parties. Transactions happen faster and more efficiently, improving sustainability. Retailers can even use block data as a selling point, telling customers precisely where their food products come from.
Deploying a blockchain-enabled logistics network in the agriculture sector would have similar results. Business leaders, customers and regulators could track food product shipments as they move from field to table — or to facilities to be converted into animal feed or biofuels. More importantly, parties could track labor.
While no scaled systematic assessment exists, research suggests that 62% of forced labor in the food supply stems from domestic production or processing. In an age where any customer can scan a barcode to see a distributed ledger of the person who picked a tomato, the plant that canned it and the truck it was shipped on, problems like this will not happen.
Benefits of Using Blockchain to Facilitate Transparency
The blockchain facilitates transparency throughout the extended supply network, allowing professionals to monitor carbon emissions, reduce resource waste, streamline shipping or prevent counterfeits from entering supply chains. Collectively, these improvements contribute to a sustainable logistics process.
The broader implications are just as important. Granular traceability made possible by a blockchain-enabled supply chain helps companies eliminate forced labor, provide customers with detailed insights and automatically audit their third-party vendors. In other words, this technology could foster social, economic and environmental sustainability.
Business leaders should consider the blockchain a fundamentally valuable tool. After all, it provides a wealth of accurate, detailed data points that are accessible in real time. They can use it to improve inventory management, anticipate disruptions or audit vendors. Already, this technology has helped companies improve supply chain management efficiency.
At the very least, improving traceability fosters trust between suppliers, manufacturers, warehouse workers and carriers because it holds each party accountable, facilitates communication and prevents tampering. This level of transparency can help them build effective long-term relationships.
Addressing Blockchain’s Environmental Concerns
While a blockchain-enabled supply chain can improve sustainability, professionals must understand that the environmental impact of distributed ledger technology is not entirely positive. Computing resources — and therefore energy — are required to verify transactions and create new blocks, generating greenhouse gasses.
For instance, proof of work networks — transaction validation systems that close one block so another can be opened — are secure but energy-intensive. By some estimates, they have a carbon footprint equivalent to that of a gas-powered sedan driving hundreds of miles. If left unaddressed, they could offset any sustainability gains.
The silver lining is that the adverse environmental effects of blockchain are well-researched. Decision-makers won’t have to do much work or invest many resources to determine which pain points they need to address. Either way, proactive action is necessary if they want to use this technology to reduce their organization’s carbon footprint.
Implementing a Blockchain-Enabled Supply Network
Business leaders should start small to work out any kinks before fully committing to distributed ledger technology. For instance, focusing efforts on a single warehouse or a handful of routes may be wise. Staggered implementation is one of the best approaches for companies with strict budgets or a lack of relevant research.
