Blockchain

How the blockchain can save our food

19 April 2017  •  Author(s): Sean Crossey | Arc-Net

It’s hard to escape blockchain in 2017 – not that we’d like to. Each industry seems to consider the technology as potentially revolutionary and so we asked Sean Crossey of arc-net for an insight into how blockchain might significantly change the food industry.blockchain-food-arc-netWhen it comes to our food supply, what we don’t know most certainly can hurt us. The World Health Organisation estimates that almost 1 in 10 people become ill every year from eating contaminated food, with 420,000 dying as a result. Our global food supply has grown so complex that it has become almost impossible for food producers and retailers to guarantee the provenance of their products.

As with any industry, where there is opportunity there will inevitably be those who take advantage. Individuals tampering with our food is nothing new, in the 17th Century fraudsters would water down milk and add chalk to bread in order to squeeze out as much profit as possible.

While technology may have improved in the 21st Century, similar methods used in our food today give the phrase “you are what you eat” an unsettling connotation. Many are aware of high profile incidents of food fraud, from the 2013 UK Horsemeat scandal to the 2009 Salmonella peanut butter outbreak and now the recent scandal surrounding two of Brazil’s largest meat production firms.

Of course the size of such events naturally bring huge national attention to the security of our food supply, but what must be remembered is that these are not outliers. Our food supply is under constant threat from adulteration, with food fraud estimated to cost UK families up to £1.17 billion a year.

The phrase “you are what you eat” unsettling connotations…

For organisations who find themselves caught up in a food scandal, the consequences can be dire. The cost of one adulteration verdict can be up to 15% of annual company revenues, not to mention the damage to organisational reputation and brand loyalty that inevitably occurs.

Just as the revelations following the 2008 Financial Crisis damaged public trust in the banking sector, and left people looking to technology to fill in the gaps, so too is the food industry coming under the same scrutiny.

It is becoming all too apparent that current food safety and quality management systems are simply not designed to detect, nor sophisticated enough to prevent fraud occurring in our food.

So what can be done to bring trust back into our food?

Well, according to Racheal Botsman it all begins with a progression in our understanding of ‘trust’. According to Botsman, we are beginning to move from an institutional system of trust to a distributed system, a natural progression in her eyes as “institutional trust is not designed for the digital age”. One example of a distributed trust system Botsman identifies is the technology underpinning the latest in Fintech, and which has huge potential for the food industry, the blockchain.

The blockchain was developed as a decentralised ledger which records transactions and stores this information on a global network in a manner which prevents it being changed at a future point. While initially adopted for it’s financial implications, the blockchains’ decentralised system has huge potential for the traceability of supply chains.

The blockchain provides a neutral open platform, there is no third party needed to authorise transactions, but rather a set of rules all participants, both users and the operators of the system, must abide by.

Such a system is invaluable in complex supply chains were trust is low and compliance difficult to assess. It is no wonder then that The Economist dubbed the blockchain “The Trust Machine”.

Blockchain offers the transparency and openness…

This brings huge advantages for every actor within the supply chain. For food producers, the blockchain means that any attempts to tamper with a food item as it moves through the supply chain can be immediately identified and prevented before the food ever reaches the retailer.

For retailers, if a potentially hazardous food product somehow makes it onto shelves, stores can identify and remove only the offending items, eliminating the need for costly batch recalls.

For consumers, the blockchain offers the transparency and openness needed to reassure them that the food they eat is exactly what the label says it is. The ability for consumers to identify high quality food is currently prohibited by information asymmetry.

Academic research has pointed out that this asymmetry can cause failure in the market, with the risk of consumers adversely selecting lower quality (or unsafe) food in the absence of high quality information relating to food quality.

The blockchain has the potential to take the power of information from Big Food and place it into the hands of the direct customer. Through the use of a simple QR code and a smartphone, customers can scan a package at the Point of Sale and receive a full and complete history of their foods journey from Farm to Fork.

This is particularly useful in the grey areas of food traceability, such as country of origin labelling. This is an element of food information where it can be difficult to differentiate true claims from false, for instance a product can claim to be British pork when in reality it is for example, French in origin and subsequently processed in the UK.

The blockchain is a useful tool here as it records each interaction with an item and assigns it a digital certificate, meaning it can not be changed or adulterated later by a company seeking to hide the true origin and movement of the product through the chain.

This represents a huge opportunity for those companies who see the advantage of early adoption of blockchain infused traceability systems. Indeed by 2022, Gartner estimates an innovative business built on a blockchain will be worth $10 billion.

Consumer trust in food is already damaged and demand for full traceability is only growing stronger. Companies can no longer rely on generalised terms such as “healthy” or “organic” in order to signal value, the new generation of consumers are savvy enough to seek reassurances of quality past just what is printed on the label. The blockchain provides a method of substantiating these previously unsubstantiated claims, strengthening customer loyalty for those companies who can consistently guarantee quality.

In an increasingly volatile market, the blockchain adds an extra level of security for the food industry. Companies who can utilise the blockchain to instil transparency in their supply chains already have an insurance policy should another scandal hit the industry.

It is already clear that the tide is turning towards traceability. Food producers who bury their head to block out the calls for more consumer empowerment do so at their peril, the rise of the blockchain means that those who answer the call put themselves at the top of the food chain.

References

  1. http://www.who.int/mediacentre/news/releases/2015/foodborne-disease-estimates/en/
  2. http://www.newfoodmagazine.com/wp-content/uploads/NSF-Whitepaper.pdf
  3. https://www.bloomberg.com/news/articles/2016-02-16/the-parmesan-cheese-you-sprinkle-on-your-penne-could-be-wood
  4. https://www.theguardian.com/uk-news/2016/aug/26/three-men-charged-over-uk-horsemeat-scandal
  5. http://www.foodsafetynews.com/2012/04/2009-peanut-butter-outbreak-three-years-on-still-no-resolution-for-some/#.WOtvgFPytTZ
  6. https://www.netnames.com/assets/shared/whitepaper/pdf/The-Online-Counterfeit-Economy-web-FINAL.pdf
  7. https://www.pwc.com/gx/en/food-supply-integrity-services/publications/food-fraud.pdf
  8. https://hbr.org/2015/10/the-changing-rules-of-trust-in-the-digital-age
  9. http://www.economist.com/news/leaders/21677198-technology-behind-bitcoin-could-transform-how-economy-works-trust-machine
  10. https://www.researchgate.net/publication/23512107_Consumer_demand_for_traceability
  11. http://linkis.com/www.econotimes.com/Zk8mh
  12. https://www.pwc.com/us/en/issues/food-trust/assets/food-supply-and-integrity-services.pdf
  13. https://www.labelinsight.com/transparency-roi-study
  14. http://www.theglobeandmail.com/news/national/how-the-food-industry-is-using-canadians-changing-eating-habits-to-market-to-different-generations/article32316327/
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