How Blockchain Can Prevent Human Rights Violations in the Supply Chain

By Scott Nelson, CEO of Sweetbridge

The term “sweatshop” was first coined in the 1850s to depict the arduous conditions of garment factories in London. It’s a dated, yet provocative term still used to evoke imagery of corporate labor abuses in domestic and international manufacturing. While much of the mainstream world shies away from the notion that goods and services can originate from unethical production facilities, the sad reality is that human rights violations in our modern commercial ecosystem aren’t just persisting, they’re getting worse. In fact, every year, an estimated $140 billion USD worth of goods enter the U.S. market as a result of forced labor.

It’s a problem that has permeated the shelves of stores of every major industry at almost every available price point. Companies seeking higher manufacturing margins are sourcing products from vendors in disparate parts of the world with little to no understanding of their ethical integrity prior to forming a contractual relationship. Earlier this month, the U.S. Customs and Border Protection (CBP) service banned cotton imports from Turkmenistan due to findings that the country used state-enforced slave labor in their production facilities, with an estimated 15,800 individuals potentially impacted. And it’s not just a problem impacting the developing world either. Wholesale giant Walmart was recently implicated in unknowingly contracting a third-party vendor in California with an extensive history of underpaying its workers, going so far as to settle a $1.6 million USD class-action lawsuit on behalf of nearly 110,000 employees.

As companies continue to globalize their business models, corporate labor abuses aren’t just becoming harder to identify, they’re becoming harder to enforce. Faced with new vendors, in new industries, in new regions of the world, company executives simply cannot conduct the due diligence necessary to keep up with the pace. Thankfully, in the pursuit of a fairer commercial ecosystem, recent advancements in blockchain technology have the potential to put an end to corporate labor abuses, shining an immovable spotlight on safety and compliance practices at each juncture of the supply chain.

Fundamentally, blockchain is a distributed, immutable ledger of information that can be made instantly viewable to every party in a given supply chain. If you own a computer, and you’re participating in the exchange, then you have access to an entire chronology of information recorded from production to sale. The criteria for storable data on the blockchain is seemingly boundless (e.g., labor wages, sanitation practices, compliance obligation), eliminating doubt about whether forced or unethical labor practices were used at any point in the production process. Digital ledger technology is already a solution that’s being explored to address this problem; in March, Coca-Cola and the U.S. State Department teamed up on a project to create a blockchain-based registry for workers that will combat the prevalence of forced labor globally.

Perhaps most valuable about the potential use cases of blockchain is that it doesn’t require excessive overhead to implement. Using little more than a smartphone, vendors in rural parts of the world, potentially without adequate access to the internet, can upload information to the blockchain with unparalleled efficiency. At present time, it’s presumptuous to believe that vendors, with varying technological capabilities and under varying compliance requirements, have the bandwidth to completely overhaul day-to-day operations. However, through blockchain technology, companies can extract value from previously illiquid assets and reduce working capital requirements, thereby providing a financial incentive for actors on the supply chain to more widely adopt the technology.

As a result of rapid globalization, expansive industry growth, and heightened efficiency, the world as we know it has never been more interconnected. Demand for products to be delivered cheaply, conveniently, and direct to consumer is at an all-time high. While this has certainly contributed to a flourishing global economy, it has also prompted many companies to circumvent labor standards in an effort to achieve higher metrics. With blockchain technology, we’re truly on the precipice of a paradigm shift in the way that we observe and enforce an ever-expanding supply chain, ensuring that the products we purchase don’t inadvertently come at the expense of someone’s fundamental human rights. Who knows, in the near future, the term “sweatshop” may finally fall from our vocabulary.