Blockchain for the Python Skins Supply Chain

Blockchain for the Python Skins Supply Chain.

The illegal trade in python skin generates $1+ billion annually, according to a 2012 report by the International Trade Center.

Given that python skin has become one of the most pronounced sartorial trends of recent years, this number can only be expected to have increased. If the status quo continues, continued demand will support an unethical and unsustainable supply chain mired in ambiguity and complexity.

Consumer demand is driving a supply chain whereby for every legally obtained animal skin, another will be illegally poached, as estimated by the Convention on International Trade of Endangered Species (CITES), the primary regulatory body in the python skin industry. South-East Asia alone imports more than 500,000 skins legally into Europe each year.

In this post, we will explore the unique challenges in the python skins supply chain and how a blockchain-based asset tracking solution can address them.

What’s wrong with Python Skin Trade?

The trade-in python skin is problematic for more than its frequent illegality. It is mired in an opaque supply chain that often allows for cruelty and unethical practices, drawing mounting consumer, supplier, and regulatory concerns.

Pythons Are Endangered (Despite Their Resilience)

According to CITES, if properly harvested, the python is “a species resilient to high levels of harvest.” Despite this fact, consumer demand for python skin is driving demand beyond their resilient levels.

The python skin trade preys on a species classified under CITES Appendix II, labeling them as a species not immediately threatened with extinction but at risk of becoming so if trade is not regulated and they continue to be exploited.

The International Trade Center’s recent report on the python skin trade in South-East Asia found that many pythons are killed before reaching sexual maturity, having an adverse effect on the ability of the population to maintain stable levels.

Why is this happening?

• Highly Lucrative Business
• Lack of Regulation around Python Skins
• Unethical Practices in the Illegal Python Skin Trade

Jump straight to how STRATO will facilitate a solution for the python skin supply chain
STRATO ASSET TRACKING SOLUTION

A Complex Supply Chain

Illegally sourced snakes are initially found by hunters who are typically poor and dependent on their prey as sources of income. These hunters then sell the python skins for slaughter to a slaughterhouse, where they are processed and sent to a tannery.

From there, the skins are sent to fashion factories, where they are made into boots, belts, handbags, and more.

These items then enter the often lengthy fashion supply chain and are eventually sold in stores to consumers, primarily in Italy, France, Switzerland, and Germany.

Between all of these points, there are also transport services, increasing the number of interested parties. Additionally, around 70% of python skin exports are re-exported via the Republic of Singapore, where they are often stockpiled.

Unique Traceability Challenges

Python skin traceability is a uniquely multi-faceted and multi-national challenge.

• Traceability Across the Globe
• Traceability Across Time
• Traceability of Authenticity

A Known Industry Issue

The situation has been so pressing as to motivate Kering, the parent company of brands such as Gucci, Saint Laurent, and Alexander McQueen to establish their own python farm, creating their own autonomous supply chain rather than sourcing through independent hunters and supply chains.

“Today, there is no way to be fully sure where the skin comes from.”
Marie-Claire Devau, CSO, Kering SA

The establishment of a directly-owned farm is not only a testament to the level of difficulty in traceability but also a strategic statement in support of corporate responsibility.

The New Financial Value of Sustainability

While there is undeniable financial value in the illegal trade of python skin, increasing regulation and consumer awareness is already “wearing” on the industry.

In October 2019, McKinsey released a report entitled ‘Fashion’s new must-have: Sustainable sourcing at scale,’ which detailed the results of a survey of 64 executives collectively responsible for sourcing more than $100 billion of goods. All participants in this survey reported a sense of urgency around integrating sustainability, traceability, transparency, and digitizing sourcing processes.

1. Sustainability Tied to Executive Compensation
   As such, Kering is making an environmental and financial move by opening its python skin farm. Marie-Claire Daveu said: “This is a long-term commitment to developing sustainable and responsible sourcing of Kering’s python skins.”Kering has also made 10% of their chief executive’s annual bonus contingent on them fulfilling sustainability goals.Kering is also a pioneer of the “environmental profit-and-loss statement”, or EP&L, a process measuring the environmental costs and benefits of a company’s operations. Kering’s goal is to decrease its total environmental impact, as recorded via EP&L, by 40% by 2025.

1. Sustainability is Driving Generation Z Purchase Decisions
   Today’s consumers value sustainability more than ever before and are willing to pay a premium for it.Nine in ten Generation Z consumers are adamant that companies have a responsibility to address environmental and social issues, a critical statistic given that Gen Z already accounts for 40% of global consumers. A recent CGS survey found that over one-third of consumers will pay 25% more for sustainable than non-sustainable products. More importantly, according to Nielsen, “cruelty-free” and “farm-raised” are two of the four sustainability attributes consumers are most willing to pay more for.

STRATO Solution

A company such as Kering is in a unique position to convert this challenge into a monetizable strength.

To create credibility, foster consumer trust, and truly monetize on sustainability Kering’s efforts must be legitimate and verifiable.

The best way to do this in the python skins market is to create traceability, not only for the Kering farm but for the industry as a whole.

• Traceability Across the Globe, Time, and Authenticity
• A Cooperative Network of Sustainable Parties
• Automation and Digitization of Systems
• Consolidated Data

If all actors on a supply chain were to integrate with the STRATO platform, they would be inherently held accountable, as the system would automatically update data in real time and with guaranteed accuracy.

It would be near impossible, for example, for stockpilers to shroud the true count of skins at hand, as the supply chain players before them would have entered immutable data into the universal, shared system.

1. Traceability with STRATO
   It would be near impossible for any party to misrepresent the journey of any given python skin.STRATO automatically records its origins, movements, and associated agents. It also makes immutable and real-time notation of a skin’s value so as to represent any falsification on that account.Not only would increased traceability drive a clear record of origin and sourcing, STRATO’s smart contracts feature could hold parties to certain agreed-upon terms and store and digitize relevant permits and licenses in order to prevent fraudulent copies.For example, export permits could be stored directly on the network to strengthen the credibility of CITES certification. Smart contracts could also be used to automatically trigger penalties if broken, and any breaches could be easily detected to create a level of deterrence.Additionally, by clearly logging each movement of a python skin, STRATO also creates a clear record of any and all parties interacting with it. This inherently simplifies the complex supply chain at hand: by mapping it, STRATO renders it comprehensible and to an extent, easier to control.
2. Monetizing Sustainability with STRATO
   A single source of truth, with digitized and consolidated data as provided by STRATO, would provide unparalleled and indisputable evidence of sustainability. Given that social impact is difficult to prove and quantify, STRATO could propel a brand and its network to a unique level of achievement and credibility, monetizing sustainability so that distributors and retailers could efficiently assign premiums to verified sustainable traders.This could benefit parties at each step of the supply chain, down to the local hunters at the bottom, who could be efficiently rewarded for the legality and paid premiums for sustainability. Stable and controlled captive farming businesses (such as Kering’s) could even provide hunters with more regular employment than hunting them in the wild.

Building an Industry Network Solution with STRATO

• Start at the Source
  The establishment of an independent, self-contained farm such as Kering’s allows an unprecedented level of control and access to a skins movements from end to end, rendering Kering a perfect place to start a case study for the potential of STRATO in creating responsible python skin supply chains.
• Trace a Select Few Assets
  STRATO’s platform allows brands to trace a selected number of assets from end to end. This information can then be communicated to consumers through a QR code attached to each asset. This newly available data presents an immediate marketing opportunity which can be used to drive and confirm market validation.
• Integrate Existing Technology
  Through STRATO, the python skin supply chain network can quickly transition from manual operation to a digitized system automatically integrated with existing technologies such as ERP & logistics software. This capability is made possible by STRATO’s RESTful API and would allow for the procurement of far more comprehensive, accurate, and time-sensitive data – which enforces higher standards for the data on the supply chain in general and unlocks initial business intelligence & logistics savings.
• Grow the Network
  STRATO’s scalability is intended to enable to a cost-effective expansion of networks.
  For the python supply chain, a network could begin with a sustainable, self-contained farm and grow to contain other partners, seamlessly integrating each onto the network for automated data collection and communication between parties.
  
  This process can begin downstream with other capable farms that require minimal persuasion or alterations to their process to operate. Concurrently, larger mid-stream operations can begin their integration and create a cycle of adoption – eventually including other less-established farms and facilitating their transition to sustainability.
• Integrate New Technologies
  Once the supply chain network has reached a “critical mass” in terms of verifiable traceability and sustainability, STRATO could also be used to integrate with new technology systems such as DNA or isotope testing technology.This testing can determine whether a python is sourced in the wild or bred in captivity and be used to confirm the exact species, automating away the challenge of authenticity at an incredibly granular level.

  In addition to the growing credibility and data capture benefits, STRATO can also use such a technology as a verification method – allowing the network to seamlessly scale, adding other sustainable hunters as verified and trusted, while poachers can be excluded.

• Expand Network Capabilities
  Once (or even before) the industry network has grown to encompass a meaningful level of activity for python skins, it can scale further to add other downstream companies in varied locations, as well as a broader range of products as dictated by consumer demand. With every vertical and horizontal expansion of the network, a new level of automation and business intelligence capabilities will naturally surface.