Praising the “enormous, game-changing potential" of blockchain technology, the Forest Stewardship Council (FSC) is pilot testing the so-called ledger technology on its Chain of Custody (CoC) supply chain standard.
Over the years, FSC Chain of Custody has been the subject of harsh criticism, even from former FSC Director General, André de Freitas, who in 2014 called the standard a “myth” due to its paper-based system of transaction verification, which allows for fraudulent manipulation of certified volumes.
Introducing blockchain - at first with a limited pilot running until October this year, and after, depending on feedback and lessons learned, perhaps a larger roll-out - FSC expects the secure data system to become the “norm”.
“Companies want to know, not only that their supplier has been certified, but that the material, they are purchasing, is accounted for all the way from the source,” said Michael Marus, Chief Information Officer and Director of IT.
“I think it is a big step forward. We are trying to focus in on all the problem areas that we know from our investigations. And this will be a very solid step forward to tightening things up. If this can become the norm of handling your materials, there is so much more we can do on top of that,” said Michael Marus.
Trust and transparency
In the past, FSC has developed several IT-tools to strengthen its paper-based transaction verification system, such as the Online Claims Platform (OCP) – a voluntary system inviting certificate holders to upload transactions to a database. Largely unsuccessful, however, the OCP was ‘retired’ in 2019.
Because of the decentralized and virtually impossible-to-tamper-with nature of the blockchain technology, even two or more colluding parties will not be able to manipulate the volume of certified material recorded on the chain.
“Blockchain offers quite a bit in terms of maintaining trust, while at the same time allowing there to be a level of transparency that can connect all actors in a supply chain without having to reveal business sensitive information. It allows them to keep connected in a way that all materials can be accounted for all the way to the source,” Marus explains.
Blockchain was invented in 2008 to serve as a public distribution ledger for the cryptocurrency Bitcoin. While cryptocurrency has been given a somewhat tarnished reputation due to cases of currency fraud and excessive energy consumption related to ‘bitcoin mining’, blockchain technology is quickly becoming popular with companies and major brands wishing to document their supply chains in a secure and transparent way.
Whereas non-conformances is so far being investigated retrospectively by FSC and ASI, blockchain makes it possible to discover discrepancies in real time, by analyzing the volumes recorded. This is obviously a huge advantage, says Michael Marus.
So, is there anything blockchain can’t do?
“It cannot do things that do not have data involved. And it cannot replace audits. Do certificate holders treat their workers right? Do they adhere to our principles and criteria? Blockchain should not be considered as just a simple check mark to show that your company has accounted for all material. FSC Certification is much more than that,” said Michael Marus.
FSC is now inviting companies to apply to join the pilot, which will focus on short, high-risk supply chains. All companies are welcome, says Marus, who points out that the FSC Blockchain is for all businesses, whatever the size:
“Maybe their it-capabilities are great or not so great, so we have created a web form, a spread sheet, and an API – a way to plug in their management systems into our blockchain. We have tried to cater for all companies, whether they are big or small,” said Michael Marus.
Out the door, across the board
As more and more companies are adopting blockchain to keep track of their product data, from complex wood items to simple agricultural products, the new technology is no doubt here to stay:
“We have to be able to check compliance at any time. I believe it will become a valuable asset for FSC as a system, in terms of compliance, but also a valuable tool for certified companies. In five years, I would foresee this is very much out the door and across the board in FSC. And I think it will be driven by real need from all parties,” said Michael Marus.
Read more about FSC Blockchain here.