Palm Oil Blockchain: Traceability and Sustainability in Palm Oil Industry
Palm oil industry continues to be attacked by negative issues related to the deforestation, human rights and exploitation. Massive expansion of palm oil plantations is considered to be one of the causes of global warming. In addition, the rise of the “Palm Oil Free” movement campaign has put pressure on the palm oil industry in Indonesia and Malaysia.
In dealing with palm oil issues, major brands that use palm oil raw materials such as Nestlé, L’Oreal, Unilever, Colgate-Palmolive, General Mills, Hershey, Kraft Heinz, Mars, Mondelez, PepsiCo and others are starting to policies that all their products will use sustainable raw materials and prevent deforestation. These major brands work together with producers to collect data traceability of all suppliers in realizing their policies.
All of brands, retailers, refineries, and factories are working together with their suppliers to identify where their raw materials come from, who produces them. This has become very important in starting the journey to fulfill the policy of responsible raw material sources.
However, traceability in the palm oil supply chain is a complex and diverse problem. At the upstream level, Fresh Fruit Bunches (FFB) are often traded between smallholders and local traders or agents before fruits arrive in the mill, making it difficult to trace, even impossible. The speed and large scale of palm oil trade in commodity market has hampered the tracking of goods and hampering the tracing to factories and plantations.
Traceability Solution Using Palm Oil Blockchain Platform
Traceability is the key to achieve transformation of palm oil industry in the industry 4.0 era. In the palm oil supply chain, traceability is intrinsically related to sustainability. If a product can be tracked back to its original mill or plantation, it is possible to investigate whether the origin mill or plantation has complied with laws and principles of sustainability. Therefore, it needs guidance on how to trace raw materials and calculate their traceability. With the guidance, it is hoped that it will become a guideline for all palm oil companies in tracking raw materials to keep up with global demands regarding the sources of raw materials.
As a concrete process, numbers of palm oil industry leaders, included palm oil companies (Asian Agri and Apical), renewable diesel producer (Neste), consumer goods manufacturer (KAO), technology partner (SAP), facilitation team (Proforest and Daemeter,) formed an alliance called Sustainability Assurance and Innovation Alliance (SUSTAIN). The collective aim of this group is to build a Blockchain-based palm oil platform to address sustainability issues and fulfill the objectives related to the principle of No Deforestation, Peat, and Exploitation (NDPE).
SUSTAIN will offer an access to Blockchain platform where various party can upload information to monitor traceability of palm oil commodity. This scheme is obviously a step in the right direction in moving the palm oil industry towards the implementation of transparent sustainability criteria.
Blockchain technology is believed to have a transformative impact on the industry, not only creating transparency in the supply chain but also creating value for stakeholders in both the upstream and downstream sectors.
The Blockchain is an encrypted and tamper-proof database for each entity that participated in the value chain. Each node contains a record of the exact transaction, both at the farmer, producer, transporter, or buyer level, each transaction in the value chain will be in each node.
In other words, the Blockchain is a decentralized, distributed, and public digital ledger that is used to record transactions on many computers so that they cannot be retroactively changed without changing the entire block afterwards and consensus in the network. Thus, allowing parties to verify and audit transactions easily.
The Blockchain database is managed independently using peer-to-peer (P2P) networks and distributed timestamping servers. They are authenticated by mass collaboration supported by collective interests, so they have a strong and safe workflow. The utilization of the Blockchain can eliminate the infinite reproductive characteristics of data from a digital asset.
How EPCS works in Palm Oil Blockchain Platform
The application of Blockchain technology will probably experience numbers of obstacles given the lack of attention to digital technology in palm oil producing countries, especially in the business process (in field operational) which is the main base of the problems so far. In facts, most palm oil plantations are still based on paper (non-digital) use in their daily operational, making it difficult to record all activities to the Blockchain system.
To overcome the challenges presented by the current traceability method, eKomoditi Solutions Indonesia develops digital software application that works with smartphones and mobile applications, given name Electronic Plantation Control System (EPCS).
Through this Android-based application, the journey of the palm oil can be traced back to its origin, including the farmer’s identity, plantation legality and making sure that the palm oil was legally sourced as well as produced from an environmental and social conflict free area, thus it will create palm oil trading industry with perfect sustainability records.
A plantation worker (1A) harvest Fresh Fruit Bunches (FFB) using the EPCS Application. Information such as location estate blocks, plantation identity, worker identity, date and time harvested, quantity and quality of FFB can be captured and uploaded into the EPCS (7A) application in real-time based on GPS Satellite (7B). While FFB from independent farmers / plasma (1B) and middlemen (1C) are considered as an external source.
EPCS application software can support the registration process for compliant plantations, which can then be used to check the geolocation data of the harvested fruit bunches. This not only provides an unprecedented level of transparency, but also contributes to protecting the working conditions and legal employment of field workers and gives plantations rich data on crop harvesting. Thanks to digital maps with geolocation features, farmers, governments, certification authorities, and producers can maintain digital inventories of the plantations, and implement sustainable land usage planning policy. (7C & 7D)
Another primary concern that EPCS can address in the supply chain is to minimize the spoilage of oil. Palm oil has a propensity to rapidly oxidize or hydrolyze under sub-optimal storage and transport conditions. Both these reactions –- activated by high temperature, moisture, or impurities -– can increase the contents of Free Fatty Acids (FFAs) in the oil, which could prove to be hazardous for human consumption (3, 4A, 4B, 5A & 5B).
Similarly, in the palm oil’s multimodal transportation chain, shipping companies could use tamper-proof GPS-enabled seals to lock containers, and mobile devices to record product shipment information based on the EPCS application. Once the shipment reaches the destination, only authorized personnel can access the credentials from the blockchain application to open the seal and start the receiving process.
In the era of environmentally aware and health conscious consumers (9A & 9B), this level of transparency will lead to a new era of trust and brand loyalty that impacted great value to companies in competitive era.
Finally, retailers (8A) and suppliers (8B) can present the end products with identifiers such as the QR Code, enabling buyer to view the oil’s journey back to its source through Blockchain platform (10).