Is blockchain a passing tech trend or the future? What do procurement professionals in maritime need to understand? Katja Grothe-Eberhardt answers our questions
Blockchain is arguably the most hyped of the recent technological developments, yet it remains poorly understood. What exactly are its benefits? How can it improve supply chains? Is it just a load of hype? To answer those questions, we spoke to Katja Grothe-Eberhardt, COO of BLOC (Blockchain Labs for Open Collaboration), the leading blockchain resource and advisory consultancy for the maritime and energy sectors, ahead of her talk at IMPA London, to see if blockchain is worth all the fuss and what exactly it can do for shipping.
There has been so much written and talked about with Blockchain. Is it actually starting to deliver for business?
This is a really good question. A recent report from the Boston Consulting Group (BCG) does a great job of identifying some of the barriers the technology faces in transport and logistics, markets where, initially, the thought of a secure, decentralised store of information, seemed to be some of the most exciting and applicable use cases.
According to a survey of professionals in the sector, the vast majority of respondents (88%) still believe that blockchain will disrupt the industry at least somewhat. And most (59%) believe that the disruptions will take place within the next two to five years. But nearly three-quarters (74%) say that they are exploring opportunities only superficially or have not thought about blockchain at all.
An important reason why so many applications in transport and logistics have struggled to find their feet is the issue of trust. The value of blockchain networks lies in building trust between multiple stakeholders. But shipping is so fragmented, that it is hard to find the common ground to start building that trust. If a single company is creating a blockchain application that only they and their customers can use, for example, it is unlikely to succeed, as it requires a level of transparency between multiple stakeholders that the creator is unwilling to facilitate.
“The value of blockchain networks lies in building trust between multiple stakeholders. But shipping is so fragmented, that it is hard to find the common ground to start building that trust”
This speaks directly to the value of our consortium-led approach. We bring together industry stakeholders by invitation and we align interests to address shared friction points across entire value-chains. These stakeholders include suppliers, producers, customers, competitors, regulators, and governments, to name a few.
Rather than a top-down process of society and industry adopting to technology and not participating in its creation, BLOC facilitates a process whereby industry identifies, designs and refines its own solutions.
BLOC always conducts feasibility research in blockchain solutions before creating them, and takes a healthily sceptical approach to blockchain/DLT solutions before it can be proved that they add value.
By first identifying where the most common ground is, and where the most incentives to work together lie, we can build things that will deliver benefit in the long term, as our work in fuels shows. This then sets the framework for further work in tackling carbon emissions, and further identifying the financial and regulatory incentives to encourage cleaner fuel adoption and decarbonisation.
How have you used blockchain in the marine industry?
Our work in the marine fuels space has been one area where we have seen how blockchain can form the basis of a cleaner and more trustworthy supply chain. In September 2018, in collaboration with GoodFuels Marine, we successfully completed the world’s first bunker delivery and transaction using blockchain technology.
The delivery, made to a Samskip vessel via a Reinplus Vanwoerden bunker barge in Rotterdam, represented a landmark moment for the shipping industry, which has traditionally been beset by quality and quantity disputes when fuelling vessels. Unlike traditional bunker delivery notes (BDN), a paper document still widely used in the industry, blockchain – a decentralised, distributed and public digital ledger – provides end-to-end traceability of marine bunkering transactions from storage, to the barge or jetty, and on to the vessel’s fuel tank, thereby providing assurance to shipowners, shippers and charterers.
The landmark also represented the first transaction for MBL and marked the first sustainable low carbon marine fuel delivery as part of the GoodShipping Program, which is part of MBL.
We built on this in February this year, when our blockchain fuels assurance platform verified the CO2 savings for a delivery of sustainable biofuels to the BHP-chartered, NYK-owned bulk carrier Frontier Sky. At every step, participants used web applications on their smartphones to upload documents to the software, including fuel specifications, supply contracts, and sign-off statements confirming fuel delivery from point A to point B. GoodFuels provided independent verification that its fuels were not sourced from palm oil or other feedstocks linked to deforestation.
“Blockchain solutions need to be closely integrated with physical solutions and to focus on governance as much as they do technology”
In this way, blockchain served as proof of sustainability. By using a biofuels mix, rather than 100-percent fossil fuels, Frontier Sky avoided emitting more than 50 metric tons of carbon dioxide en route to Canada, the emissions equivalent of driving 125,000 miles in a car.
We are further testing the prototype in a real world setting to capture the biofuel delivery from BHP, and to create a complete digital audit trail, with extended functionality for biofuels and emissions tracking. This is an important demonstration of how blockchain technology could play a role in creating a global, trusted MRV system, and build the trust necessary for broader adoption of cleaner fuels both in terms of meeting 2020 Sulphur cap requirements and the IMO’s 2050 decarbonisation goal.
It has not been particularly clear how blockchain can benefit the maritime supply chain. How do you think it will help? In what ways does it improve what already exists?
As BLOC, we note and understand that there are tremendous issues and challenges facing our sectors on a business as usual pathway. This provides a vast opportunity for blockchain protocols and distributed ledger technology to create alternative solutions that transform value chains and challenge the status quo, making them fairer, more equal and more democratic.
The main value that blockchain creates for maritime is that it can be a source of trust in supply chains that are traditionally very fragmented. When properly integrated, blockchain creates an immutable digital record of a product’s journey through the supply chain. To go back to the issue of bunker fuel, for example, it means that a ship’s captain can, at the point of bunkering, see what tests have been carried out, and who has verified the quality of the fuel, without having to rely on an easily lost or falsified paper document.
This does however require integration with physical tracking measures, which is why we are working with Forecast Technologies Ltd (FTL) to explore the integration of blockchain with synthetic DNA-based tracing, which applies a unique fingerprint to fluids.
What do procurement professionals in maritime need to understand about blockchain?
The main thing to understand is that it is not a magic bullet. By providing an immutable single source of truth and enabling process automation, blockchain can address many of the industry’s pain-points. However, one of the main obstacles of addressing these pain-points is the reliance (and focus) on a single technology or immutable source of truth rather than the process of obtaining said truth in the first place and the collaboration and sharing required to get there at all.
Blockchain solutions need to be closely integrated with physical solutions and to focus on governance as much as they do technology.
With our Bunker traceability solution, BunkerTrace, it opens up a new possibility for especially procurement in bunkering, to ensure reliability and bring trust to the buying process. Having worked closely with procurement professionals in companies participating in the consortium, we understand that there is a big need to bring trust and reliability to especially the bunker procurement process, since it has historically been a black box as to what quality oil would be delivered. Contamination and low quality fuels can bring significant economic and environmental consequences to ship owners, insurers and a range of other stakeholders. We aim to combat this specific issue through BunkerTrace.
Outside of the supply chain, how can blockchain help to improve the maritime industry?
Blockchain technologies provide an efficient, tamper-resistant and auditable chain of custody. The same characteristics that make an effective basis for cryptocurrencies also mean that blockchain can benefit shipping. For example, applied to bunkering, blockchain-based systems can reduce safety risk and creating a more trustworthy framework for accurately monitoring emissions from shipping such as sulphur and carbon. We have already demonstrated how this would work, using blockchain to verify chains of custody for the bunkering of sustainable biofuel. We are continuing to build consortia to develop solutions for fuel traceability, as well as crew certification, with stakeholders throughout the industry such as Lloyd’s Register Group, Maersk, Heidmar, GoodFuels and many others. We regard this collaborative approach of aligning shared interests among multiple participants in a network as akin to the ‘sport’ of conducting business, where every actor may have different roles and self-interests, but by working together, they collectively achieve more than if by going at it alone.