There is no way around Blockchain

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SUMMARY

Blockchain is the link that businesses have been missing in order to build a complete digital infrastructure, which can ensure efficient communication via the Internet as well as authentication and traceability in relation to origin, while simultaneously protecting themselves against forgeries, fencing and illegal copying. The technology is applicable everywhere, but in particular in connection with products whose production chain involve a number of players. At the same time, blockchain will become crucial for the green transition, as businesses will be able to document their products’ carbon footprint via technology and thus prove that they meet, for instance, the UN’s Sustainable Development Goals. When complete traceability turns into a competitive advantage, it will most likely only be a very short time span before businesses will no longer be able to sell a product if they cannot document its origin. For businesses, this leaves no alternative but to get on board.

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The word “blockchain” can make even seasoned business leaders’ heads spin. Many will most likely have heard of the technology, but what does it actually entail? Is it not related to cryptocurrencies? And is it really something businesses will benefit from?

“Yes, and yes – and before we know it, there will be no way around blockchain technology for a great number of Danish businesses,” Jan Damsgaard, Professor at the Department of Digitalization at CBS, states. He has been heading the project “Advanced Blockchain in Danish Design” (ABCD), financed by The Danish Industry Foundation and carried out in collaboration with the Trade Association within The Confederation of Danish Industry and the Lifestyle and Design Cluster.
 

THE INTERNET’S MISSING LINK

The man behind the modern Internet, Tim Berners-Lee, has said that blockchain completes the work he started when he invented the World Wide Web, because among other things, the technology enables the protection of value and creative products. And this is greatly needed, Jan Damsgaard points out.

“Since it took off in the mid-1990s, the Internet has been the ‘Wild West’ in terms of copying and disseminating content. In principle, all can copy, clone and change digital content, and prosecuting the numerous violations of copyright, which happen all the time, is difficult. This is a problem for consumers as well as the designers, researchers, developers, artists and other people who see their products and ideas copied without being paid or recognised as creators of their products,” he elaborates.

However, counterfeiting is not only a problem in the digital world. For instance, cheap pirated copies can undermine the measures companies take to ensure that their brand is sustainable and does not put a strain on the environment, nature or the climate and that their products are not produced by using forced labour, because pirated copies can be produced much cheaper when there are no such considerations involved. Furthermore, pirated copies can make a well-renowned product less valuable, as the market is flooded with fake copies. This is a huge problem regardless of whether it concerns a design chair, cold-pressed virgin olive oil or diabetes medication.

“In many ways, blockchain is the missing link that businesses have needed to build a complete digital structure that can ensure fast and efficient communication via the Internet, document authenticity, traceability and origin, while simultaneously protecting their products against forgeries and illegal copying,” Jan Damsgaard states.

In a few years, it will most likely be all but impossible to sell a product if, for instance, you cannot prove that it lives up to the UN’s Sustainable Development Goals.

- Jan Damsgaard, Professor at the Department of Digitalization at CBS
 

CBS IS DEVELOPING BLOCKCHAIN PROTOTYPE

The purpose of the ABCD-project is to help Danish trade and design businesses see the possibilities embedded in blockchain. And according to Jan Damsgaard, it has been amazing to experience how fearlessly the companies have thrown themselves into testing the technology. During the programme’s two-year run, as many as 200 companies have tested the blockchain prototype developed by CBS programmers. A number of these companies have taken it one step further and implemented the blockchain in their business model, including the manufacturer Roccamore, who sell hand-sewn leather shoes made from hides from Danish cows – and the company’s blockchain documents every link in the production chain.

All Danish cows are earmarked, and their individual numbers lead to a lot of information within an IT system, where among other things, you can find out where the cow was raised, what it was fed, and how much methane it released. When the cow is slaughtered, its skin is tanned and the amount of water and chemicals used in that process is stored in the blockchain alongside the information about its life conditions. At the same time, the earmark-number is branded into the tanned hide, which will then be shipped off to Germany, where it is dyed. Here, the information about the chemicals used will also be added to the blockchain. Next stop is Italy, where the hide is cut into smaller pieces, used to make hand-sewn shoes. Then soles and heals are added and the Italian company’s information about its use of resources is also added to the blockchain.

The finished shoes are then returned to Denmark, where Roccamore mounts a unique QR-code on each individual shoe. When consumers scan the code, they will be informed that this is a genuine Roccamore shoe, and they will be able to see all the gathered information from the entire production chain, including the collective greenhouse gas footprint from the production and the transportation between each link in the production chain.

“It is not possible to forge or change this information, and it will follow the shoe throughout its lifetime. And because a Roccamore shoe is hand-sewn and made from the best materials, it will most likely have a long life, and there will probably be an after-market. And in the long run, we will see that when a pair of shoes are sold, the blockchain will be updated with information about the previous owner and the current owner – in much the same way that it is registered on your bank account when you, for instance, use MobilePay,” Jan Damsgaard explains.

He mentions the furniture manufacturer Wehlers as another example of a company who opted for the extended blockchain solution in the ABCD-project. Among other things, Wehlers use recycled sea plastic in their chairs, and again, it is possible to find all the information on the production of each individual chair in the blockchain. Even the name of the village next to the sea from where local inhabitants have pulled out old fishnets that are then used as part of the chair seat.

The aforementioned after-market is one of several reasons why Wehlers have chosen to use blockchain technology. The company practices what is popularly called second-generation sustainability, where rather than relying on one’s product being recycled in the future, they make sure that their product is extremely solid and its design long-lasting. Thus, today, a Wehlers chair is built to last for at least one hundred years, and during its lifetime, the chair will have 5-6 different owners. And the blockchain will then help verify that it is indeed a genuine Wehlers chair, and the resources used, the climate impact, the owner history, among other things, will be accessible.

IS THE T-SHIRT REALLY ORGANIC?

Similar information is far from accessible in terms of most products on the market today. And it is hard for customers to know if a company’s praise for their own sustainability holds water. Is the tree used in the garden furniture really from an FSC-approved plantation? Is the T-shirt really made from organic cotton? And are the apples in the supermarket really organically grown? What they tell you at the store is one thing, but how do we, as consumers, know whether it is also correct? It may very well be that any given unit along the production chain has cheated and that the stores merely reiterate a claim that something is organic. If, on the other hand, the products were connected to a blockchain, the entire production chain would be accessible – from producer or manufacturer to store – and then the information would be indisputable and possible discrepancies would be more easily spotted.

“The blockchain technology can be utilised everywhere, but in particular in connection with products whose production chain includes a number of independent players. This is true of among others, the fashion and textile industries and manufacturers of cars, pumps, lamps, vacuum cleaners, computers, mobile phones … I could go on forever,” Jan Damsgaard says and then continues:

“Take the mobile phone. Personally, I would think twice about buying a phone unless I am absolutely certain that it has not been produced with the use of child labour. For me, it is not enough that the sales assistant in the shop tells me so. I want to have available information on the entire production chain, so that it can be confirmed that none of the many manufacturers who contribute to the making of the phone use child labour. And in addition, I want to know its climate footprint, so that I can choose the phone that contributes the least to global warming.”
 

SUSTAINABILITY SHOULD BE DOCUMENTED

According to Jan Damsgaard, blockchain will play an important part in the green transition, because the technology supports the companies who take sustainability seriously, which more and more companies do these days. Because consumers and the law require them to – and because they take co-responsibility for the climate situation.

“Increasingly, the companies who are not on top of their production and their responsibility toward the climate, social aspects, the environment, tax legislation, best practices, equality etc. risk being rejected. In a few years, it will most likely be all but impossible to sell a product if, for instance, you cannot prove that it lives up to the UN’s Sustainable Development Goals,” he elaborates.

But when will blockchain be standard in Denmark? Naturally, the CBS professor is not able to provide an unequivocal answer. However, he is convinced that it will only be a short time span from the moment when complete traceability becomes a competitive advantage to shops refusing to sell a product unless they can account for its origin. And as for companies, it is a question of not getting caught with their trousers down when that scenario becomes a reality, or when it becomes a legislative requirement or a clear expectation from consumers.

The ABCD-project was concluded in the autumn of 2021, but Jan Damsgaard hopes that it will continue in the years to come, supported by new research grants. Because there is still much to do in terms of getting Danish companies to use blockchain. And in addition, they would also like to be able to focus on developing solutions for specific lines of business.

“In the first phase of the project, we made prototype solutions for individual companies, but this will prove much too laborious in the long run. There is a need for common business solutions, which make sense, because businesses typically operate with relatively similar value chains and production conditions. Furthermore, this also speaks to the Danish co-operative idea, where you generate value together,” he concludes.
 

WANT TO KNOW MORE?

Please contact Professor at CBS, Jan Damsgaard for further information: jd.digi@cbs.dk

Read more about the project, “Advanced Blockchain in Danish Design”, which is financed by the Danish Industry Foundation and find company cases here

In November 2021, CBS Professor Jan Damsgaard published the book, “Blockchain Business – Ægte, sporbart og uerstatteligt”, at DJØF Publishing (in Danish). The book illustrates the possibilities embedded in blockchain and among other things, zooms in on cryptocurrencies and their value. The book is aimed at Danish heads of companies.