Blockchain

Integrity is a core value for FSC: a fundamental principle and value of who we are, how we work, and what we stand for. With its enhanced data security and traceability, blockchain technology has enormous, game-changing potential that reaches far beyond the realm of finance. And people around the world are researching, experimenting with, and increasingly deploying the technology to address the big problems of our time, from the refugee crisis to climate change. FSC is exploring how to best use this technology to improve supply chain integrity in the FSC system.

FSC Innovation Blockchain
CC Pixabay

Securing supply chains

We have launched the FSC Blockchain Beta digital verification platform pilot program for high-risk supply chains.  Our aim is to revolutionize FSC materials traceability and trade compliance with blockchain technology. 

What is the FSC Blockchain Beta?

The FSC Blockchain Beta is a “permissioned” private blockchain ledger platform designed to verify materials trade compliance across FSC supply chains.

We are conducting pilot tests of our technology from April to October 2021, and these pilots focus on high-risk supply chains.  A select control group of certified organizations are being contacted during this period to participate in the pilot programme.

The goal of the pilot programme is to demonstrate blockchain technology’s facility to transform trade compliance verification.  The pilots will gauge organizations’ means of meeting requisite criteria to share standardized point-of-trade data, and we will gather information on features that would be indispensable to certified organizations.

Our pilot programme will offer the space to validate blockchain technology with real data and to determine the conditions that enable us to develop enhancements towards wider general availability to certified organizations in the future.

We believe that the FSC Blockchain has the potential to transform materials trade compliance verification and traceability with a secure and trustworthy self-service digital platform to verify real-time “point-of-trade” inputs and outputs of FSC-certified materials.

Why are materials compliance checks and traceability so important?

FSC trademarks are valuable to all our stakeholders, and FSC works to protect our reputation and enforce our trademark rights by monitoring trademark compliance and investigating false claims.  Certified organizations are licensed to use the FSC trademarks for on-product labelling and promotional use, and at the point of trade, organizations’ trade documentation carries FSC claims that tell trading partners the materials they are buying are certified. 

When we find fraudulent claims and non-certified materials in FSC supply chains, there is a breakdown of trust, and the achievements of compliant certified organizations can be significantly obscured.  FSC’s supply chain investigations and Transaction Verification allow FSC to investigate, uncover, and address fraudulent activities carried out by certified organizations.  However, transaction verification has two major downfalls when it comes to addressing challenges in certified supply chains. First, it only allows us to investigate events that occurred in the past once the damage has already been done. Second, it only allows us to investigate with a very narrow and fixed scope on a particular supply chain. This leaves FSC with little ability to adjust or scale to real-time monitoring during or after an investigation. (More on this in the FAQs, below.)

Compliance checks and undisputable traceability of materials are important to certified organizations and for FSC, and Information Technology tools can help overcome the obstacles of the lack of efficiency and not having timely verified information while protecting the privacy of business relationships. 

What is blockchain and how can it support integrity in FSC supply chains?

Simply put, blockchain is a record-keeping digital technology, and it registers transactions into a digital ledger that cannot be changed (a concept known as immutability).  These transactions are recorded in the ledger as a chain of data blocks via a consensus protocol that defines the veracity and data integrity of each transaction before it can be recorded on the ledger.  Unlike public blockchains associated with cryptocurrencies, consortium or “permissioned” private blockchain ledgers allow for access restrictions governed by parties’ permission to participate in the blockchain, even if the parties are not “known” to each other. 

Like many global supply chains, forest-related supply chains rely on paper documentation, including a paper trail of invoices, bills of lading, and other “wet” signature/stamp trade paperwork.  Paper systems open the potential for fraudulent claims by cause of tampering with or falsifying documentation to inflate material volumes.  Blockchain can fundamentally change how compliance and traceability of FSC materials across supply chains are verified using secure technology, breaking free of paper-based documentation and the exclusive reliance on paperwork exchanged amongst organizations to assert trade claims that imply that materials are compliant. 

Another important aspect of blockchain is that it helps overcome IT “architectural” and operational limitations related to delivering a full package of immutability, information security, and consensus when the participating parties may be either known or unknown parties to each other.   A certified organization clearly knows their direct suppliers, but generally they do not have knowledge of their trading partners’ suppliers.  Blockchain allows trading partners to be connected to all parties handling materials down to the source and to verify the compliance of the materials as they move through the supply chain, without the need to reveal or even identify business relationships beyond those direct relationships an organization already has today. 

FSC believes that blockchain can offer value to certified organizations to support verification that the materials they trade are compliant and traceable to the source. Today, FSC-certified organizations are required to maintain up-to-date material accounting records of the certified materials they trade, and we can tap into these records with blockchain to securely share and verify these point-of-trade exchanges across the supply chain. 

More about the FSC Blockchain Beta 

  • Forest for the Future Podcast – Find out more about the FSC Blockchain in our latest podcast: Apple Podcasts | Castbox | Google Podcasts | Podtail
  • Feedback and expression of interest in the FSC Blockchain – certified organizations are invited to provide feedback and express interest in the FSC Blockchain. Check back here soon to sign up.

Frequently Asked Questions

  1. How does blockchain apply to FSC?

    FSC is a system built on integrity, and blockchain has the potential to help support our efforts to keep certified supply chains strong and free from fraudulent claims.

    Because of the decentralized, independent, and virtually impossible-to-tamper-with nature of the technology, we will be able to trust that the supply chain transactions entered into FSC’s blockchain ledger are verified and reliable. Furthermore, it will enable companies to receive and send verified claims in a decentralized and timely manner, breaking us free from an approach of investigating events from the past towards a much more real time verification of claims.

  2. Why is FSC making this change?

    Blockchain technology addresses two main issues with FSC’s current transaction verification and investigation systems.

    First, investigations allow FSC to address problems that occurred in the past, often once the damage is done and materials have already passed through the supply chain even to the point of end-user sales.  Fraudulent activities carried out by one certified organization in the supply chain can cause lasting damage to the credibility and reputation of FSC and to all the certified organizations that are fully meet our standards.  Transaction Verification is suitable for supporting investigations, but ex post facto data and verification offer little immediate and direct value to those certified organizations that are compliant with FSC’s certification standards.

    Second, Transaction Verification is used in FSC’s supply chain investigations with a fixed scope (time period in the past and focus on high-risk supply chains), offering very little ability for FSC to adjust or scale to real-time monitoring during or after an investigation.  The process of conducting Transaction Verification requires multiple steps and interventions by certified organizations and their certification bodies to support maintaining the privacy of business relationships across the supply chain.

    Compliance checks and undisputable traceability of materials are important to certified organizations and for FSC, and Information Technology tools can help overcome the obstacles of the lack of efficiency and not having timely verified information while protecting the privacy of business relationships.

  3. How will this change my day-to-day work?

    For the vast majority of certificate holders, there is no change for now.

    The FSC Blockchain Beta is for a select group of companies operating in high-risk supply chains.

    For the companies within this group, we will be requesting submission of claims in a standardized format, similar the transaction verification datasets familiar to many of the companies involved.

    The companies will be able to utilize several different methods for submitting their data (browser interface, spreadsheet, or API) and we will work with each certificate holder individually to identify the best solution for them, capture and address any pain points as well as learn from their experience and needs for future improvements and potentials of the technology.

  4. Who can use or access the FSC Blockchain Beta?

    The FSC Blockchain Beta platform is accessible and usable by companies participating in our pilot program.

    As a participating certified company, your company’s data on the blockchain is accessible by your company and not trading partners. Data can be analyzed by Accreditation Services International (ASI) to assist in verifying compliance.

  5. Does the FSC Blockchain Beta allow my data and suppliers to be visible for everyone?

    No. Certified organizations participating in the FSC Blockchain Beta will not be able to see more than what they see today.

    Unlike public blockchains associated with cryptocurrencies, consortium or “permissioned” private blockchain ledgers, such as FSC’s, allow for access restrictions governed by parties’ permission to participate in the blockchain, even if the parties are not “known” to each other.

    This means that the blockchain allows trading partners to be connected to all parties handling materials down to the source and to verify the compliance of the materials as they move through the supply chain, without the need to reveal or even identify business relationships beyond those direct relationships an organization already has today.

  6. Can I be certain that my business data will be secure?

    Yes. The data on the blockchain is decentralized and encrypted.

    To ensure an additional layer of security, the data is encrypted even beyond a normal blockchain cloud service. This means that in the unlikely event of unwanted parties obtaining access to the blockchain, the data will be undecodable unless they are also in possession of each of the participating certificate holders’ decryption keys. It is hard to overstate how unlikely this scenario is.

  7. Will this affect how much I pay for certification?

    FSC will not charge for participation in the FSC Blockchain Beta.

  8. I am not part of the pilot. Can I volunteer to be part of it?

    The FSC Blockchain Beta focuses on a select group of certificate holders in high-risk supply chains.

    However, you can let us know that you are interested in learning more when we open for a wider group of certificate holders.

    Check back here soon to sign up.

  9. Where can I get updates and learn more about the project?

    We will be updating interested stakeholders on our progress in the project. Check back here soon to sign up and we will reach out to you as the project moves into the next stages and keep you informed.