PwC and Merck Test Blockchain System to Track Global Cocoa Supply
Blockchain System Aims to Track Cocoa From Farm to Factory
PwC Germany, Merck KGaA, and The Hashgraph Group are testing a new system to track cocoa production. The project uses a combination of physical markers on bags and records on the Hedera distributed ledger, which is a type of shared digital database. The goal is to provide a clear history of where cocoa comes from as it moves through a complex global supply chain.
The system was created to help companies follow upcoming European Union rules regarding deforestation. Because cocoa involves millions of small farms and many middlemen, it is currently very difficult to trace batches back to their origin. This lack of transparency often hides issues like child labor and illegal smuggling.
Key Features of the Tracking Tool
- Pairs physical tamper-evident seals with digital records on the Hedera network.
- Helps companies comply with EU deforestation due diligence requirements.
- Allows manufacturers to identify specific contaminated batches instead of closing entire factories.
- Provides a way for farmers to receive digital payments without needing a traditional bank account.
How the Physical and Digital Verification Works
The system uses technology from the chemical company Merck to place a unique physical fingerprint on each cocoa bag. If a bag is opened, the seal is destroyed, which alerts the system that the contents may have been tampered with. Information about the bag’s origin and quality is then recorded on a platform called TrackTrace, which runs on the Hedera ledger.
PwC Germany designed the business workflows to ensure the system works for large companies. To make it easier for businesses to use, the technical parts involving tokens or cryptocurrency happen in the background. Companies and suppliers only see traditional money, such as U.S. dollars or euros, to avoid concerns about crypto regulations.
Why Modern Tracking Matters for Farmers and Factories
The cocoa industry is highly fragmented, with over 2 million farmers in Africa alone. Data is often trapped in separate systems, making it hard to find the source of a problem. If a batch is contaminated, companies today might lose millions of euros because they cannot pinpoint exactly which cocoa is affected. This new ledger system aims to solve that by keeping all data in one place.
The creators also hope to help smallholder farmers, who are individuals running small farms. By giving these farmers a digital identity linked to their production history, they may be able to access financial services like credit and insurance. The firms stated that while the project is starting with cocoa, the same technology could eventually be used for pharmaceuticals, electronics, and luxury goods.
Upcoming Deadlines for Regulatory Compliance
Large companies must begin meeting the EU’s deforestation rules by the end of this year. Smaller businesses will have to comply at a later date. Companies that fail to follow these rules could face fines of at least 4% of their annual turnover in the EU. This tracking system is intended to give processors and regulators a way to verify a batch’s history before these deadlines arrive.
