Managing and verifying forest products in a value chain is often reliant on easily manipulated document or digital tracking methods { Chain of Custody Systems. We aim to create a new means of tracking timber by developing a tamper proof digital system based on Blockchain technology. Blockchain will be combined with new digital protocols for physical veri cation and authentication. Deliverables include online traceability system, and procedures for entering and verifying data inputs. Certi cation schemes and governments gain increased legitimacy from tamper-proof means to comply with timber trade requirements. Global companies gain from e cient traceability; society at large bene ts from increased tax revenues, anti-corruption, and environmental bene ts from sustainable forestry. We think this potential collaboration between government and industry can help simplify a variety of current due diligence processes, in this paper we focus on timber tracking.
Trade in illegally harvested timber is highly lucrative and estimated to be worth
between USD 51{152 billion annually. This results in the loss of crucial resources
for developing countries, while damaging their economies, public trust, and
institutional structures [
Companies in many regions are required (and interested) to ensure the usage of commodities from that follow legal and sustainable land management practices, and have installed procurement practices to enable sustainable values. Growing regulations such as the European Timber Regulation (EUTR) requires European companies to conduct due diligence and ensure that imported timber is not illegally sourced. One such solution is to use independently certi ed \ecolabels" that verify legality, environmental and social sustainability of products. However, these practices rely on a paper-based analog \chain of custody" (COC) systems to control the ow of certi ed materials from land to marketplace. Obvious problems with COC systems are: { Resource intensive and low tech, and expensive process { Lack of trust due to reliance on paper trails, which can be easily tampered which are vulnerable to arti cially in ated volumes and product substitutions { Centralized design, e.g., designated government authorities, IT solution providers and intricate manual certi cation of all companies along the entire supply chain 2
Blockchain is a distributed database that is characterized by decentralization,
consensus, validity, immutability, and authentication. Bitcoin, the most
wellknown use of Blockchain [
We would recommend building a platform agnostic as possible to allow a
potential interface to di erent platforms (between Hyperldeger, R3 Corda and
Ethereum for instance). In previous work on nancial contracts over Ethereum
[
Current gaps in Blockchain technology relevant for timber supply chain tracking includes: { A digital tracking technology that is able to identify requirements on computational performance, consistency, security, and privacy { A Blockchain to employ smart contracts' analysis with tools to support productive application development by users and guarantee safety and security of smart contracts { A system with contract manager architecture that provides a safe execution environment on top of Blockchain technology when a trade cannot be reverted 3
We propose a single, tamper-proof system for digital tracking of timber in a supply chain that veri es the physical product. We use Blockchain technology, to generate a digital ledger of transactions for trade in forest products (or potentially other commodities) which cannot be manipulated.
In the past twenty years, there have been several public and private
initiatives looking to address environmental and social issues around harvesting of
natural commodities. Stakeholders have tried to solve these issues through
various means, including [
To illustrate the problem above. Consider the following COC scenario (cf. Figure 1): A company in country D wants to assess that an imported products is made of legal timber. The timber is imported to country D from a country A, which is suspected to have a large amount of illegal timber alongside with legal timber. The rst level of complexity is to understand where the timber is sourced and follow an appropriate due diligence to nd out that the source is legal. However, another likely scenario is that a country imports a timber based product (such as a table) from a country that itself imported that timber from another country. This further contributes to the complexity of the problem, especially in the absence of tamper proof systems (and obviously in many scenarios there may be even more countries and companies involved.) Even so, a product consists of timber from a variety of origins and complexity grows even further. This scenario becomes complex by fan-in and fan-out of trading transactions. In general, there are no-su cient tests to the trail of document of timber tracking. The reason is the complexity of the due diligence process and the high costs
Legal Timber Illegal Timber
of verifying the paper trails. This problem can resemble the problem of money laundering when the origins of transaction are hard to trace.
Fortunately, Blockchain based systems can be installed to help tracking the problem in hand such as can be seen in Figure 2. Authorities supervise legal timber and certify its legal state in a Blockchain. A Blockchain entry (transaction) can be linked to physical evidence, e.g., its DNA pro le in digital form as cryptographic hash. The importing company can now query the Blockchain for a certi cation of a composite product, e.g. a table, by tracing the certi cations of its components.
n i a h c k c o l B r e b m i T
Country C
Country A Legal Timber Illegal Timber
Country D Import Country B
Fig. 2. Due diligence COC scenario for illegal timber using Blockchain technology
In the end, each of these stakeholders are forced to rely on one crucial point: that commercial traders are not purposefully manipulating their supply chains. This project will solve that need through use of digital, tamper-proof technologies.
We pick up this problem and our approach addresses previously mentioned issue in the following way: { Use Blockchain technology to enable fraud protected volume control along supply chain entities | a major challenge in current supply chain management systems { Make sourcing environmentally and socially responsible commodities more e cient, and more trustworthy { Allow companies to source responsibly from areas normally perceived as high risk | opening the market to a wider variety of raw materials while ensuring environmental and social sustainability { Safeguard forest areas previously thought of as non-viable forestland, currently at risk of being converted to oil palm plantations and other agricultural uses
We expect that a successful solution has to ful ll the following requirements: { Scalable for multiple hundred parties allowing for 100k transactions per minute { E cient computation and veri cation of transactions for legality, environmental and social sustainability { Provides a public key infrastructure for certifying transactions { Usability of the solution on mobile devices { Digital representation (data structure) of transaction data { Physical evidence, e.g. DNA trace, linked to a digital representation
We expect future changes and impact: { Commercial companies can use the system to verify information about commodities they are buying and selling. { Government regulators can use the system to verify information needed for the implementation of relevant environmental and trade policies (such as EU Timber Regulation, U.S. Lacey Act, Australian Illegal Logging Regulation). { Certi cation schemes can use this approach as an alternative to outdated chain-of-custody systems and thereby increase trustworthiness of these systems. 4
We nd the problem of ensuring sustainability in supply chains to be a particular
interesting case for the use of Blockchain technology. In this position paper, we
would like to further encourage research and development of such system and we
in particular are interested in collaboration on the topic and similar problems. A
lot of e orts has been done on utilizing Blockchain technology for the nancial
sector [
The authors would like to thank Phil Guillery, Fritz Henglein, Katie Miller, Iben Nathan, Christian Pilegaard Hansen and Christian Sloth for valuable discussions and contributing ideas.