Innovation

RSBN is the result of the research conducted by John Gabriel and his team at IBM. In 2016, Mr. Gabriel and his team were told by IBM to research blockchain technology while it was in its infancy to see how it could be used in future projects. Originally designed to mitigate the harmful sourcing of cobalt, RSBN is now looking to be implemented in other areas of the supply chain. Cobalt mining originally had extremely poor labor conditions even including child workers in some mines. Seeing as cobalt is an essential element in almost all modern technology, there is an obvious reason why sourcing had become unethical. RSBN was made to ensure that the companies buying this cobalt are doing so through ethical sources, while not giving up their confidentiality about their source.

Confidentiality was integral in the development of RSBN because of the standards of the supply chain industry now. It is standard for companies to not release where they are sourcing materials from and competition only gives them more incentive to do so. To counteract this, RSBN utilizes blockchain technology to ensure that all of the sourcing of materials is ethical and provides an exclusive benefit of confidentiality to these companies due to the use of the blockchain. RSBN technology is now being used by other companies IBM has sold this technology too. IBM itself is a fairly large company which means that the funding that went into researching this technology was provided by the company. This innovation has the potential to shift the entire culture within the supply chain industry due to these benefits.

Inspiration

This specific innovation emerged from the people that work in the procurement department at IBM. The motive behind this idea of blockchain was that it could change the lives of thousands of people, “If you pinpoint where the problems are, you will not affect all these other people.” Take a resource such as lettuce, for example, say it gets recalled, instead of throwing out all lettuce, with blockchain technology we can now track where the specific issue is in the supply chain. This can also be helpful, specifically with the resource cobalt. This innovation emerged once IBM realized that the labor conditions throughout the world with mining were growing increasingly worse, specifically in the Democratic Republic of Congo. The production of cobalt is extremely important though as it is used in many common resources such as lithium batteries. John states that the “Government wants to see and know about these issues in the supply chain, which previously was not public image because we still have issues.” This motivated IBM specifically to look and find issues within the supply chain as well as hidden reports of children.

Specifically, cobalt remains such a large issue because, “The hardest place to be in the supply chain is in the mines, in the fields, etc.” All of these issues ultimately prompted the Sustainability Team at IBM to study blockchain and labor as these unfair conditions need to be addressed. If we continue to let workers in the mines be mistreated, “The money that you have in your wallet and purse is probably more than what these people will make in a year.” This innovation relates to a sense of mission and purpose as this is a non-stop operation that is still in its infancy. Yet IBM knows that without this technology that allows for pinpointing in supply chains, this would mean a general approach has to be taken. This goes beyond IBM’s company impact as they “set goals, continually measure progress, and report our results as part of IBM's commitment to transparency and accountability.”

Consequently, with large-scale initiatives and operations that come forth, the necessity for additional oversight and management to ensure the success of the program come about. In regards to the Blockchain initiative at IBM, as stated by Mr. Gabriel one of the forerunners of the program, a team labeled the “blockchain transparent supply, which is an entire group of people dedicated to creating blockchains for different supply chains and sectors” This sector of the company works towards improving and innovating how companies manage their business processes to produce a positive result upon society. Furthermore, as Mr. Gabriel elaborated upon the background of the blockchain initiative, he mentioned that the task force for the program stemmed “through essentially our group in global procurement.” The company established clear lines of management in which the blockchain sustainability program follows the guidelines of an experienced and seasoned management and employee team to ensure the success of their work.

Overall impact

The overall impact that RSBN has/will have on the world, both short and long-term is immense. The first primary impact RSBN will have is advancing blockchain technology into the mainstream. During our interview, Mr. Gabriel informed the group of laws being passed in Europe and soon in America that helped to ensure the ethical sourcing of materials in the supply chain. Mr. Gabriel seconded the notion that these laws will propel blockchain even more into the supply chain industry, “This is going to push the adoption of blockchain moving forward.” The innovation of RSBN will not only affect the mining of cobalt, but it will also fundamentally change the landscape of transparency in the supply chain. Due to the blockchain technology surrounding RSBN and how it is already being implemented into the supply chain, sourcing all materials will soon be extremely transparent and ethical. This long-term effect of RSBN will only be supplemented by the short-term effect which is eliminating all of the questionable sourcing of cobalt in the supply chain. The short-term might not be the most accurate descriptor of this monumental result, but it is the shorter-term goal of RSBN. These effects are only going to be the floor for RSBN. Mr. Gabriel emphasized this notion about the possibilities of blockchain technology in the supply chain, “The limit is only set by the willingness of the participants."

The measurement and evidence for this innovation are all done through IBM’s procurement division which was established in the mid-1990s. After this division was created, the office continued to monitor the sourcing of materials. Mr. Gabriel informed the group that there are sourcing checks done every quarter and if a source fails on one of these checks, there are immediate measures put in place to remedy this conflict.

Business benefit

IBM has invested millions in developing blockchain technology. With the digitization of supply chains, technologies involving blockchain improve business integrity, data quality, and visibility. With the uncertainty of COVID-19, many organizations came to realize that they were unprepared for the disruptions caused within the supply chain. IBM commissioned a study to Forrester to shine a light on the impacts of the pandemic that negatively influenced supply chains across the globe. When surveyed about what disruptions supply chain makers faced, Forrester found that 21% of suppliers had product problems and 23% had transportation failures. They also found that there was a 49% increase in costs and a 39% in productivity loss. Four years ago, 1% of decision-makers described that their supply chain was digitized. Now around 69% of supply chains have been expected to become completely digitized.

As mentioned previously, supply chains have seen an improvement in data quality and integrity. Due to these improvements, there has been an increase in supply chain visibility, speed and flexibility, and customer confidence. Since transparency and communication between manufacturers, suppliers, and consumers, blockchain technology provides all participants in the supply chain to view all data and information at the same time. All transactions can be viewed and traced back accordingly which can even eliminate fraud. With supply chains being digitized through the use of blockchain, transactions can be completed faster than ever before. Blockchain technology shows what benefits and opportunities it offers not only for IBM but for the company’s business partners and smaller organizations.

Social and environmental benefit

IBM’s blockchain technology serves several purposes, but arguably its most important is its positive impact on the environment. IBM has been able to use blockchain to cleanse global supply chains because of its ability to track the sourcing and filter out the suppliers and producers who are not eco-friendly. Companies’ practices are being watched now more than ever, and are held responsible by everyone from regulators to investors to maintain environmentally sustainable production standards. As Mr. Gabriel described, companies are using IBM’s technology “to analyze every step of their production process which helps them track their sustainability goals and report out their progress.” IBM’s blockchain technology can monitor carbon emissions, for example, which are becoming more regulated as combating climate change continues to gain priority for both governments and corporations.

IBM is not only using blockchain technology to help other companies, however, but they are also using it to make their operations more environmentally sustainable. Like many tech companies, IBM relies on supply chains that provide lithium-ion batteries so that they can produce and sell computer software, so they must track their operations as well. To become more sustainable, IBM has created a list of 21 goals to become more eco-friendly, each with its time frame. Each of the goals has a very specific outline and quantifies the change it wants to make, whether it's a percentage of greenhouse gas emissions it wants to cut back by or an increase in the amount of renewable energy it wants to use. As Mr. Gabriel explained, IBM does not want to be known only for its innovative technology, it also wants to be viewed as a leader in sustainable solutions, and its internal commitments to the environment bring them a step closer to being that leader within the tech industry.

Interview

John Gabriel, Global Team Leader for Social Responsibility