Imagine... A New Generation of Fairer Trade Now

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CONTENTS 3 5 6 WELCOME THE OPPORTUNITY THE POTENTIAL IN AGRICULTURE OF BLOCKCHAIN 7 8 9 THE CIRCULAR SOLUTION A CONNECTED PRODUCT SUPPLY CHAIN CAPABILITIES SUPPLY CHAIN 10 11 12 CIRCULAR SUPPLY BENEFITS ACROSS BRINGING THE CHAIN HOW IT WORKS THE SUPPLY CHAIN SOLUTION TO LIFE 2

WELCOME THE CIRCULAR SUPPLY CHAIN NEW TECHNOLOGIES CAN HELP REDUCE FINANCIAL INEQUALITY Individuals, communities, governments, and enterprises around One contributing factor is that current supply chain models the world have taken a heightened interest in sustainable may lack the trust and transparency that are essential to production and the sustainability of their environments. More creating an inclusive economy that promotes social equality, than 90 percent of CEOs state that sustainability is important to mitigates risks, reduces waste, and improves society’s long- their company’s success and 66 percent of global consumers term health and environmental well-being. say they would pay more for sustainable brands. Green trade, which includes things like renewable energy, sustainable agriculture and manufacturing, and low-carbon transportation, is rising in political and economic importance, and is projected A small-scale farmer to be valued at well over US$2 trillion per year by 2020. produces about While interest has grown and impactful steps have been taken, 500 pounds of Fair much more remains to be done to address enormous waste, mismanagement, and misalignment of resources and the Trade organic coffee financial inequality among participants in supply chains. All too often small producers at the beginning of the supply chain who a year and gets around $1.30 follow or want to follow sustainable practices receive a mere a pound, or $700 a year, for sliver of the economic pie that sustainable goods yield while retailers at the opposite end reap the biggest. coffee that can retail in the US Consumers who want to buy responsibly are often at a for $20 per pound. disadvantage, unable to see or influence an economic model that exacerbates income inequalities. CONTENTS 33

But new economic models are emerging, powered by technology innovation, that may provide an alternative. A COSTLY PAIR OF JEANS One such model is the circular economy. Rather than a linear economy of make, use, and dispose, a circular Consider the environmental impact of making one economy encourages maximum use and reuse of goods pair of blue jeans. The life cycle of the denim begins and materials by repurposing them at the end of each in cotton fields, often littered with toxic chemicals and stage of their service life. organophosphates that wreak havoc on the surrounding wildlife. The cotton gets spun into yarn using starch and This model combined with the help of blockchain and artificial caustic soda, which if run off into rivers, kills the aquatic intelligence, provides full visibility from the initial producer all life. And even if proper measures are taken, or the cotton the way through the supply chain to the end consumer. We is organically grown, the impact is still significant. In an call this the circular supply chain. The circular supply chain is analysis of its supply chain, Levi’s realized that creating a way of better connecting base-of-the-pyramid producers one pair of blue jeans requires almost 920 gallons and consumers through additional visibility and extended of water, 400 mega joules of energy, and expells 32 serialization of tracking. kilograms of carbon dioxide. That is the equivalent to running a garden hose for 106 minutes, driving 78 miles By connecting the consumer to the initial producer, the 5 and powering a computer for 556 hours. Creating blue consumer can consume responsibly and reward good jeans is no anomaly. A McKinsey analysis found that more production practices. For the initial producer, the rewards can than 90 percent of the environmental impact associated help re-align financial incentives and support good business across the consumer sector is embedded in supply and environmental practices, improve sustainability and 6 chains. reduce waste. Moreover, producers and distributors can more effectively manage their inventories by aligning their product with changing consumer demands. The potential of the circular supply chain enabled by blockchain and other technologies now make what once seemed impossible possible. Sources: (1) https://ssir.org/articles/entry/the_next_phase_of_business_sustainability# (2) https://www.nielsen.com/us/en/press-room/2015/consumer-goods-brands-that-demonstrate-commitment-to-sustainability-outperform.html (3) https://www.unilever.com/news/press-releases/2017/report-shows-a-third-of-consumers-prefer-sustainable-brands.html (4) https://www.sustainabilityconsortium.org/wp-content/2016-impact-report/ CONTENTS 44

ADDING VALUE TO THE BEGINNING IN A THE OPP OF THE SUPPLY CHAIN Small producers typically are far removed from the point of purchase in the In the United States alone, more than 150,000 tons of food is wasted each day—equal to a pound per person—with an environmental toll equivalent to supply chain and may also lack the access to the financial infrastructure to such the yearly use of 30 million acres of land, 780 million pounds of pesticide mechanisms as banking or insurance, for payments, protection, or to make and 4.2 tons of gallons of irrigated water. investments. This makes it extremely difficult to add value to the beginning of the GRICUL supply chain. By contrast, markets for sustainably certified products are in high In addition, consumers’ interests in produce that is verifiably grown, processed, demand, with high premiums, but these premiums do not reach the pockets and manufactured using fair, humane, and environmentally sustainable practices, of the producers. with improved food safety measures is on the rise. Promoting more responsible use of environmental ecosystems and ensuring sustainable consumption and There are many types of producers that are excluded or marginalized from production patterns are among the United Nations Sustainable Development the value their work yields. Child labor and slavery are still major issues. As an OR Goals (SDGs). example, the African plantations that supply the world’s cocoa beans from Côte d’Ivoire, Ghana, Nigeria and Cameroon are responsible for 70 percent of the 3.5 Ensuring sustainable production patterns spans from the originating point of million tons of cocoa beans produced to satisfy the world’s voracious appetite planting crops through each touchpoint across the supply chain all the way for chocolate—in part, through the use of child labor and modern slavery. to the end consumer. A historically challenging point in these complex, global TURE TUNIT agricultural supply chains is at the beginning, starting with farm production. Until now, consumers have had limited visibility to the provenance of products, and few ways to interact and reward, and therefore, incentivize producers that follow sustainable practices. Advances in technology, combined with rising THE PRICE OF PALM OIL consumer interest and awareness in product provenance, set the stage for even more positive action and impact. One case raising concerns worldwide is the massive expansion of palm oil plantations in Borneo and Sumatra and its threat on the survival of orangutan populations. Over 50,000 orangutans on the islands of Y Borneo and Sumatra have died because of palm oil deforestation. Orangutans whose habitats have been destroyed often enter villages and oil plantations in search of food where they are captured or killed by farmers who treat them as pests. In 2016, it was reported that just 45,000 orangutans remained in Borneo and, at this rate, it’s projected they will be extinct in the wild in just 25 years. The situation is equally acute in Indonesia’s rainforests and other tropical regions. Sources: (5) https://www.denimsandjeans.com/denim/manufacturing-process/vintage-denim-at-what-cost-to-environment/ (6) https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/ starting-at-the-source-sustainability-in-supply-chains (7) https://www.theguardian.com/environment/2018/apr/18/americans-waste-food-fruit-vegetables-study (8) https://orangutantrekkingtours.com/orangutan-blog/palm-oil-products-are-killing-orangutans/ CONTENTS 55

END TO END TRANSPARENCY OF BL THE P CAN REDUCE WASTE The opportunity to address the challenges of provenance, authenticity This data, collected from grocery stores, can be fed into growing and traceability, and to provide small producers with a more equitable recommendations for farmers to help manage supply and demand. Which seat at the Fair-Trade table is now more real with emerging technologies varietals are growing in popularity? How many are needed in each region? Each such as blockchain. state or province? Each individual store? By combining blockchain and AI, the entire process can not only become more intelligent, but can produce more At its most basic level, blockchain (a type of Distributed Ledger Technology, collaborative synergies. OCK O or DLT) is a new type of database system that maintains and records data in a way that allows multiple stakeholders to confidently and securely share access TENTIAL to the same data and information. This database technology is driving major A DIAMONDS TRUE ORIGIN business transformation where the business processes and relationships across ecosystems are being reimagined. In the high-end market, diamonds have long been associated with unethical DLT systems enable all of the participants to confidently share access to data and origins, as blood diamonds are often mined with the hands of indentured CHAIN therefore strip away significant amounts of “messages” and data reconciliation servants and child labor for the benefit of warlords. Given the multitude of that define how we work today. Importantly, this new data capability creates the hand-offs along the supply chain, it has been extremely difficult to have ability for users to know the full provenance of a piece of data, to know that it any confidence in the true origin of a diamond. Everledger, an emerging hasn’t been tampered with, and to be able to control who has access to what to technology enterprise, has sought out to solve this problem by using a preserve privacy where required. distributed ledger among all partners across the supply chain, allowing the Imagine apples going through a supply chain. Once apples are picked, they are manufacturers, retailer, and grouped into a shipment and entered onto the blockchain as a digital asset— consumers to know a diamond’s tagged with information about time of picking, varietal, orchard and potential story from origin to the end classifications such as being organic. As the apples are shipped to different customer. The core characteristics end markets, sensors track each hand-off between multiple logistics providers, of distributed ledger distribution systems, wholesalers and retailers, but the data is held in data siloes. technology–immutability, speed An individual player could apply AI to generate insights, but they have limited and security– create the ideal visibility of the data. platform for tracking and protecting high-value assets and Now imagine a blockchain-enabled shared data system. AI applications would critical data. In its first three years, have end-to-end transparency and be able to provide insights regarding routing Everledger has encrypted the logistics in order to match insights about freshness to optimal destinations that provenance of over 2 million diamonds, would also assure the apples aren’t wasted. During the growing process, AI can with future plans to add other luxury provide insights about fertilizer needs, what varietals to plant, and the best time goods to the blockchain. to harvest, including the optimal distribution routes to reach consumers at the peak of freshness. AI could even recommend faster routes or re-route around storms or heat spikes. Over time, it can also monitor demand. CONTENTS 66

WHAT IS IT? S THE CIR Circular supply chain is a solution concept from Accenture that generates a new UPPL kind of value in the global producer supply chain by going beyond track and trace in providing consumers with a mechanism to reliably identify products, prove authenticity and enable new channels of engagement. Accenture’s vision of the circular supply chain is one that combines supply chain, blockchain, identity, biometrics and payment capabilities to connect base-of-the- pyramid producers to consumers. This combination brings financial benefit to the Y CHAIN producer/grower and empowers the consumer to be in control. It encourages more sustainable production methods and choices, extends retailer and manufacturer CUL visibility into what customers value and will purchase, and offers various benefits such as waste reduction, inventory optimization and streamlined data reconciliation. The solution’s aim is to enable consumers to reward producers following responsible and sustainable protocols with a “tip” through direct payment to the beginning of the supply chain—directly to producers. These producers in turn are able to gain direct AR income and improve their livelihoods. This direct connection between consumers and producers will redirect incentives to the beginning of the supply chain to promote more sustainable and inclusive growth with net new money and no impact to the existing supply chain processes or actors. Importantly, the solution enables greater financial inclusion, made possible through the rise of digital technologies and innovation, and helps drive new business models that are tapping into diverse consumer markets and providers. This A FIT FOR RETAIL MANUFACTURING opportunity makes the market more accessible to producers and helps bring them into the global economy. Greater financial inclusion also enables a new generation Circular supply chain enables companies in the retail and manufacturing of producers. Reaping the economic benefits opens doors to other opportunities industries to manage inventory and distribution more effectively and emerging, such as access to more formal credit as new producers build a financial reduce waste by accurately planning and consolidating inventory. With credit history and gain access to agriculture insurance. better insight on what consumers demand, producers can choose to Circular supply chain also pulls back the curtain and overcomes the challenges produce less, rather than let materials go to waste. The information that of limited product provenance visibility with full visibility. Additionally, a circular comes from blockchain can enable better planning and utilization of supply chain provides companies with the opportunity to drive greater positive resources from a demand perspective. Blockchain can provide greater societal impact by improving livelihoods and increasing their green credentials. efficiency by reducing some of the redundancies in data management For producers, it provides ways to engage in the global economy, and encourage and sharing. It can also capture the authenticity of products, confirm labor sustainable practices by creating compelling incentives. Plus, the outcomes sources and enable traceability and corporate targets around their supply support the United Nations SDGs promoting sustainable land use, responsible chain. Green credentials matter in the new economy and help to serve eco- consumption and production, and ending poverty. The solution holds the potential conscious consumers. to be scaled to other use cases with alliances, peers and partners. CONTENTS 77

ACCENTURE’S CIRCULAR SUPPLY CHAIN C SOL SOLUTION RELIES ON SEVERAL KEY CAPABILITIES: AP BLOCKCHAIN IN THE SUPPLY CHAIN DIGITAL TRANSFORMATION ABILITIEUTION This new technology maintains and records data in a way These components are essential for thriving in an increasingly that allows stakeholders in the supply chain to confidently digital world. They could include but are not limited to cloud, and securely share access to the same data and information. mobile devices, social media, Internet of Things and analytics. Blockchain provides the trust necessary to verify a producer’s actions in combination with certifying and standard-setting authorities. CIRCULAR PRODUCTION Blockchain enables better planning and utilization of resources IDENTITY AND BIOMETRICS WHERE APPROPRIATE from a demand perspective. It can also capture the authenticity of products, confirm labor sources and enable traceability and By verifing the producer’s identity through secure, well- corporate targets around their supply chain. established and innovative systems, the producer, certifying authority, and each participant can determine that the right S person is linked to the right digital identity and their product, and that the attested interactions are genuine. BIOMETRICALLY ENABLED PAYMENTS Payments solutions provide real-time funds transfers directly with cash endpoints through partners where appropriate. These solutions can provide smallholder producers with options in primarily cash-based economies. Biometrics ensure that the producer’s identity is unique and their own. Augmenting payments with the trust and security provided by biometrics and blockchain brings to life a platform that nurtures an environmentally friendly economy. CONTENTS 8

ATTRIBUTES S A CONNE UPPL Traceability: 1. The ability to verify and trace the location and origin of raw materials, components and manufactured products in real time, on demand, anywhere. Certainty: Y CHAIN 2. Guarantees of product authenticity, quality, grade and origin; compliance with certification and regulatory standards; and inclusion of anti-fraud measures. C Transparency: 3. Shared permanent and verified record of all transactions and transfers across TED PR an ecosystem of partners. Fast Settlement: 4. Real-time sales transactions with atomic ownership transfers and proceeds distribution. Simplicity: 5. Streamlined reconciliation; eliminates exceptions; improved auditability; ODUC reduces paperwork; increased collaboration with ecosystem partners. Efficient Trading: 6. Digitization trading enabling instant sale, goods transfer and payment; enables peer-to-peer models; improved risk management; market stability. Food waste reduction: T 7. Greater efficiency through better management of food resources. CONTENTS 99

INCENTIVIZING MORE ETHICAL BEHAVIORS HO CIR Circular supply chain will consist of a combination of various technologies A consumer purchases the product. working together. The differentiating aspect of circular supply chain is in its ability To show appreciation and support of the producer behind the to take the consumer to an escrow account of the originating producer’s group product, using a mobile app, he/she scans the QR code on the W IT W or co-op of the product they are purchasing and want to support. It is a solution product package, views information about the producer and his CUL retailers can offer to their consumers to demonstrate traceability and authenticity certifications, and tips the producer. Information about the product of the products they are selling. It also creates greater connection to the can be viewed and traced. consumer in today’s digital and immersive experience world. The technologies empower the consumer with certainty to make an informed decision and create additional incentives for behaviors that are positive for the planet and people. A biometric payment mechanism with the producer’s data is issued. Only the producer can use the funds given it is AR S Here is a high-level description of how Circular Supply Chain works: biometrically controlled. Where appropriate, the producer is able to get cash through a partner such as The consumer can see that only the producer can access the funds, ORK A producer plants crops in a sustainable manner. and the transaction completes. He harvests the crop, demonstrating no harm to the environment. UPPL Circular Supply Chain will consist of a combination of various technologies The producer delivers his crop to a transporter. working together. The differentiating aspect of Circular Supply Chain is in its Through the use of his mobile app, he receives an attestation on ability to take the consumer to the originating producer of the product they S his identity wallet that the crop is his and is sustainably grown. are purchasing and want to support. It is a solution retailers can offer to their The information of that badge is then added onto the blockchain. consumers to demonstrate traceability and authenticity of the products they are selling. As the crop moves through the supply chain, the information It also creates greater connection to the consumer in today’s digital and Y CHAIN about the crop is locked throughout. The various participants in immersive experience world. The technologies empower the consumer with the supply chain interact with the information on the blockchain. certainty to make an informed decision and create additional incentives for Movement from one stage to the next is visible and traceable. behaviors that are positive for the planet and people. A large supplier sends the product to distributors and retailers. The product is delivered to a supermarket chain. CONTENTS 10

EVERYONE STANDS TO GAIN THE S BENEFIT The Circular Supply Chain model can be applied across the supply chain. Producers provide proof of actions to processors, who then pass that on to consumers. There are benefits for the parties involved throughout the process. Current incentives can be used to drive producers, processors, wholesalers and consumers to align on business goals. UPPL Producer/Farming Cooperative Wholesalers Circular Supply Chain benefits producers and farming Circular supply chain offers wholesalers transparency in cooperatives significantly by increasing their control over their production process, improved food security (faster time to recall), S A income and enabling secure and trusted identification. This and potential cost savings and efficiency (e.g., reduced cost to additional income allows for increased choice in favorable mitigate). The solution has the potential to enhance company farming methods. The solution also enables direct feedback from brand and reputation, set premium pricing, protect against fraud purchasers, likely the first such communication ever shared. and identify issues or issue recalls faster. Y CHAINCR Incentives to producers to embrace Circular Supply Chain include the opportunity to increase income earned, gain access to digital Consumers payments or chase end points, and remove expensive financing With Circular Supply Chain, consumers gain improved visibility from middlemen. Improved financial status affords the ability to to the governance and quality of products they buy and proof of O optimize their production and harvest cycle as well as gain more sustainability. They are empowered to use their money to directly bargaining and price control. influence producer behavior. Many consumers are interested in S influencing supplier behavior to support positive values and seek to increase value for their money. S Processors Processors along the supply chain benefit from Circular Supply Chain and gain transparency and traceability to small producers and they have proof of provenance. They also gain the ability to demonstrate tangible actions supporting corporate objectives for sustainability and use this information as a market differentiator. Many processors will be driven by incentives to enhance their brands, increase profit and/or market share, reduce need for paper documents and enhance compliance with regulations. CONTENTS 11

JOIN US IN MAKING SOL BRINGING THE A DIFFERENCE FOR THE WORLD Within the agricultural and food sector, digital transformation is under way and poised to continue. Circular supply chain is a solution in the concept phase, to advance to a proof of concept and demonstration next. A patent is pending. There’s a lot of excitement around blockchain in the agricultural UTION T sector and particularly in the supply chain for its ability to provide transparency and certainty of information. But it will take a global village to turn this solution into a reality. To accelerate our journey and action plan, we’re looking to form a consortium with interested partners who are willing to collaborate with us to help empower potential solutions. For large enterprises, a solution like circular supply chain addresses a company’s sustainability goals. One way is by helping to drive social impact and improve the livelihoods of producers. The solution offers incentives throughout the O LIFE entire ecosystem for players to follow the right protocols. For those enterprises interested in participating in our consortium, participation provides a means to drive innovation and amplify emerging technology investment by furthering corporate priorities. It offers the potential to create new channels of customer engagement, help build brand loyalty, and enhance reputation and brand through green credentials. Many of today’s environmental practices are unsustainable. If left unchanged, mankind will pay a heavy price for inaction. Conversely, mankind has much to gain if circular supply chain can change destructive methods to more responsible and sustainable practices. Such a change holds the potential to change the way our food, clothing and other retail goods are produced, and enhance the incomes of producers—benefiting the environment and society. The key thing here is to change the dynamics at the beginning of the supply chain. CONTENTS 12

CONTACTS ABOUT ACCENTURE To learn more about the benefits of blockchain for Accenture is a leading global professional services your business or discuss how any of the ideas in this company, providing a broad range of services and paper could improve your organization’s performance, solutions in strategy, consulting, digital, technology please visit accenture.com/blockchain or contact: and operations. We help organizations maximize their performance and achieve their vision. We David Treat develop and implement technology solutions to improve our clients’ productivity and efficiency — Managing Director | Global Blockchain Lead and may run parts of their operations on their behalf. New York Ultimately, we enable our clients to become high- [email protected] performance businesses and governments. With approximately 469,000 people serving clients in @dbtreat more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Christine Leong Visit us at www.accenture.com Managing Director | Digital Identity Innovation Lead Houston [email protected] Copyright © 2019 Accenture. All rights reserved. Accenture, its logo, and High performance. Delivered. are trademarks of Accenture. 13