Blockchain has the potential to revolutionise the way business is done. The availability of credible data can improve the traceability of products along the value chain, making it easier to assess impacts and risks. Some industry frontrunners are already exploring ways to use blockchain as a tool to improve their sustainability performance and for building trust with their customers, while also increasing efficiency and promoting further improvement projects.
Heinz Zeller is Principal Sustainability at HUGO BOSS. He shares his perspective on how blockchain has the potential to improve a fashion brand’s sustainability performance.
For the past couple of years, it has become increasingly clear that full traceability can accelerate the transformation to more responsible value chains in the fashion industry. Blockchain, or more precisely: Distributed Ledger Technology, offers a solution for that due to secured and easier information sharing whereby transparency is only one of the benefits. It is a solution that is expected to increase supply chain optimisation at different levels such as for example decreased duplication of work and optimised logistic services.
In the last 30 years, the industry has operated through proprietary, centralised systems for procurement and compliance with external business partners. This form of information exchange hinders full transparency and trust. Complete transparency could only be achieved in rare cases at high costs and for specific claims only, focusing on defined topics such as animal welfare. In replacing this traditional system of information exchange, blockchain promotes shared responsibility and accountability through consensus from all actors from one single point of information. This decentralised approach allows to see the sustainability claims of all business partners immediately, avoiding duplicate audits and promoting focused steering towards more sustainable practices.
Based on a digitised, decentralised, public ledger of cryptographically secured transactions, blockchain technology empowers companies with the ability to update and grant access to all relevant information, including compliance. Thereby, the receiving business partners and a greater blockchain community validates the information. With information sharing in real time, companies can quickly reach an increased overall efficiency. For example, throughout the whole supply chain, repetitive tasks (e.g. delivery slips, bills of lading and customs clearance) may be automated through so-called “smart contracts” or apps built on information, secured by a distributed ledger. Bringing together procurement, compliance and financial transactions by using so-called cryptographic tokens (a concept pioneered by Bitcoins), the blockchain ecosystem unfolds its real potential and differentiates itself from current approaches.
The tokens further function as an ideal instrument for loyalty programs, which can foster long-term partnerships between business partners and build trust between brands and their final consumers. That trust and those partnerships are the result of and underpin sustainability measures, providing a mutually reinforcing process that is important for the sustainability impact. Moreover, triggered by so-called “smart contracts”, the tokens increase supply chain optimisation by replacing letters of credit and lowering financial transaction costs. On the other side of the spectrum, tokens, already used today for crowdfunding, will become an ideal way to connect improvement projects within such an ecosystem to all partners (donors and receivers) in the value chain in a fully transparent way either publicly sponsored or as a public-private partnership.