Using digital technologies to promote decent work and economic growth
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United Nations Sustainable Development Goal 8 aims to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.”
Economic growth in the industrial and technological eras has often involved producing goods in regions with lower pay and weaker regulation on worker protection. Mining is an industry that often occurs in less economically developed areas of the world such as Africa and South America (Maconachie and Hilson, 2011), or on indigenous land in the economic north. The locations of some mines in these regions, and the institutional weaknesses found there, create risks for workers which have led to legislation aimed at protecting people vulnerable to labour and related abuses in supply chains. In particular, the mining of four specific minerals – tantalum, tungsten, tin, and gold – are regulated under so-called ‘conflict mineral’ laws in both the United States and the European Union. ‘Conflict minerals’ are those mined in areas which are conflict-affected or at high risk of conflicts, which both exacerbate and rely on labour abuses as a source of inexpensive labour to produce valuable materials.
What is a ‘blockchain’?
A blockchain is a type of distributed ledger technology (DLT). DLTs are, like traditional ledgers, lists of transactions. And like traditional ledgers, blockchain was created to record financial transaction data. Unlike with traditional systems, however, blockchain transactions do not require an intermediary – a bank for example – because the blockchain system is a closed system and the data are stored on all the computers within that network. Data are entered into a block, generating a unique cryptographic code (a ‘hash’) and a time stamp. When another transaction takes place, this process is repeated, and the hash from the previous transaction is added to link the two blocks together. Linked records therefore create a ‘chain’ of ‘blocks’ – a blockchain. In a mining context, ‘transactions’ can be recorded when the mined ore is transferred from mine to a means of transporting it to a testing laboratory, smelting facility, or other next stage of the process. At every stage of the ore’s journey thereafter, each change of ‘ownership’ (which we call the ‘chain of custody’) is recorded, and the data added to the blockchain so that the blockchain contains a list of every detail relevant to the tin’s journey, including who has recorded the information.
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How was the technology used?
Minespider is a Berlin-headquartered provider of blockchain services for responsible supply chain management. The company employed its blockchain solution for labour rights assurance by tracking using its product passport service to record cassiterite (the mineral which is processed to become tin) mined at the San Rafael mine in Peru. Cassiterite is recorded as it is mined, tagged using a quick response (QR) code, and then tracked through the various processing and transportation stages from the mine, including through chemical testing by SGS, a Swiss assurance firm. At each stage of the supply chain, data are added to a continuously growing record (the product passport) for the shipment. The result is that, when the tin arrives in China for use as solder in electric vehicle batteries and consumer electronics, a full record exists of where specific shipments have been and who has handled them and when. Labour inspections carried out at San Rafael are also recorded on the blockchain, meaning that the tin used in specific electronic goods can be traced back to the mine, demonstrating an unbroken chain of custody which evidences decent work and a lack of conflict-affected tin in those devices.
Costs of adopting the technology
Development of Minespider’s app was financed in part by European Union grants of almost €2,500,000 (around $2,800,000) of the total €3,300,000 (around $3,750,000) cost. Minsur mined 20,273 tonnes of tin at San Rafael in 2019, the year the project began. At an average of $20,000 per tonne, the $3,750,000 development costs were therefore able to assure around $400,000,000 of tin in 2019. The system is extremely inexpensive to maintain, however, so while the first year’s costs were around 1% of the tin mined, every shipment of tin from San Rafael brings down the overall cost per tonne substantially. A senior manager at Minespider has described longer term the costs of tracking tin as amounting to “pennies per [$500,000] container”.
Benefits of the technology
The use of blockchain technology in this case offers three major benefits. First, the system is able to track material more efficiently than previous systems. Data can be more quickly and accurately entered into a system because the digital system can recognise unlikely numbers such as incorrect decimal point position in a document, can be shared more quickly and more widely, and are retained in a product passport as a form of evidence that cannot become lost. Second, in using a multi-layered blockchain design, the actors involved retain ownership of their own, commercially sensitive data on a private blockchain layer while being able to share data required by authorities on a permissioned layer and offering data such as evidence of materials origin and labour rights to consumers on a public blockchain layer. Third, because the identity of individuals and entities recording information in securely and immutably stored on the blockchain, data can be checked at any time. This benefit reduces the incentive for fraud between parties to a contract, enabling trust through digital accountability.
Barriers, problems, and challenges
The two main challenges faced by Minespider’s Peruvian mining project were financial and legal. Financially, the up-front development cost of the large-scale blockchain project was expensive because the system was built from scratch, requiring coding expertise which remains scarce. Without European Union funding, the project is likely to have taken much longer to find the money for the project, if it could have been funded at all. Legally, the firms involved in the project, for whom the tin was tracked, had to ensure that the data shared on the blockchain did not constitute anti-trust issues with authorities.
Lessons learned for other organisations wanting to implement a similar program
The main lesson from the Minespider blockchain project with Minsur at the San Rafael mine is that a blockchain can offer reliable traceability of minerals back to the mine from which they came. As a result, targeted checks on labour standards can be carried out for specific shipments and uses of the minerals produced at that mine. Two main challenges to the system have been identified.
- First, although the system offers assurance of material provenance and the ability to provide targeted checks on working conditions, the blockchain itself cannot yet record and monitor those conditions. Data from employee payslips, CCTV cameras in mines, and third-party interviews with mine employees could be collected and stored on the blockchain to provide further evidence of compliance with accepted standards and laws. However, these methods require the collection and storage of often sensitive personal data and a solution to the difficulties of collecting sufficient data which is not so problematic has not yet been identified.
- Second, the system currently works in an environment in which a small number of large, powerful firms (Google, Volkswagen, Cisco) are party to the project. Where a larger number of firms is involved, and especially where there is a disparity between the size and influence of the actors, the equitable sharing of data and distributed nature of the system between the parties may not be possible.
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