"Granular visibility": Blockchain is helping Unilever solve supply chain challenges

Sam Kini, CIO at Unilever, explains how her company is tracking palm oil using blockchain

Earlier this year Unilever, the multinational consumer goods company, began a trial with SAP to bring traceability to its supply chain using blockchain.

When dealing with goods where sustainability and ethics are important - like palm oil, or diamonds - traceability is becoming a key differentiator for the end customer.

Sam Kini, CIO of Unilever, explains why the firm pursued a blockchain approach instead of relying on paperwork:

"Blockchain can potentially help companies create transparent, tamper-proof records of what happens in their supply chain," she says. "Additionally, the flexibility of blockchain to carry a wide range of information means the technology can be used in projects supporting a company's ESG and climate strategies."

Having access to critical, tamper-proof data helps companies take targeted action to improve supply chain sustainability, and hold companies to account.

"We're exploring the use of blockchain to understand how it could be used to give consumers the confidence [to know] that when they pick up a Unilever product, it has been made with sustainable materials."

Going green

Palm oil is often blamed for deforestation: along with Unilever's other key crops (paper and board, soy and cocoa), palm contributes to about two-thirds of the company's land-use. On top that, it is known for being "especially difficult to trace", so tracking the oil from the point of origin offers a real use for blockchain, much as Anglo American is doing with platinum.

GreenToken, SAP's blockchain solution, was designed for just such an application: to help companies keep track of their bulk commodity sourcing in long, complex supply chains. A huge amount of the world's raw materials - Kini estimates 90% - are traded on a bulk basis, meaning they are often mixed with identical raw materials at some point in the chain.

Tracing those goods is difficult, if not impossible, using traditional paperwork. But the blockchain has the potential to disrupt the way supply chains work.

"With GreenToken, tokens are created by commodity buyers - mills, in the case of palm oil - and a range of information related to the crop like origins or sustainability credentials are captured within the token. As the crop moves to each stage of the supply chain, a request is made to transfer the digital tokens. Specific data can be drawn upon for that crop, even if the materials have been mixed with materials from a different source."

Innovation meets regulation

Unilever ran its blockchain pilot in Indonesia this year, and Kini says it has proved it is possible to achieve "a granular level of visibility" in the sourcing chain. However, as with any new concept, there were challenges.

"Palm oil supply chains are both long and incredibly complex. From the time the fruit of the oil palm is harvested, up to the point it is packaged and sold in a product like shampoo as a palm oil derivative, the material can undergo multiple transformations.

"The 'first mile' is a particular challenge. This refers to where the palm fruits are sourced, such as smallholder farms or plantations, to where they are first processed, i.e., mills."

Unilever uses solutions like Orbital, Descartes Lab and Premise for insight into the first mile; these then 'dock' with GreenToken to record first mile data on the blockchain. It's a new way of handling the information, and results are still being recorded - but there were other challenges in the proof of concept, specifically around compliance with local data storage and processing regulations, and the way they were managed with blockchain. These are new concerns businesses will have to face as tech changes over time, which Unilever took on in consultation with "global and local experts."

The company is now looking to other environmentally concerning crops it deals with, like soy, and working to expand the GreenToken pilot by identifying the suppliers and stakeholders who will need to play a role in the work.

GreenToken is just one avenue Unilever is pursuing to manage its supply chain. As well as prioritising suppliers with the same sustainability ambitions, "We are also ensuring we continue to develop a supply chain that is inclusive of smallholders and using our partnerships with Google Descartes and Orbital Insights - among others - to monitor our supply chain. This is technology that just wasn't available a few years ago."

While blockchain (via cryptocurrencies) might be floundering in the consumer space, business leaders are only just starting to explore its potential: a potential that could rewrite the operating rules for hundreds of industries. It's going to take time and effort to get there, and trials like this represent the first step.