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UNILEVER PILOTS SAP BLOCKCHAIN TECH FOR DEFORESTATION-FREE PALM OIL: ‘THIS WILL
BE TRANSFORMATIONAL FOR SMALLHOLDER INCLUSION’

By Katy Askew contact

24-Mar-2022 - Last updated on 25-Mar-2022 at 11:35 GMT

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Blockchain is supporting Unilever's drive to stamp out palm oil linked
deforestation from its supply chain / Pic: GettyImages-Wirachai

Related tags: Unilever, deforestation, Palm oil


Unilever is piloting new blockchain technology, GreenToken by SAP, in a bid to
increase traceability and transparency in the consumer good giant’s palm oil
supply chain.

The ‘first mile’ of the commodities supply chain presents a particular
challenge. This is the stage from plantation to mill, when raw materials like
palm oil are often mixed with non-verified sources. This means that origin
information is ‘lost or hidden’, Unilever explained.

The company believes that blockchain can help strengthen traceability in that
‘first mile’ of its palm oil supply chain.

“This technology absolutely can help Unilever and partners to manage the
complexities that come from very long supply chains – particularly for crops
that are at risk of being linked to deforestation – by providing additional
transparency to the movement of the commodity and visibility of its unique
attributes,” Andrew Wilcox, Senior Manager, Sustainable Sourcing and Digital
Programmes at Unilever, explained.


BOOSTING TRACEABILITY WITH BLOCKCHAIN

GreenToken has been developed by German software corporation SAP. Unilever has
conducted a successful proof of concept in Indonesia, where it applied
GreenToken to source more than 188,000 tons of oil palm fruit.

“With GreenToken, we want to bring the same traceability and supply chain
transparency to bulk raw materials that you get from scanning a bar or QR code
on any consumer product,”  Nitin Jain, Co-founder and General Manager of
GreenToken by SAP, said. “Our solution allows companies to tell what percentage
of palm oil products they purchased is from a sustainable origin and track it to
the end consumer product.”

Oil palms from different sources are often mixed in the first mile of the supply
chain /Pic: GettyImages-migin

The GreenToken solution helps Unilever track, verify and report in near
real-time the origins and journey that palm oil takes through its long and
complex supply chain.

“By working with GreenToken by SAP, we can capture data about the commodity,
including the conditions under which it was grown or harvested. Then we build on
it to capture supply chain information and pass [this] down our supply chain
intact through digital tokens. Giving every physical unit of a commodity its own
data attributes enables a ‘virtual segregation’ of data even in long and complex
supply chains where commodities may be commingled. For example, crops that are
sustainably sourced being mixed with those that are not,” Unilever’s Wilcox told
FoodNavigator.

“Our work with GreenToken by SAP, and projects with other partners, will give us
much richer data about the commodities that are entering our supply chain – from
sourcing origins to biodiversity in crop growing regions and more.”

Through the initial pilot, GreenToken enabled palm supplier Golden
Agri-Resources and other palm oil companies from whom Unilever sources to create
tokens that ‘mirror the material flow of the palm oil’ throughout the supply
chain and capture the unique attributes linked to the oil’s origin.

Golden Agri-Resources had already been working with technological solutions to
help strengthen supply chain transparency and participation in the Unilever
pilot provided the Indonesian palm group with some ‘useful’ takeaways, Chief
Sustainability and Communications officer Anita Neville noted. “Technology has
played an important role in our efforts to enhance visibility and transparency
in our own palm oil supply chains. Our participation in the GreenToken pilot
with SAP and Unilever provided useful insights in how to successfully pass
information between different actors in the supply chain,” she said.

Blockchain is a shared immutable digital ledger that can be used to track
commodities as they flow through supply chains / Pic:
GettyImages-peterschreiber.media

Importantly, Wilcox added, GreenToken relies on existing practices to generate
the data. “The system leverages existing business processes like creating
purchase orders, goods receipts and weighbridge logs, to originate and transfer
these indivisible and unreproducible commodity tokens and keep the accounting
transparent at each stage of the supply chain. This makes the system potentially
scalable and robust, even when the supply chain contains multiple layers of
trading and processing."


SUPPORTING SMALLHOLDER INCLUSION

Today, 13 million hectares of forests are being lost every year. Unilever is
first focusing its efforts to end deforestation on its supply chains for palm
oil, paper and board, tea, soy and cocoa. With an agricultural footprint of 3
million hectares these supply chains contribute 65% of the company’s total
impact on land. They are also the crops that are most often linked to
deforestation and conversion of natural ecosystems to farmland.

In a similar way, the group is targeting its initial blockchain efforts on areas
that have an ‘outsized’ impact: tropical forests. “We think this is especially
relevant for smallholders in warmer climates, who are often located next to the
planet’s most exceptional biodiversity, the most carbon rich forests and
peatlands and often the most endangered ecosystems, where their production
decisions have the most outsized impacts,” Wilcox explained.

In Indonesia, where the blockchain initiative was piloted, large palm
plantations are professionally operated and managed. Palm sourced from these big
players can be verified as deforestation-free relatively easily. This means
that, if a company wants to ensure its supply chain isn’t linked to
deforestation, sourcing from a big player can be a simple answer.

Unilever aims to hit zero deforestation by the end of next year / Pic:
GettyImages-Richcarey

However, this approach carries a number of drawbacks in terms of the social and
economic development of smallholders. In a country where 40% of palm is produced
by smallholders, it also fails to tackle deforestation and would simply result
in the development of a two-tier market. If deforestation in countries like
Indonesia is to be addressed, smallholder inclusion is paramount.

Unilever believes that its use of blockchain ‘will be transformational for
smallholder inclusion’, Wilcox told this publication outlining three key points
that will support engagement.

Firstly, the sustainability expert explained, use of blockchain establishes
‘location as a commodity attribute’. “Every unit of material that Unilever buys
and tracked with a blockchain solution could be traced to a specific point in
space and time. Ensuring smallholders are visible is critical so with our
suppliers and partners we can accelerate and scale up our work on smallholder
inclusion in our sourcing footprint,” Wilcox said.

GreenToken by SAP also helps establish ‘sustainability as a journey’, he
continued. “We recognise that it can be quite difficult for many smallholder
farmers to meet the rigorous demands of most sustainability standards. Huge
investments are necessary and smallholder farmers and local governments might
lack the resources required to aid this shift quickly. Indeed, Unilever already
runs some of the largest programs in the industry to help smallholders attain
sustainable practices.

“This ‘virtual segregation’ enabled by blockchain, and paired with first-mile
traceability data, can capture information about the smallholders’ farming
practices and environment to show the effort and progress made by smallholders
towards sustainability. Reflecting reality, smallholders will be able to show
the improvements they’ve made on a ‘scale’ instead of a yes/no option – which
will help to bring sustainable transitions into reach for many more
smallholders.”

It also gives Unilever the tools to incentivise continuous improvement, which
Wilcox said can be a challenge even for smallholders who have achieved
sustainable certification. “Once a producer becomes recognised as sustainable,
there is little incentive for them to continue to progress and adopt further
sustainable practices, for example to sequester more carbon or protect more
biodiversity than they needed to satisfy the minimum requirements.  The tokens’
ability to convey data on a ‘scale’ of improvement enables measurement and
therefore the potential to better incentivise improvement and positive impact,”
he detailed.

New digital tools can help companies like Unilever onboard smallholders on their
sustainable procurement journeys / Pic: iStock


AN INTEGRATED DIGITAL AND PHYSICAL ECOSYSTEM

While Unilever sees great opportunity in GreenToken by SAP, blockchain
innovation and adoption alone can only get the company so far towards its
zero-deforestation target. Unilever is developing a data ecosystem that goes
beyond any one solution to drive change, the digital sourcing expert told us.

“While we think this technology is transformational… we recognise that
blockchain commodity tokens on their own cannot change conditions on the ground
or directly influence farmers’ decisions. This is why Unilever is building a
suite of technology solutions with different partners, designed to all be
complementary to each other and to interact with a data ecosystem.”

Unilever has worked with SAP to design GreenToken to accommodate different first
mile traceability systems. The group is also working with Orbital Insight and
other partners on anonymised device geolocation signals. “We are developing an
appropriate framework and technical infrastructure to leverage this technology
at scale in diverse commodity geographies that would plug in to GreenToken’s
solution and make generating the location data on the tokens much lower
friction,” Wilcox explained.

The blockchain data will also be integrated into Unilever’s satellite monitoring
systems. “Once we receive tokens with location data, we will be able to
integrate them into our geospatial platform which has Google Earth Engine at its
core.  This means that we can cross reference the origins of a commodity against
sustainability impacts and relate this to our relationships with suppliers on a
granular volumetric basis.

“In short, as the data ecosystem on our geospatial platform is updated and
becomes richer, we get an increasingly clearer idea of the environmental impact
of our sourcing and actions we can take to help protect and regenerate nature. 
The work in this space is evolving incredibly rapidly, and we are actively
collaborating with others such as through the Forest Data Partnership we’ve
launched with USAID, UN FAO, WRI, NASA and Google to continue to accelerate
research in this space and align action based on the data.”

Alignment with suppliers and other stakeholders on the ground also remains key,
Wilcox stressed. This ‘tech stack’ must be in support of engagements with
suppliers, jurisdictional approaches, and communities. This, Wilcox explained,
is an area ‘where our teams invest enormous time and resources’.  “This
technology has the potential to support those actions by making the information
about origins available to downstream users.”









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