Sean Caputo is the co-founder and chief strategy officer at Augusta HiTech, a consulting firm that works with social-impact focused partners on improving their product development, software, and technological services. He was the founder and chairman of the board at Smart Engagement Inc. He currently serves in the same capacity at 420 Blockchain Inc., is an entrepreneur-in-residence at Vonzo Partners Venture Capital, and is an advisor at SmartChain Media.
Over the past decade, the distinction between organic and conventional food has drawn a more discerning eye from consumers. From the farm to the table, food supply chains have grown in complexity and become subjected to ongoing pressures related to global compensation, regulatory controls and the ever-changing interests of customers.
But instead of focusing on organic foods in general, people spend more time trying to figure out various interpretations of “organic,” “farm-raised” and “grass-fed” through the eyes of the Food and Drug Administration. The FDA's increased oversight of associated track-and-trace initiatives demonstrates its commitment to preserving the quality and safety of food and mitigating any risks associated with sourcing.
As effective and entrenched as the FDA is, it needs an additional layer of support that a service like blockchain-powered governance can provide. While the government and, to a lesser extent, advocacy groups, each verify food safety for consumers, blockchain's supervision is different. It represents an independent third party that injects transparency into supply chains that governing bodies can't match.
Why transparency matters
A recent slew of controversies has cast a shadow over the food industry. For instance, reports in 2014 and 2015 suggested that several U.S. vendors — including names like Safeway, Walmart, Kroger and Red Lobster — were selling seafood harvested and processed by forced labor.
Even more troubling are the rampant reports of E. coli from romaine lettuce and various outbreaks of salmonella linked to turkey and raw chicken. Since 2015, Chipotle has lost more than 46% of its market capitalization because of multiple problems related to its foods.
To instill a sense of security in the general public, various corporations pledged to address these problems by prioritizing stronger supplier language. Delivering on these promises has proven to be much harder, and until now, retailers haven't had the tools at their disposal to combat these gaffes.
Many modern companies order products from specific providers of origin, but it's extremely difficult for any company to ensure that every product was sourced with complete integrity. Furthermore, it is challenging to deal with the high prevalence of fraud. If companies are willing to enslave workers to perform rigorous tasks, they are most likely willing to falsify documents pertaining to the origin of products.
This lack of clarity into sourcing practices means siloed food chains will continue to wreak havoc on consumer health and corporate credibility. Blockchain and food governance can eliminate both concerns, though.
What's to gain from blockchain
The absence of transparency in the food supply chain is notable for a number of reasons. Perhaps the biggest concern is the inability of some technological solutions to identify problems and determine the source of breakdowns.
With blockchain, industry vendors can define, audit and collaborate on food safety standards. The platforms can connect with existing legacy systems to monitor food supply behavior, streamline compliance management, and analyze internet of things data. Bringing these processes under one umbrella creates a foundation for food supply chains to grow and evolve, which should give peace of mind to vendors and customers.
With this information available, vendors can build proactive strategies to stave off recalls and have processes in place should an incident occur. The FDA has loose guidelines in place for integrity and sourcing issues, but the Food Safety Modernization Act looks to improve those by directing the FDA to increase its efforts regarding traceability. The FDA must begin these efforts by running some traceability pilot projects.
Blockchain also would separate transforming and processing events into two sets of records: one for tracking inputs and another for tracking outputs. Accurately tracking data such as shipped and received items, quantities and lot numbers can help companies better track produce during every stage of the process.
Food vendors must be able to write and share information across an expanding network of trading partners. Blockchain architecture can bring similar networkwide data-sharing benefits to food integrity governance.
Where governance as a service might fall short
Unfortunately, numerous providers only concern themselves with the bottom line. They know their actions aren't entirely ethical, but the profits they make far outweigh any potential fines or legal issues. If the penalties were to exceed the profits, maybe vendors would be less likely to send out harmful products knowingly.
Under the new set of standards, companies are subject to criminal and civil punishments for adulterating or misbranding any product. The Federal Food, Drug, and Cosmetic Act of 1938 defines adulterated foods as anything that has been prepared, packed or held under unsanitary conditions that could cause it to become contaminated with filth or potentially injure the health of consumers. Under new regulations, liable parties are subject to as much as a felony conviction.
Blockchain technology may provide numerous benefits for certain types of supply chains, but it is not quite ready for mass adoption. Pilot tests have not adequately proven how truly valuable blockchain technology is to the supply chain sector. While blockchain has been unable to capture mass data across many untrusted parties, there are other ways to deliver full transparency and traceability to food supply chains.
The true costs of developing and running a blockchain are not clear, and there is a substantial gap between blockchain’s current capabilities and the enormous capacity needed for food supply chains. Although it's not immediately apparent how food governance as a service will look in the coming months or years, business leaders should consider the benefits of increased transparency in this sector and continue to push toward it.