NZ startup wins 3.9m XEM grant to fight slavery with blockchain

Posted: 17 July 2018 6:09 pm
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Most businesses never get a transparent overview of their supply chains, letting forced labour creep in.

To date, the forefront of technological innovation in sustainable and ethical goods is a label. This label can be put on goods, so customers can look at it and feel good about that item.

It's probably time for an upgrade.

The problem

The Origins platform is one more supply chain blockchain platform among many. Unlike most, it's not wasting time on an ICO and instead picked up 3.9 million XEM, through the NEM community fund, with the community voting to accept her proposal.

At the time of the initial proposal, it was worth about US$900,000, but now it's closer to US$700,000.

Also unlike most, Origins is being created by the founder of a relatively small New Zealand-based clothing company called Little Yellow Bird. It was founded in 2014 by former military supply chain manager Samantha Jones in 2014 to design, manufacture, ship and sell socially and environmentally sustainable clothing.

Jones got some first-hand experience of the technical limitations of sustainability over the years, with the fundamental problem being that it always ended up as just another logo and more words that customers would have to take at face value.

"Most people actually know very little about most of the products they use," Jones said in her proposal. "Fashion garments generally travel through vast networks of suppliers, retailers, distributors, transporters and storage facilities yet in almost every case these journeys remain an unseen dimension... Without understanding the origins and impacts of the clothes we purchase, we inadvertently buy into a system that depletes natural resources and reinforces the cycle of poverty inherent in garment producing countries.

"Third-party verification and rating systems exist. All are costly for brands and provide little benefit in terms of validating the authenticity of the supply chain. This has also resulted in mass misinformation and confusion for consumers. Most third-party verification systems are also unable to mitigate against "greenwashing" and the outcome of any certification is often just a printed label on packaging with no ability for the customer to validate the claim. Certification schemes in regions with levels of high corruption is also a major flaw in the current system."

According to Jones, the apparel industry accounts for 6.7% of the world's greenhouse gas emissions, with more than 50% of that coming from just three phrases: Fibre production (15%), yarn preparation (28%) and dyeing and finishing (36%).

More insidiously corruption, greenwashing and the profit potential of forced labour can undermine the best efforts, while the many facets of manufacturing and logistics make it extremely hard to avoid problematic practices at some point of the supply chain. Even if a brand wants to operate with the best intentions, there's often little it can do to actually verify the ethical origins of its own goods and it simply can't verify what really happens throughout the supply chain.

Ideally, the system also needs to benefit the actual individuals who make the clothes and produce the materials, letting fashion brands more directly and reliably invest in actual communities.

"Most fashion brands do not have access to this information and have little knowledge about where and how their products are made," Jones says. "Most do not pay their workers a living wage or ensure the safety of the people that make their clothes. We want to change this, first by targeting our eco fashion community who we expect to be early adopters, followed by targeting major fashion brands who are actively trying (and failing) to solve these issues internally.

"Many eco fashion brands want to make investments into the communities that produce their raw materials. [But] it is currently difficult for even the most transparent brands to trace the origins of their raw materials past farm or cooperative level. We invest in the cooperatives where we source from, this totals 40,000 farmers. It would be mutually beneficial for both brands and individual farmers to be able to link the origin story to a specific farm, using NEM and Apostille [NEM blockchain notarisations]."

The solution

Jones highlights several features that an effective solution needs. The main one is a network that can transparently and reliably track goods and finished products across each stage of the journey, verifiably ending up right at the point of purchase so customers can accurately compare brands on social and environmental impact, right there in the store.

Instead of just relying on (or ignoring) some kind of tick of approval, the goal is to let customers compare different items based on actual impact, right there in the store before making a decision. It also gives merchants more insights into the options available and lets them shift to more ethical or sustainable suppliers based on their own preferences or in response to customer demand.

The complete system aims to bring in all stakeholders by allowing companies to actually start calculating the commercial value of ethical clothing and environmental sustainability based on how customers vote with their wallets and take action accordingly. Starting from the consumers themselves, this can extend down the supply chain as each company (the clothing store, the logistics firm, the manufacturer, the raw materials suppliers, etc) respond to growing consumer demand for ethical and sustainable clothing.

In a more mercenary sense, it might also be thought of as a cost-effective compliance solution for businesses that want an answer to upcoming modern slavery reforms in Australia and elsewhere.

This kind of shift has been the intended result for a while, but when you look at how limited current systems are, it's probably no surprise that it hasn't really eventuated.

It takes a village

Along the way, the NEM community is getting something of an inside look into what it takes to develop a blockchain platform, with the total funds only being allocated over time based on the project milestones that are achieved.

  • The first 11.1% is set to be distributed after completion of full proof-of-concept documentation and network architecture
  • The next 22.2% is for the presentation of proof of concept and the onboarding of team members
  • The next 22.2% is for the development phase, including starting development of the web app, full proof of concept, more recruitment and ongoing development
  • The next 22.2% is for the launch and bringing on the first customer use case, sponsoring events, onboarding a sales team, marketing across New Zealand and trialling at least 10 brands on the Origins platform.
  • The final 11.1% is for a job well done, with integration and adoption from at least 2 ethical fashion brands, presentation at the Copenhagen Ethical Fashion Summit and participation in NEM awareness events.

"The supply chain industry is one of best areas to develop a real world blockchain use case and we are excited to support Origins in utilising the NEM blockchain technology which will be a great showcase globally," said NEM expansion director for Australia and New Zealand, Jason Lee. "This also aligns with NEM's aim to support social impact project like these across the region."

It's probably no coincidence that this solution is emerging in New Zealand. It's estimated that more than half of the world's forced labour victims are in the Asia Pacific region. Australian and New Zealand businesses naturally source more products and services from nearby, and so inadvertently end up being more at risk of finding slavery somewhere in their supply chains.

As a result, many companies operating in Australia have made outsized investments in supply chain monitoring solutions. But without a major step forwards, which simultaneously gives brands more transparent oversight of their own supply chains while letting customers vote against forced labour with their wallets, the results might be limited.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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