MATTHEW FEARGRIEVE examines how the meat industry is applying blockchain technology to the processing of livestock in a way that is being welcomed by animal welfare groups, consumers and investors alike.
We have been eating animals for thousands of years. Throughout the post-war era, industrialisation and higher disposable incomes in developed nations boosted meat consumption. In under than two decades, however, our increased awareness of environmental damage has thrown a spotlight on the industry which has made its main players squirm.
A report entitled “Livestock’s Long Shadow”, published in 2006 by the UN Food and Agriculture Organization, estimated that greenhouse gas emissions produced by the meat industry were potentially greater than that of the global transport sector, and at minimum were around 5 per cent of global emissions.
The notion that the meat industry is as damaging to the environment as the transport sector has inevitably led to comparisons between emissions from a burger and those from a flight, with meat companies being compared to the oil majors. The industry is feeling the pressure.
A 2019 report by another UN body, the Intergovernmental Panel on Climate Change, calculated that low and middle income countries contribute 70 per cent of emissions from ruminants like cows, and 53 per cent from other animals such as pigs and chickens, whilst developed countries account for almost one-third of global greenhouse gas emissions from cows and sheep.
As the effects of the earth’s warming temperatures become more extreme, climate change campaigners, investors and consumers are increasingly scrutinising the greenhouse gas emissions attributed to the US$1.4 trillion meat industry.
Meat producers, who slaughter and process animals, are facing calls by consumers and investors for more transparency. With many governments now committing to net-zero emissions by 2050, and the US set to rejoin the Paris climate agreement, the debate is turning to risks caused by climate change with livestock rearing and processing assets becoming less viable as the earth warms up. The scrutiny of the industry’s impact on the planet is only going to increase.
Many of the world’s meat producers have been slow to respond. A recent survey of the 60 largest listed protein companies, including meat and fish groups, revealed that three quarters of the companies surveyed have not declared or put in place reduction targets set according to scientific guidelines for emissions.
This unresponsiveness is expected to change, however, as institutional investors become increasingly focused on sustainability. For them, the environmental issues associated the meat sector are a business risk that means lower internal valuations.
Unsurprisingly, the larger meat producers are starting to take steps to address the environmental impact of their practices and their public image. Like Tyson Foods, the largest meat company in the US, which is committing to tougher targets on emission reductions, as well as adjusting its budgeting and capital planning processes to reflect the longer time horizon of sustainability investments.
Tyson, like a growing number of other meat producers, has realised that future-planning is the only way preserve their long-term enterprise value and remain investible.
Enter Blockchain Technology
The animal meat industry is not very efficient. It is a burden on the environment and is more segmented than other types of food systems. In short, it is an industry ripe for technological streamlining.
From more robots on the processing lines, to sensors and artificial intelligence in the animal rearing process, as well as feed additives to reduce emissions, technology is playing a bigger role in the industry. And blockchain is one such technology.
JBS is Brazil’s largest meat producer. It has not enjoyed particularly good press of late, with charges of Amazonian deforestation being levelled against it. Like its US counterpart Tyson Foods, it has taken pressure from the newspapers and from its institutional shareholders to galvanize the company into action.
Most recently, accusations of “cattle laundering” — where animals from illegally deforested land are brought to legitimate cattle ranches that supply meat companies — has prompted JBS to pledge to use blockchain technology to ensure traceability of its cattle and meat.
Bad publicity aside, blockchain technology has huge potential to transform the different processes within the meat industry. There is a growing awareness in the industry that blockchain technology can equip industry players with the ability to provide market regulators, as well as consumers, with enhanced levels of transparency and assurance in food quality and safety.
Several applications of blockchain technology in the meat industry have emerged over the last three years:
- boosting consumer confidence regarding the provenance of their meat, using tracking technologies.
- tackling food fraud and enhancing product safety by reducing misrepresentation of red meat products in overseas export markets.
- improving supply chain security and provenance by storing tracking information, thereby providing assurance that each participant along the supply chain did the right thing.
- helping optimize supply chains by digitalizing and improving the export documentation processes.
- providing greater levels of trust in supply chain data shared between participating parties.
- enabling ‘smart contracts’, which are digitally encoded contracts that self-execute when programmed parameters are met.
As can be seen from the above, the application of blockchain technology in the meat industry has the potential to provide a boost for the integrity of the industry in two key areas, encrypted supply chains and provenance; both of which are central to consumer confidence in the end product.
The attraction for meat producers is obvious: a decentralized network based on cryptography that uses peer-to-peer consensus to validate transactions. In short, a system enabling international sales of meat to consumers who are increasingly demanding about the provenance and health of the animals whose meat they are eating, and the social impact of the product they are buying, by using encrypted time-stamped blocks and electronic records preventing after-the-point data manipulation.
A good example of a multi-layered application of blockchain technologies in the meat industry is BeefChain, an electronic supply chain set up to enable Wyoming beef farmers to realise the full market premium for their beef by eliminating value leakage to intermediaries through system inefficiencies.
BeefChain was set up to meet two objectives. The first is to deliver technology to the participating farmers that enables traceability and proof of humane handling of livestock. RFID tags and other IoT devices upload information unique to each individual animal to the blockchain, establishing immutable, auditable provenance enabling farmers to capture premia associated with free range, grass fed livestock. Set up in 2019, BeefChain has tagged thousands of heads of cattle, which are hashed to the Ethereum blockchain.
The second objective is to create an end-to-end supply chain solution through partnerships with wholesale buyers, auction houses, feedlots and processing operations. These partnerships allow participating farmers to offer exclusive, long-term relationships with buyers across the globe.
In this way, blockchain technology boosts the value of the supply chain by delivering immutable, third party verification processes that benefit meat producers as well as other participants like distributors, retail grocers and, of course, the end consumer.
With the meat industry under increasing scrutiny from investors and consumers, and with certain parts of the industry facing increased competition to supply the growing market for premium meat in Asia and the Middle East, the increased take-up of blockchain technology across the whole industry can be expected to gather pace in the coming five years.
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