Palm oil is a key ingredient in everything from soaps and shampoos to ice-cream and margarine. Farmers today produce more than 73m tonnes of it each year – more than double the amount of 20 years ago. But the rapid growth of palm fruit plantations in Indonesia and Malaysia has caused major deforestation and human rights issues.
An industry-wide shift to sustainable palm oil is therefore urgently needed. Palm oil supply chains are long and complex, however, spanning multiple traders, storage tanks, pipelines and oil tankers. It’s difficult and expensive for companies to establish fully segregated supply chains for sustainable palm oil, so batches that have been produced sustainably are often shipped in bulk and commingled with conventional palm oil.
By the time the oil is part of a tub of ice-cream or tube of toothpaste, the origin information may have been lost or hidden – a problem that the software firm SAP aims to solve with a blockchain-based tool called GreenToken.
“It’s really hard to get supply chain transparency with these raw materials,” says James Veale, co-founder of GreenToken by SAP. “With a finished product – something that comes from a factory to you – it’s easy. A tin of soup has a barcode [so] … you can probably figure out when it was made, the batch date. But you can’t do that with raw materials such as crude palm oil.”
GreenToken brings this kind of “barcode’’ transparency to the near “first mile” of the supply chain. When a palm oil farmer’s fruit arrives at the mill for processing, a digital token is created at the gram level. “One kilo of palm fruit becomes a thousand tokens,” says Veale. “Each of those tokens has the farmer’s ID, the date the fruit arrived, and the RSPO [Roundtable on sustainable palm oil] certificate.”
These tokens effectively accompany the palm oil as it is mixed, refined and transformed while moving through the rest of the supply chain. This is achieved by using so-called mass balance accounting, a chain of custody approach that is often used to trace the flow of materials through complex production and supply chains by measuring inputs to a production process and outputs. In the case of palm oil, it can ensure that the inputs of sustainable palm oil match outputs at each stage. GreenToken uses blockchain technology to create an unalterable chain of custody that prevents double counting of the tokens, which can only be “spent” once by each supply chain actor. This means companies can tell precisely what percentage of palm oil they’ve purchased from a sustainable source and track it to the end consumer product.
In a successful proof of concept, the consumer goods giant Unilever recently used GreenToken to track and verify more than 188,000 tonnes of oil palm fruit from plantation to end product. In a single click, the company could see data on palm oil purchasing that affected huge swathes of land and forests.
The data GreenToken offers can also be used by companies to measure their performance against sustainability targets and to make more informed decisions about their supply chains. As the blockchain element of the tool automatically keeps track of where raw materials originated from and where they ended up, a report drawn from the blockchain ledger can be used to audit sustainability claims too. “We have direct traceability right back to individual mills, and hence individual deliveries from farmers,” says Veale.
Firms along the supply chain only need an internet connection and browser to access the GreenToken network. It is also industry-agnostic and works for various types of material flows – such as waste plastics, where it can be used to determine the proportion of recycled plastic in circular recycled products.
Chemical recycling of plastic waste produces pyrolysis oil (sometimes known as synthetic oil), which is similar to conventional crude oil. But as with sustainable and non-sustainable palm oil, commingling often occurs between the two types of oil on their journey to becoming new plastic packaging or products.
GreenToken provides certainty that the plastic that companies are using really did come from waste sources. Different coloured tokens are used to identify the material’s origin – for example green for recycled materials and red for conventional. By comparing the ratio of the two, customers can get instant insight into the recycled plastic content of their products. “It’s really proving that … circular plastic really is circular,” says Veale.
By enabling companies to track not just what goes into their products, but what happens to materials once these products reach the end of their lifespan, GreenToken can also help the development of a circular economy.
The technology now needs to be scaled across the plastics recycling industry, as well as supply chains for palm oil and other agricultural raw materials. It could also be used to trace the origins of metals and ores, as well as emissions-free “green” hydrogen. This could help companies from a wide range of sectors to ensure that the commodities they source respect people and the planet – something that’s all but essential in an era of increasing regulation and consumer concern about companies’ sustainability credentials.
“We’re moving to a world of mandatory reporting, where investors, regulators and consumers are all looking for progress against the goals companies have made,” says Natasha Pergl, global circular economy lead at SAP. “Technology such as this allows companies to actually demonstrate that they are delivering against the ambitious sustainability commitments they’ve made in a very practical, actionable way.”
Find out more at sap.com/sustainability
