Both Hydro and Rio Tinto announced recently that they are launching blockchain initiatives. Hydro’s customers will be able to ‘trace the metal from the factory gates until it reaches the customer’ using the auditor DNV’s ‘Tag, Trace Trust’ solution. Rio Tinto is going it alone with the launch of START, which they describe as a ‘nutrition label’ for responsible aluminium. In not unrelated news, members of the European Parliament have just backed a proposal for a supply chain due diligence law covering human rights, the environment and good governance.
Hydro and Rio Tinto are both focussing on sustainable aluminium, to give the consumer confidence that their purchase is helping to reduce climate change. Hydro’s collaboration with DNV brings extra assurance. Because, whilst the blockchain ensures that data cannot be altered as it is transferred from one member of the supply chain to another, someone has to verify that the information going into it is correct. This is the role of the auditor. DNV can verify the quantities and sustainability credentials of the materials as it enters the blockchain.
The claims of traceability and independent third party assurance sound rather like those made by the Aluminium Stewardship Initiative (ASI), the sustainability scheme for responsible aluminium. Hydro and Rio Tinto are both members of ASI. So why the need for a blockchain solution at all? Well, these initiatives allow customers to demonstrate an unbreakable chain between their operations and the ASI certified sustainable smelter, without having to become a member of ASI in their own right. So Hydro in particular, via its collaboration with DNV, itself an ASI accredited auditor, is offering an attractive option to its customers.
In general, sustainability schemes have difficulty tracking volumes of certified material passing from one member to another. On occasions (in other sectors), fraud has occurred with purchased material entered into a company’s accounting system as ‘certified’ when it is not. Blockchain offers a good solution, if all members of the scheme are willing to opt in. But blockchain isn’t just about quantities of material; it can also be used, in conjunction with auditing, to guarantee that participating companies are responsible actors. In the aluminium example, an auditor could verify the environment, social and governance performance of all members of the blockchain.
Now there are indications that verification of customers and suppliers will no longer be a voluntary activity for companies in Europe. The European Commission is expected to table a supply chain due diligence law this year, with the European Parliament already urging the widest environmental, social and governance scope. Sustainability schemes will still have an important role to play in setting standards. But it is clear that there are new ways of overseeing supply chains, as shown by novel developments in the aluminium sector.
Published: 11 March 21
