Executive Summary
The world is moving towards efficient, clean, and affordable food services. Among its sustainable development goals, the United Nations lists supply chain sustainability as an important course toward sustainable development. The distributed ledger technology allows tracking activities in the entire supply chain in just in time. Decentralized blockchain technology promotes reliability, accountability, transparency, traceability, and efficiency in the supply chain (Pournader, Shi, Seuring,& Koh,2020). The impact of blockchain technology has been felt in most parts of the economy with cryptocurrencies. Pilot tests have also been done in the supply chain, with companies such as Kroger, Unilever, Nestle, Dole, and Walmart presenting impressive reports. Blockchain was invented by Satoshi Nakamoto in 2008 through Bitcoin, which is an end-to-end cash system. Blockchain, hence, became the backbone technology of all cryptocurrencies. The shared ledger promotes sharing and transactions without altering transactions (MarketWatch, 2019). Despite continually expanding, blockchain has elicited much debate on its impact at the social and economic levels. This paper examines blockchain’s opportunities and possible threats when adopted in businesses, specifically in the supply chain. The paper examines Walmart’s pilot tests on Hyperledger Fabric to establish its success in promoting fare trade, efficiency, quality, traceability, and transparency.
Introduction
Blockchain was released to the public in 2008 as Bitcoin. Bitcoin is a peer-to-peer electronic cash. Bitcoin was aimed at curtailing the fraud of double spending associated with digital tokens. The risk of the multiplication of the tokens is that they can result in inflation. As a result, there was a true need to stop such spending without entirely stopping the use of digital coins (Marr, 2018). The success of Bitcoin created traction in its use in other areas, and companies worldwide have been running trials to harvest such efficiency. The blockchain non-altered shared ledger became a source of interest for companies using it in asset and stock management. Blockchain is highly malleable and can be designed to track almost anything in the organization. Bashir (2017) considers blockchain a paradigm of interconnecting nodes coordinating a specific goal. Others can consider a group of computers relaying information as one computer. Despite the interconnectedness, the failure of one computer cannot affect the entire system.
Blockchain promotes seamless transactions without central authorizations, as is common in most organizations. Whether a financial institution or an individual offsetting the transactions, the central authority is part of the chain. Jaikaran (2018) considers blockchain a system open to all the involved parties with permission entry. The chain can be private, public, or consortium. The selection of technology is need-based, and businesses can adopt each technology based on the level of access they need, permission, and operating futures (Jaikaran, 2018). Miners access public blockchains; they only need to follow the designed algorithm to mine or transact. The authority in blockchains is limited to an individual or an organization; they have a higher level of security. Private blockchains are common in companies’ databases and audits. Gem Health Network and Hyperledger Fabric are private blockchains (Lee & Pilkington, 2017). A consortium blockchain is an amalgamation of public and private blockchains. The authorization is discretion, based on blocks (Venkatesh et al., 2020). When selecting blockchain, companies should appreciate the needs. Walmart adopted Hyperlerger Fabrics to manage its supply chain, a pilot study that yielded mixed results but is still highly debatable.
Study Design
This study follows a two-step framework: ALiterature Analysis and a Case Study. The literature review analyses the historical application of blockchain in supply chain sustainability. It also establishes the current trends in blockchain applications. A keyword approach was used to select the material for analysis; the keyword includes blockchain technology, supply chain technologies, blockchain, blockchain-based supply chain, sustainable supply chain, blockchain-based supply chain, distributed ledger, Hyerperlerger, Hyperledger Fabric, Walmart supply chain. An ESG rating was developed to demonstrate the success of the technology. The second step is a case study analysis of Wal-Mart and IBM Food Trust. Based on its Food Trust program, IBM rolled out food supply chains to promote food chain safety and security. The program aims to shorten the chain’s operation time, minimize tracking time, reduce gas consumption, shorten the operation process, and promote efficient and effective resource planning (Venkatesh et al., 2020). The case study analysis is aimed at: demonstrating the impact of supply chain sustainability performance, the opportunities in blockchain technology, and possible risks associated with the technology.
Study Findings
Literature Analysis
The world is grappling with environmental, economic, and social sustainability, the three pillars of sustainability. As fostered in the UN Sustainable Development Goals (SDGs), sustainability calls for the effort of all stakeholders in the business, which is always problematic. They are based on the Environmental, Social, and Governance (ESG) ratings (Saberi et al., 2019). Among environmental factors considered in the rating include energy efficiency, utilization of resources, the amount of waste, and emissions ejected by the business (Saberi et al., 2019). The social paradigms are established in human rights and include workplace health and safety, diversity and equal opportunity, child labor, wage, and gender or racial gaps, all of which are part of human rights (Venkatesh et al., 2020). Governance is concerned with the company’s profitability and growth indicators. It involves corporate and financial analysis of an organization (MSCI, 2019). There is a strong link between the supply chain and the ECG indicators. It is evident that technology can influence ESGs whether positively or negatively.
Environmental sustainability arises from natural economic interaction and economy-nature interaction. This involves the initial phases of sourcing the raw material from nature and the later phase of manufacturing, where factors such as polluted materials are ejected into nature. According to Saberi et al. (2019), the United States Environmental Protection Agency (EPA) highlights that supply chains significantly influence the environmental footprint by 40-60% in the manufacturing and80% in the non-manufacturing sector carbon footprint. Sustainable environmental practices call for reversing the extremes and improving the world. The concept of a green supply chain was invented to abate the situation (Saberi et al., 2019). Blockchain technology has been identified as part of this revolution. The technology can be used to track and manage environmental emissions, resource management by tracking the path in the chain, and waste management (Kouhizadeh & Sarkis, 2018). According to Köhler and Pizzol (2020), IBM Food Trust can track and alert waste management deviations with many accuracies.
Social sustainability is a framework that involves social responsiveness within the organizations and to the communities they interact with (Venkatesh et al., 2020). Within the supply chain, the concept involves the stakeholders’ social-economic conditions and monitors human rights triggers across the processes. According toEpstein and Yuthas (2011), the case of Blood Diamond is an example of supply chain exploitation at the production level. The supply chain offers an immutable system ensuring exploitations are reported in time. It also generates and safeguards e-reports for transparency. By monitoring the entire supply chain, blockchain allows fast tacking and response to unethical practices, such as child labor, underpaid workers, human trafficking,
Economic stability is heavily dependent on governance. Economic sustainability is promoted by supply chain transparency, accountability, traceability, and, ultimately. Stability is essential for investment and boosting consumer trust (Nayak & Dhaigude, 2019). Good governance strengthens the supply chain by identifying bottlenecks in advance, promoting the chain’s health, and employing competitive strategies (Tan et al., 2020). Most supply chain failures emanate from challenges linked to governance. Information asymmetry, which affects transparency along the supply chain is a common phenomenon (Casey & Wong, 2017). Unreliable governance can cause an error because of the centralized transaction system (Venkatesh et al., 2020). Governance also influences investment decisions in the supply chain, transparency and accountability can be promoted mainly by huge investment, a risk that some leaders might not be willing to undertake.
Evidently, despite the supply chain’s self-regulatory nature, sustainable governance is responsible for corporate governance and behavior, which directly influence the supply chain’s behavior. Corporate governance is defined by organization ownership, board activities; ownership; and accountability (MSCI ESG Research, 2019). On the other hand, corporate behaviour is a product of leadership ethics that include a lack of accountability, an unstable financial system, corruption and instability; tax compliance, anti-competitive practices; financial system instability; and tax transparency (Hastig & Sodhi, 2020). Since blockchain technology has been linked to improved governance through transparency and accountability, it will directly influence the supply chain through three key parameters: it promotes transparency through just-in-time tracking, accuracy, and permission data (Yiannas, 2017). Blockchain will streamline information to the stakeholders in a symmetric manner since all stakeholders coordinate in information sharing. Finally, blockchain has a reliable database that can store historical data, which is essential for communicating with stakeholders, including investors (Venkatesh et al., 2020). Last, the historical performance of supply chain participants, such as on-time deliveries or payments can be stored on the blockchain, which can be further used to establish trust and collaborations among stakeholders (Tan et al., 2020). Hence, blockchain technology has a positive impact on supply chain governance. From the discussion, companies that have implemented the technology have a higher ESG rating than those struggling to meet the demands.
IBM Food Trust and Walmart Hyperledger Fabric
Walmart has often relied on its traditional supply chain, which has been considered opaque and challenging to track in case of food contamination. Walmart has experienced many food-related scandals, from E.coli, and Salmonella to infant formula mild. Each time, health officials have to track the source of contamination, bringing the entire supply chain to a halt and sending customers away. In such cases, Walmart suffers from poor brand image, loss in investment, customers turning away, and losses along the retail line. An option of tracking the supply chain to reduce the number of days while tracking became inevitable.
Pilot Projects
The project was launched in China, and the pork was tracked from the pens to the kitchen. On the other hand, Walmart started tracking mangoes from South America to North America (Kshetri, 2018). The data collected across the supply chain are realtime information on the food, factory, batch number, processing, and transportation details. In the pork and mangoes tracking, Walmart realized a positive outcome when the tracking time was reduced to 2.2 seconds from over a fortnight ((Kshetri, 2018). According to Mearian (2018), Walmart rolled out a large-scale implementation of Heperleger Fabric technology following the success of the pork and mangoes. The tracking included fresh leafs strawberries, yogurt, chicken, and baby foods in this rollout. Suppliers were encourage to capture and load the data in the blockchain, which was made available to all permissible stakeholders (The Leadership Network, 2020). The result was an elevated trust among the stakeholders including the consumers.
The effect of Walmart’s blockchain technology on food can be examined on the basis of food waste management, safety, and food health and nutrition. In 2005, Walmart set a 25% waste reduction by the year 2008, under the name Zero Waste. The waste targeted included farm waste, processing waste, and factory waste among others. Despite the reduction in plastic waste, Walmart did not realize a reduction in food waste by the year 2015. The company; therefore, launched a tracking system to accurately measure the waste management progress. In 2016, it developed Zero Waste for Future, a holistic approach that targeted the entire supply chain from the farm to the consumer. IBM Food Trust helps Walmart track its waste even at the recycling centers (Kouhizadeh and Sarkis, 2018). Based on its 2016 report, the company reduced its waste by 15.6%, making Walmart the best food management store in the world (Wal-Mart Global Responsibility Report, 2019-2020). Its diversion rate of food waste from landfills has also surpassed 70% based on the report.
Walmart has used blockchain technology to promote food safety, health, and nutrition. According to Köhler & Pizzol (2020), the Fabric allows consumers and suppliers to have full information about food ingredients, the farm, the possibility of contamination, and expiry dates. Walmart has involved h IBM and Tsinghua University to enhance traceability and transparency in the food chain. Consumer safety, therefore, is guaranteed. Data from CSRHub Ratings shows that, Walmart shows that Walmart ESG ratings have been on the rise since its partnering with IBM. This is a demonstration that Walmart has benefited from the blockchain technology with regards to ESG goals.
Block Chain Technology Challenges
The literature and case studies have demonstrated the positive impact associated with blockchain technology. Despite the positive outlook, blockchain still has some inadequacies. The legal environment of developing technologies is uncertain. Because a gradually evolving technology, Walmart cannot be certain of future legal iof mplications of the Fabric (Ledger Insights 2019). The security of distributed technology is incomparable to POW and has to rely on crypto tokens, which are also exposed to constant market fluctuations. As the name suggests, blockchain technology in Fabric is permisssioned; hence, the level of transparency depends on the stakeholders with the entry. The cost of implementing and running the technology is high (Lacity & Van Hoek, 2021). This cost involve experts, who install, monitor, and report. It also involves training all the stakeholders on the use of the new technology; some of which may not be ready for the new changes. Petersen et al. (2017) also argue that the success of Walmart’s Fabric depends on the cooperation of all the stakeholders along the chain. In case some members feel, they are not motivated to embrace the change the system might collapse. Finally, the success of Fabric is dependent on internal factors. Any external factor, such as vandalism, ship submerging, piracy, or fire will disrupt the chain momentarily. The assumption is that there will be no unexpected forces for the success chain. Based on the limitations, the key recommendation includes Walmart should gradually implement the blockchain technology instead of the assumption that the technology will seamlessly solve the inefficiencies in the chain. The company should consider iintegrated approaches to act as the backup of the blockchain.
Conclusion
For companies willing to take risks, blockchain technology creates this opportunity. The technology is rather new but has shown some potential. It has proved relatively secure and stable in cryptocurrency trading and even in other management portfolios. It has been linked to improved transparency, efficiency, traceability, and trust among stakeholders. It achieves milestones through its distributed ledger, which is immutable and which transfers realtime data. Blockchain technology is important to stores such as Walmart because of its fast-tracking system, which reduces lag times while tracing inefficiencies.
While analyzing supply chain sustainability, blockchain in the supply chain, and supply chain management, the literature demonstrates blockchain technology is highly a researched domain. Further, the case study has proven its application in a real-life situation beyond the crypto market. The partnership between IBM Food Trust and Walmart has demonstrated some of the effectiveness of the technology, while also eliciting some concerns. Blockchain technology has been linked to sustainable business growth across the ESG frameworks business. It has also been considered secure, a competitive advantage tool, and socially responsive. Based on the ESG rating, Walmart has managed to score higher ratings since implementation. On the other hand, blockchain is an evolving technology that still present many uncertainties to the stakeholders. Its cost of implementation is also a concern. More research is also needed on regulatory concerns surrounding the technology.
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