Can blockchain alone guarantee traceability in our food system?

by Arthur · April 4, 2023

Chiara Corbo, Filippo Renga are directors of the Smart AgriFood Observatory at the School of Management, Politecnico di Milano and University of Brescia, Italy. Dana Bonaldi is coordinator of EU-funded projects at Digital Innovation Observatories, Politecnico di Milano.

The views in this guest article are the authors’ own, and do not necessarily represent AFN’s.

In 2021, we investigated the possibilities of blockchain for the agricultural industry. At the time, many agricultural businesses wondered about the real benefits of the technology. Can blockchain guarantee transparency, traceability and immutability of data in the supply chain, or would it just be a trend?

After three years of research, in a world upset by deep economic and social changes, we rely on our data to try to answer such questions, starting with research carried out by the Smart AgriFood Observatory of Politecnico di Milano and Università degli Studi di Brescia .

Table of Contents

Blockchain’s contribution to the agriculture industry

The agri-food sector continues to show interest in blockchain and distributed ledger technologies. In 2021, agri-food was the fourth largest sector in terms of the application of such technologies, accounting for 6% of total pilot and operational projects.

Europe has the highest concentration of projects (28% of 106 projects identified), followed by Asia (17%) and the Americas (16%).

There are four main reasons why agricultural and food companies adopt blockchain technology:

1. Objectives relating to commercial and marketing opportunities

In 54% of the 106 worldwide projects we analyzed, blockchain is mainly chosen to exploit commercial and marketing opportunities. Since blockchain has been the subject of media hype, many companies are using it to try to demonstrate to consumers transparency and traceability information about their products. The ultimate goal is certainly to get a larger share of consumers, who are increasingly interested in food quality and traceability. In addition, some digital instruments that can enhance the user experience (especially QR codes and NFC tags) are used with a communicative purpose.

2. Measures related to the efficiency of the supply chain

Blockchain’s characteristics of immutability and transparency are used to improve coordination between supply chain actors by increasing the visibility of information and subsequently the efficiency of the entire supply chain (47% of projects analyzed).

3. Goals related to sustainability

Environmental and social sustainability is becoming more and more relevant, according to 26% of the projects (up 2% compared to 2020). In most of these cases, companies try to keep track of and make their sustainability practices visible.

4. Objectives related to food safety and combating counterfeiting

Another use of blockchain concerns food safety objectives (13%), making product recall procedures more efficient and effective, especially in the large-scale distribution sector. There are also applications related to anti-counterfeiting (11%); blockchain allows stakeholders to keep track of data and its modifications over time, making overwriting particularly difficult.

It is important to highlight the number of projects aimed at improving payment and financial transaction processing, which represented only a residual part of previous projects and today represent 11% of the analyzed cases.

How blockchain can benefit the agrifood value chain

Despite its increasing diffusion, blockchain’s benefits for the agricultural industry are not always clear to users, and there is not a unanimous opinion on them. According to a survey conducted by the Smart AgriFood Observatory of 1,034 consumers, only 6% have heard of blockchain applied to the agrifood supply chain; most of these (60%) do not know this technology at all. Among those who are familiar, only 51% believe that it can provide more reliable information and only 45% believe that it can guarantee greater safety for the products.

Transparency, immutability and sharing of data throughout the supply chain are considered the main advantages of this technology, along with the speed of finding information about each product, especially in the case of food recalls. On the one hand, all this is allowed by the specific consent mechanisms of each platform, which make it impossible – or at least very difficult – to change the data entered. On the other hand, it is enabled by the distributed ledger that makes data available on a continuous, real-time basis. These characteristics have a further effect of increasing consumer trust or, more generally, trust in whoever has access to the data. That said, questions remain as to how much this can lead to effective commercial benefits for businesses.

Does blockchain alone guarantee traceability?

Another important element that emerged from our research is that blockchain technology itself cannot guarantee the traceability of a product. Instead, it must be placed in a wider context of technological solutions in the service of traceability.

Considering the phases that characterize the traceability process – identification, data collection, data registration, data management and processing, and finally transfer and communication – blockchain is mainly used in different ways in the second part of the process (data registration, management and transfer).

Moreover, while it guarantees that the entered data has not been altered, this technology does not confirm that the data is truthful and consistent with the reality to which it refers. To solve this problem, more and more solutions are integrating blockchain with other technologies such as the “Internet of Things” (IoT), although this is also still a developing field.

Blockchain and agrifood

Utilizing blockchain’s full potential around traceability requires us to think of the technology as a tile to be integrated with other available solutions.

Mapping of traceability-focused technological solutions carried out by the Smart AgriFood Observatory shows that 18% of 157 mapped solutions offered in Italy are enabled by blockchain, which marks an increase of 59% compared to 2020. Furthermore, it is important to point out the growth of mobile apps (25 % of solutions, up 65% compared to 2020) and IoT (16%, up 47% from 2020), in many cases used in combination with blockchain.

Blockchain is undoubtedly becoming a very important technology for traceability, in the food industry and elsewhere. There are still doubts about the real benefits it can bring to the agri-food actors along the supply chain, but research shows that the number of blockchain projects is increasing, especially in sectors such as animal products, coffee and cocoa and beverages.

As usual when dealing with an innovative technology, it is important that agricultural companies do not rush to implement blockchain solutions without nurturing the right skills in their teams, in order to avoid the “trend effect” with a subsequent spread of resources that in many cases are inefficient. Also, understanding how to integrate blockchain technology into existing technology systems is crucial to take full advantage of its potential.