JBS, the world’s largest meatpacker, is turning to blockchain to ensure the traceability of the tens of thousands of cattle it processes every day in Brazil, following intense pressure from both investors and activists over its environmental record.
The São Paulo-headquartered company has long faced criticism from non-governmental organisations for not doing enough to ensure that cattle coming from indirect suppliers — ranchers that provide animals to JBS’s direct suppliers — are not being raised on illegally deforested Amazonian lands.
More recently, amid mounting international pressure on the Brazilian government over the growing destruction of the Amazon rainforest, Brazil’s largest company by revenue has found itself in the crosshairs of investors who have threatened to pull funds unless the company improves its policies on sustainability.
In July Nordea Asset Management decided to exclude JBS shares from its funds due to environmental concerns. Analysts at HSBC have also warned about investing in the meat group, saying it had “no action plan, technology or solution” to monitoring its cattle supply chain.
On Wednesday, however, JBS moved to act, with the announcement of a digital ledger to trace all of its livestock back to origin. The company said that within five years its direct suppliers would be obliged to monitor their own supply chains and ensure they have documentation to prove the origins of the cattle.
The company added that the ledger would be audited by external parties and would include information-sharing provisions so that Brazilian banks would be able to determine whether they are lending to cattle ranchers associated with the destruction of the rainforest.
“The new platform will provide an essential layer of information to enable cattle to be traced throughout their lives and ensure any cattle from producers involved in illegal deforestation cannot enter the JBS supply chain,” the company said on Wednesday.
Investors welcomed the development. “Of course much remains to be proven regarding the exact impact and timelines, but [this is] definitely a significant step forward,” said Eric Pedersen, head of responsible investments for Nordea Asset Management which has €223bn under management.
Jeanett Bergan, head of responsible investments at KLP, Norway’s largest pension fund, lauded the use of “new technology . . . to drive the sustainability agenda forward” but said she awaited “detailed evidence in practice” as to its success.
Robert Muggah, co-founder of think-tank the Igarapé Institute, added that the initiative would require proficiency in technology to function properly. “Will indirect suppliers in the middle of the Amazon have access to the internet, hardware and the digital literacy to manage this process?” he asked.
The adoption of blockchain technology by the Brazilian company follows similar initiatives in the US and Australia, where cattle ranchers are increasingly sensitive to customer concerns about the impact of the meat industry on the environment.
“The use of blockchain is excellent. It is a great technology. But the important question is where the data is coming from and what is the legal framework behind the cattle transaction data you’re using,” said Petterson Vale, a consultant on agriculture in the Amazon.
Despite the growing furore surrounding the corporate impact on the environment in Brazil, JBS had a blockbuster second quarter, surpassing oil group Petrobras last month to become the nation’s largest company by revenue with sales of R$67.6bn in the three months to June. The group was buoyed by a weaker local currency combined with sustained demand for produce throughout the Covid-19 crisis.
The company’s role in global food supply chains was highlighted at the United Nations on Tuesday by Brazilian president Jair Bolsonaro, who said the country’s agribusiness sector was “feeding the world” and that this had made Brazil a target for protectionist forces abroad.
Additional reporting by Carolina Pulice