Banks team up on blockchain supply chain project

High Street banks including Barclays, BNP Paribas and Standard Chartered have teamed up with the University of Cambridge’s Institute for Sustainability Leadership (CISL) to pilot the use of blockchain to enhance the sustainability and efficiency of global supply chains.

The Trado model was also piloted with the backing of Rabobank, Sainsbury’s and Unilever in a bid to prove a use case for distributed ledger technology.

The research focussed on developing an innovative blockchain structure, enabling traceability, into a blueprint for replication, development and experimentation in other contexts.

Announcing the successful completion of the pilot, the group said that the Trado model could potentially pay for some of the investment needed to establish traceability across supply chains, although further investigation is needed to scope the model’s ability to do this while benefitting smallholders.

The Trado model enables a sustainability ‘data-for-benefits’ swap between a buyer and a seller in the supply chain, using banks’ traditional supply chain financing. This swap provides parties in the supply chain with reliable data about its sustainability properties, helping to reward first mile producers such as smallholder farmers for information on their production practices.

In exchange for the data, the buyer enables the provision of benefits by allowing a (lower) financing rate to be applied to working capital financing of the supplier.

For banking, the new technology has potential to offer better data, and therefore better oversight of transactions. A future application might be to enable compliance with domestic regulations such as the Climate Change Act, Modern Slavery Act and Bribery Act in the UK.

Improved access to sustainability data could also help to attract clients wishing to demonstrate social and environmental leadership.

Thomas Verhagen, senior programme manager at CISL, said: “Collaboration between multi-nationals, financial institutions and FinTech firms can harness new ways to ensure financial flows support fair and just policies and practices ready for a new financial system.

"The Trado model has potential for replication across a wide range of topics and we hope the blueprint will encourage others to deliver its potential for social and environmental improvement.”

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