Mineral supply chain tracking

Published Mar 21, 2018Last updated Mar 22, 2018
Mineral supply chain tracking

Mineral supply chain tracking

Presentation

You can find the presentation for our project here

Pitch deck

You can find the pitch deck for our project here

Introduction

Mineral supply chains are long and complex. Materials contained in your electronic devices originally enter the supply chain from the mining sector, a challenging industry in terms of sustainability.

Minerals don’t travel directly from the mines to the technology companies that use the metals. From the mines, they go to trading houses, then to smelters, export companies, and from there to neighboring countries where the minerals are sometimes mixed in or simply identified as coming from a secondary country.

Once the smelting process is complete, there’s no way to discern the origin of the metals, as the ore is mixed in with multiple sources (Upstream). The minerals are sold to mostly East Asian metal processing companies, which refine them into metals. Finally, the refiners sell the metals to component manufacturers that in turn supply electronic assembly manufacturers, who then use them in their products (Downstream).

From pollution and extremely dangerous working conditions to child labor, a number of mining-related practices desperately require improvement. Companies need a way to deal with varying international standards along with compliance and traceability that are challenging to collect and demonstrate.

Tracking the cobalt supply chain

In the case of cobalt, an essential component of lithium-ion batteries, 60% of global supplies are sourced in the copper belt of Democratic Republic of Congo (DRC). There, informal artisanal and small-scale mining (ASM) represents ~10-20% of the national production. Inherent sourcing risks exist, given the context of political instability and extreme poverty of the local population. Most cobalt production growth within the next 10 years is also expected to come from this region.

Artisanal mining is the greatest source of concern for downstream supply chain participants and consumers, with human rights issues typically associated with this type of mining including:

  • Modern slavery, child labour [Amnesty International, This is what we Die For, 2016] and other forms of human rights abuse
  • Extreme poverty, in part caused by unfairly low payments received by communities for their resources
  • Support of conflict and violence
  • Health and safety hazard (landslides and other incidents, exposure to radiations and respiratory problems)
  • Environmental degradation (air pollution, water contamination, loss of biodiversity)
  • Corruption and illegal taxation

Current pain points

Source level:

  1. Lack of formalisation & high degree of individualization because of lack of land titles
  2. Lack of access to technology for data collection and transfer (access to internet, reliable devices at mine level)
  3. Lack of incentives for some supply chain actors to enhance transparency
  4. Lack of standard documentation and processes to transfer data from downstream to upstream end of the chain
  5. Opaque transactions in supply chain because of multiple processing steps

Supply chain actors:

  1. Lack of incentives for some supply chain actors to enhance transparency
  2. Lack of standard documentation and processes to transfer data from downstream to upstream end of the chain
  3. Opaque transactions in supply chain because of multiple processing steps, especially at refiner level where materials from different origin are mixed together
  4. Technical difficulties to track volumes from upstream actors due to mass balance system (smelting of ores with different concentration).
  5. Cyber security attacks aimed to steal intellectual property and other proprietary information

End-users:

  1. Lack of standard documentation and processes to transfer data from downstream to upstream end of the chain
  2. Financial obstacles to efficient data sharing & cost of deployment systems on the ground
  3. Supply chains in a globalized world often change, requiring due diligence to be replicated over time
  4. Increasing due diligence requirements and consumer expectations

Problem statement

Problem 1:

End-users (like Apple, Tesla or Fairphone) are confronted with supply chain due diligence requirements (from governments, NGOs, consumers), but they do not have sufficient information to demonstrate that their entire supply chain originates from compliant mining sites.

Problem 2:

The cost of any local due diligence initiatives (deployed as a response to international transparency expectations) are borne by upstream actors, including mining communities. As such they are penalised for participating in compliant supply chains.

Purpose:

To develop a system in which all actors in the cobalt supply chain are incentivised to expand transparency and accountability for responsible sourcing of cobalt. In this hackathon we will focus on solving a part of Problem 1 first and creating a roadmap for the rest of Problem 1 and Problem 2 as defined below.

Assumption 1:

Data providers with local knowledge and expertise could provide reliable information on mining practices and could register their information on a blockchain (e.g. BSP, Fairmined, Fairtrade International, IPIS).

Assumption 2:

Access to such upstream data would add value to the supply chain due diligence process commissioned by end users.

Our Solution

Mineral Track will reward compliant mines and intermediaries with higher paying work while offering end-users full due diligence through tracking supply chains and create financial agreements between actors on the blockchain.

By addressing the vulnerabilities of transparency and accountability within the industry, we hope to begin to solve the higher level issues of child labor, poor working conditions, and conflict support over time.

Responsible value chains can only exist when all actors are rewarded for their participation. Mining communities receive a better price for their products so that they can send their children to school while companies like Apple can fulfil the requirements of concerned consumers and regulators, and prove that they are responsible corporate citizens.

We will build a system with end-to-end supply chain traceability where downstream actors, especially end users will comply with their standards, expand sourcing from that particular supply chain, and can even support the mine financially, generating more business for everyone involved.

To address the first problem we’re looking to build a system in which actors in the supply chain only have to give up who they trade with instead of transactional data.

Short term impact

The short term impact will show the world that it’s possible to map supply chains in a more efficient manner, beneficial to all parties involved and without exposing sensitive company information to a general audience.

End-users like Apple and Tesla have a demand for information about responsible mining practices so that they can inform consumers and regulators about the provenance of their metals. Currently, this valuable information doesn’t have a way of reaching the end-users that need it. But Mineral Track will be able to connect ASM’s and Intermediaries with End-users to share information about due diligence and make sure that everyone in the chain benefits.

Associated Risks

Source level

The system becomes too hard to use or understand for basic users.
Actors in the supply chain have too little technology on hand to do transactions quickly.

Fraud

Fraud is always possible in the supply chain (especially for the first mile data at mine sites level) without a strong partner for data input at the Upstream level. Incentive to misrepresent mine site situation and production levels.

Limited access to technological tools

Limited access to technological tools for effective reporting (no computer on mine site, dumb phones without access to internet, etc.). Actors in the supply chain have too little technology on hand to do transactions quickly.

Unintended consequences

Unintended consequences of enhanced transparency incentivise companies to move away from artisanal mining and move to cheapest/ safest options.

Supply chain actors

Actors in the supply chain are not keen to modify their own way of doing transactions and refuse to adopt the new technology.

Confidentiality concerns due to competitive issues, business sensitive information.

End-users

  • Investment in a technological solution / standard that will not be adopted / accepted in the market.
  • Legislative requirements on due diligence for end-users changes and impact negatively the traceability scheme.

The need for a blockchain database

For the Mineral Track tool, blockchain would be used as a mechanism to prove ownership over mapped parts of a supply chain by end-users in a distributed manner, the ownership of these mapped parts serves as a store of value.

The paper “Do you need a Blockchain?” By Karl Wust and Arthur Gervais defines a pretty nice flowchart to determine the need and the nature of that blockchain. We will use these questions as a guideline.

Do you need to store state?

Yes, we need to store at least the following state in the form of a fingerprint:

  • Origin & provenance (GPS coordinates, identification of country, province, territory, village)
  • All actors & entities involved in the supply chain
  • Transaction data (chain) and custody transfer records of the original ore to (semi-finished) products.
  • Risk and other contextual data on the compliance performance of the ASM site of origin (# of workers, income, production volumes, etc.)
Are there multiple writers?

Yes, each organisation involved in the process is considered a writer.

Can you use an “always online” Trusted Third Party instead

No, there shouldn’t be an “always online” trusted third party because data about supply chains is very valuable and in some cases the backbone of entire companies. Therefore, supply chain actors are understandably reluctant to be completely transparent with third parties. Given the power associated with such sensitive material, no single organization should have all this data.

Are all writers known?

No, the above point also holds for the identity of the supply chain actors. They should have pseudonyms with the ability to show their identity to limited actors in the supply chain.

Conclusion

Yes, there is a need for a permissionless blockchain.
Benefits that are particular to a permissionless blockchain:

  • Provides overview and special clearance levels for watchdogs and governments
  • Helps create Audit reports / Official Due Diligence
  • Serves as a logistic cross-company tracking system
  • Provides decentralised warranty and insurance services
  • Increases accuracy of information for supply chain mapping
  • Creates a clear chain of custody for counterfeit detection

Digitisation itself has many other interesting applications that could affect and benefit this project at a later stage including:

  • Improving auditing processes
  • Demonstration of provenance for other minerals and resources
  • General traceability for different industrial sectors
  • Simplify regulatory compliance
  • Information for recycling

Future Applications for Blockchain: DAO

Further down the line, a decentralized autonomous organization (DAO) could be created that ostracizes bad actors in the chain, governing itself.

  • Easily identifiable malpractice and governance
    • A pseudonymous graph of who trades with who
    • A mechanism to notify end-users of bad actors in their supply chain and submit public proof of allegations
  • Smart contracts on top of conventional trade agreements
    • Increased efficiency
    • More transparency

Down the road, there are two larger applications for a blockchain database in relation to this project.

The first application is being able to easily identify malpractice in the supply chain. If any wrongdoing is suspected or identified, the distributed database serves as a mechanism to decentrally notify other end-users that there’s a bad actor in their supply chain. From there, this actor can be called out with evidence against them and in time, a decentralized autonomous organization could be created that ostracizes bad actors in the chain and governs itself.

The second application is the ability to build smart contracts on top of the conventional trade agreements currently in supply chains to increase efficiency and transparency for the parties involved.

Product Roadmap

Roadmap

We’ve broken down our plan into four phases.

  • Phase 1: Develop a POC into an MVP and implement with 1 client
  • Phase 2: Improve MVP and scale, implement with multiple clients
  • Phase 3: Implementation consultancy & focus on organic growth
  • Phase 4+: Expand functionality to create a distributed market for responsible and sustainable financial products in the mineral supply chain

The first phase is constructed around validation of the idea and creating a viable product.

The second phase of the implementation is to improve an MVP to a scalable product, by increasing the amount of users through implementation consultancy.

The third phase is to focus on organic growth while still doing implementation consultancy. The learnings of the second phase can be applied to improving the product and organic growth.

After the first three phases are completed, the vision is to look at implementation of more complex financial products, generating a more sustainable supply chain economy that is fair and beneficial for every party involved.

Prototype Development Roadmap

Technical specifications

The prototype will be built on eight use cases for the users, defined here.

The application will be built on the following frameworks / technologies:

  • Development stack:
    • Node.js (express, mongoose, passport, Uport)
    • MongoDB
    • Truffle (React / Redux, web3, Jest)
    • Ethereum (Solidity, Remix, Truffle test framework)
  • Devops & CI:
    • Heroku
    • Github (open source)
    • Ropsten + Testrpc
    • loads of bash and makefiles

Prototype Development roadmap

  • Set up public git repository
  • Set up technology stack & CI pipeline
  • Build landing page
  • Build Prototype part 1 (non-distributed data entry for companies in a supply chain)
  • Build Prototype part 2 (fully connected supply chain gets notification to upload their document fingerprints on an ethereum smart contract).
  • Test prototype in the field
  • Discuss with users where the platform can be improved
  • Improve prototype
  • Repeat 6-8 until confident that we have (a roadmap to) an MVP, which can be implemented with clients using the implementation consultancy

Long term impact

This brings us to our long term impact. Here are some examples as it relates to different actors along the supply chain.

Additionally, by generating transparency and creating more complex financial products for the supply chain the conditions in each step of the supply chain are improved, starting with the source.

An example of a financial product that could be implemented in a later stage could be a loan or donation from an end-user to one of its’ sources.
Another example would be to create more insight into the community around a mine by paying out the workers in cryptocurrencies through a telecom network, an improved version of the M-Pesa. Creating a local crypto-economy.

Here's an overview of the long term impact per actor in the supply chain:

  • Mining communities
    • Improved working conditions
    • Higher wages
    • Healthier communities
  • Supply chain actors
    • Enhanced trade flows
    • Fulfilment of due diligence requirements
  • End-users
    • Enhanced insight in their supply chain
    • Ability to show consumers they are responsible corporate citizens
    • Due diligence cost reduction
  • Regulators & Banks
    • Better fulfilment of regulatory requirements
  • Consumers
    • Ability to choose sustainable products
    • Higher awareness of conditions of production
  • Supply chain actors
    • Loan or donation from an end-user to one of its’ sources
    • Local crypto-economy

Business plan

Our long term vision is to improve the livelihood of the millions of unknown faces behind your smartphone, electric vehicles, airplanes, computers, buildings, railroads, light bulbs,... every product that contains some sort of mineral.

Below you can find a summary of our business plan:

  • Vision
    Restructuring global mineral supply chain accountability and
    having end-users take responsibility for the working conditions at
    the source and throughout the chain.
  • Mission Statement
    Create a platform for (smart-)contracts in the mineral supply chain that serves everyone in the mineral supply chain.
  • Marketing Strategies
  • More efficient due diligence
  • Proof of involvement and direct action by end users
  • Saving costs in the process by automating financial constructions like factoring on the supply chain

We want to build a distributed protocol for tracking mineral supply chains, serving everyone’s needs and potentially create a crypto economy that is beneficial to all parties involved in the supply chain.

Our initial marketing will revolve around the set of documents can be served as evidence for an end-user for due diligence and thus serves as a store of value. An end-user can now take direct action to improve conditions in their own supply chain.

Cobalt Market

Cobalt is used various ways. The main market for cobalt is the production of lithium-ion (li-on) batteries, which are used in consumer electronics and car batteries. The growing demand for electric vehicles and home energy storage is driving the surge in demand for cobalt. Analysts project the cobalt supply deficit to increase by 83% to 5,340 tonnes between 2018 and 2020.

The Democratic Republic of Congo holds over half of the world’s known reserves. Sourcing from this region will thus remain crucial in order to realize the transition towards the green economy.

Furthermore, as similar types of actors are found in other supply chains, the model developed will provide significant insights to enable replication across other supply chains. For example, potential main candidates would be the ‘conflict minerals’: tin, tantalum, tungsten and gold (3TGs), where a more sophisticated blockchain supported model for the verification of responsible sourcing practices could replace existing schemes (see below). In the long run, the model could be adapted to other supply chains in which there are adverse human rights or environmental impacts, not restricted to minerals.

Market for Responsible Sourcing

Rising public scrutiny on the origin of products and on the impact of buying decisions promise a growing size of the market in the coming decades.

We’ve noticed a high demand for an efficient supply chain mapping protocol with the ability of creating more complex financial products on top of it. Apple, Fairphone, Cisco systems, and ABN AMRO have all shown interest in using and implementing this system as part of their due diligence.

Financial Construction

Mineral Track will be a non-profit foundation to be able to develop the tool. Alongside it, there will be an implementation consultancy helping users to apply the tool to their supply chains and donating all profits to the foundation

There will be 3 sources of revenue: Donations, profit from the implementation consultancy, and revenue generated from end-user use of the tool.

The financial roadmap is split up in 2 donation rounds, an intermediary plan of implementation consultancy and the eventual goal of organic growth of the platform.

It consists of the three phases in this roadmap. The donation round is broken up into two separate chunks to minimize risk exposure and to only trigger the second round if the milestones are met. If deemed necessary, the donation rounds can be split up into smaller tranches with related milestones.

To make sure the foundation becomes self sustaining as quick as possible, a consultancy is constructed next to it, donating all the profits back into the foundation for further development of the platform, until it becomes self sustainable through organic growth.

Measuring Impact

To measure the impact of our solution we've devised the following Metrics:

  • System Metrics:
    • Total number of supply chain participants identified
    • Total number of fully connected supply chains identified
  • Impact Metrics:
    • Volume of materials exported in transparent fashion (in compliance with international due diligence expectations)
    • Price improvements versus average market value for mining communities
    • Number of general resolved incidents at mine sites as well as incidents related to the presence of children gathered in cooperation with organizations like FairTrade or Better Sourcing Program

First off, the system metrics are there to measure the performance of the system itself. These are solid numbers like the amount of participants and fully connected supply chains.

The second category is the impact of the system on the ground. Together with the Better Sourcing Program we’ve defined three distinct factors for measurement: Volume, price and Resolved incidents.

Future metrics

  • Price of initial transaction could automatically be mapped against living income/wage data on a specific region/country. Assumption is that the more data on responsible sourcing is available, the more value the miner gets.
  • Positive impact on miners where mines in difficult context are not abandoned due to new scrutiny on their practices, especially when the mine can be linked more directly to the end-user.
  • Data on human rights issues in a specific region could be mapped against data on cobalt sourcing using the proposed method (hypothesis: more mines using our method means less negative impact).
  • Decline of whistle blowers and auditing systems (notifications of adverse human rights impacts) at a compliant and mapped mine site.
  • Stakeholder satisfaction could be used as a proxy (e.g. Amnesty praising Apple for top-class due diligence system).

Current situation & Similar Initiatives

Blockchain allows competitors to share a digital ledger across a network of computers without need for a central authority. Privately managed databases (eg. Source Intelligence, Assent, iPoint, etc.) currently exist to handle upstream and downstream supply chain documentation. The greater need for inherent security, transparency and authenticity in the supply chain and purchase process is not fully covered by the proliferation of software firms designed to help brands justify the cost of ethically sourced goods.

There are currently no efficient alternative systems to bridge the gap of information between Upstream and Downstream mass-balanced minerals supply chains. Existing upstream Due diligence schemes (eg. Better Sourcing Program, iTSCi, Fairtrade / Fairmined, Conflict-Free Smelter Program, etc.) only pass on information up to the smelter/refiner level, beyond which materials are commoditised and their origin unidentifiable. As for the downstream portion of the supply chain, it is characterised by heterogeneous and complex information flows and commercial confidentiality constraints.

Possible partners

A number of initiatives have been deployed locally to collect information relevant to supply chain due diligence. They do not involve a substitution risk as they do not systematically relate information to end-users; instead they represent potential upstream data providers.

The model that we intend to build consists of two parts: (Problem/Solution 2) the interfaces with which the supply chain actors interact, and (Problem/Solution 1) the back-end protocol which registers data on the blockchain and transfers ownership of that data through the supply chain.

These different initiatives would be ideal partners to use the interface along the supply chain to feed the different requirements of data step by step. At the Upstream level, Better Sourcing Program (BSP) would be a decisive partner to collect digitalised mine site-level information.

The iTSCi Programme and the Fairtrade / Fairmined standards could use our solution to deploy their traceability schemes in the upstream supply chain from mine to smelter.

At the Downstream level, the Conflict-Free Smelter Program (CFSP) would implement its conflict minerals reporting & the Conflict-Free Sourcing Initiative (CFSI) to identify compliant smelters to end users. Increasingly, Cobalt is being treated similarly as the defined conflict minerals. To this effect, end-users implement a due diligence process on their supply chain, cascading conflict mineral reports down into their supply chains to identify the refiners in their supply chain and verify sourcing conditions in a more efficient way.
The participation of the due diligence initiative in the system would be a decisive mean to significantly grow the amount of users to reach a scalability on the market.

Possible partners for an advisory board are: NGOs and public institutions, expertise/knowledge, privacy rights .

Intended users

Mineral supply chains are long and complex. Thus for the sake and scope of the hackathon, we simplified the exercise to one linear Cobalt supply chain. For this application, we categorised the users into three distinct groups:

  • Source (artsianal miners)
  • Supply chain actors
  • End-users (Retail)

Assumption 1: All actors have access at least to one computer with access to the internet. In reality, some actors might have access only to a basic smartphone with camera and internet access.
Assumption 2: Although the proof-of-concept focusses on one supply chain actor between source and end-user, in practice there are many more intermediaries.

Below we’ve defined personas of typical users in the supply chain. The list below provides a comprehensive picture of the cobalt supply chain in the scope of this exercise.

Source [Upstream]

Persona: Kapata miners, Kolwezi, DRC

Location: Mine

Consider the case of a small scale mine, with basic tooling and a certain security concerning land tenure there is no central structure able to feed information in a system. As the workforce is unorganised and individualised, there is a need to set-up a structure or collect information from individual miners.

Supply chain actor [Upstream]

Persona: Négociants/Traders

Location: Libanese traders with trucks, Kolwezi, DRC

Between the miners - and potentially a mining cooperative - and the smelters, exist several resellers of different size, before the ore is provided to a smelter. These intermediaries can be multiple on a same lot of ore, they can take care of a light processing of the ore and the transport to the smelting location. The multiplicity of these actors currently makes the traceability of ore impossible.
The grading of the ore occurs on-site with tooling (spectrometer) they own and usually decalibrated on purpose. The payment is realized only for the mineral with the highest concentration, and not for the other ones contained in the same lot.

Supply chain actor [Upstream]

Persona: DRC Smelter

At the smelter level the separation of cobalt from its ores and other compound ores like copper and nickel happens. The method of separation depends on the concentration of cobalt and the exact composition of the used ore. Smelting usually happens in DRC which is the first transformation of copper-cobalt concentrate (filter, drying, concentration of ore).
As a smelter receives ores from multiples sources (LSM, ASM and traders), this mass balance step (mixing cobalt ores) is usually the last point of traceability for end-users (downstream actors).

Supply chain actor [Upstream]

Persona: Chinese Refiner

The concentrate (15-30%) is then shipped to the refiner. The majority of the refining capacity of Cobalt is based in China where the process follow from precursors to Cobalt cathodes where the concentration of Cobalt can reach up to 99.98%.

At longer term the aim is to develop more concentration facilities in the extraction country directly. Cobalt concentrator facilities are scarce and basic in the DRC. Concentration activities gives a more efficient transport of material and a better income locally (taxes, local workers, higher price for sale).

Supply chain actor [Downstream]

Persona: Chinese battery producer

Battery cell and battery packaging producer process the cobalt cathodes to manufacture lithium-ion battery cells for the electronic and car industries. The industrial process is chemicals-consuming and includes the integration of other essential minerals for battery production like lithium, copper and graphite.

End-user [Downstream]

Persona: Smartphone company

The end-user is an electronic company, retailer of an consumer's electronic device containing a lithium-ion battery of around 40-50, with around 8 to 10 grams of Cobalt.

Initial smart contract

In the hackathon we weren't able to implement the smart contract in our system yet, but we made an initial setup for what the contract should look like for the POC.

pragma solidity^0.4.13;

/**
 * @title Ownable
 * @dev The Ownable contract has an owner address, and provides basic authorization control
 * functions, this simplifies the implementation of "user permissions".
 */
contract Ownable {
    address public owner;

    // log owner events
    event TransferOwner(address newOwner);

    /**
    * @dev The Ownable constructor sets the original `owner` of the contract to the sender
    * account.
    */
    function Ownable() public {
        owner = msg.sender;
    }

    /**
    * @dev Throws if called by any account other than the owner.
    */
    modifier onlyOwner() {
        if (msg.sender != owner) {
            revert();
        }
        _;
    }

    /**
    * @dev Allows the current owner to transfer control of the contract to a newOwner.
    * @param newOwner The address to transfer ownership to.
    */
    function transferOwnership(address newOwner) onlyOwner public {
        if (newOwner != address(0)) {
            owner = newOwner;
            TransferOwner(newOwner);
        }
    }
}

/**
 * @title MineralTrack
 * @dev The MineralTrack contract inherits an owner modifier,
 * and manages document fingerprint data for the owner's address.
 */
contract MineralTrack is Ownable {


    mapping (bytes32 => address) public fingerprints;

    event FingerprintStored(bytes32 fingerprint, address sender);
    event TranferFingerprintOwner(bytes32 fingerprint, address sender);


    function MineralTrack() public {}

    modifier onlyFingerprintOwner(bytes32 fingerprint) {
      require(fingerprints[fingerprint] == msg.sender);
      _;
    }

    modifier unclaimedFingerprint(bytes32 fingerprint) {
      require(fingerprints[fingerprint] != 0x0);
      _;
    }


    function transferFingerprint(bytes32 fingerprint, address newOwner) onlyFingerprintOwner(fingerprint) public {
        fingerprints[fingerprint] = newOwner;
        TranferFingerprintOwner(fingerprint, newOwner);
    }


    function setFingerprint(bytes32 fingerprint) unclaimedFingerprint(fingerprint) public {
          fingerprints[fingerprint] = msg.sender;
          FingerprintStored(fingerprint, msg.sender);
    }

    function getFingerprintOwner(bytes32 fingerprint) public constant returns (address owner) {
        return fingerprints[fingerprint];
    }
}

Team members

Our team consists of a balanced mix of mentors, experts designers and developers.

Name Expertise Team
Benjamin Clair Supply chain Mentors
Brian Iselin Supply chain Mentors
Kasper Meilgaard Software engineer (Backend) Developers
Mark Barras Software engineer (Smart contracts) Developers
Mieka John UI/UX Design Designers
Pieter-Jannick Dijkstra Visual design Designers
Ruben Zandvliet Sustainable Banking Experts
Sylvain Mignot Supply chain Experts
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