CLOSE

We permit the publication of our auditors’ report, provided the report is published in full only and is accompanied by the full financial statements to which our auditors’ report relates, and is only published on an access-controlled page on your website https://www.hermes-investment.com, to enable users to verify that an auditors’ report by independent accountants has been commissioned by the directors and issued. Such permission to publish is given by us without accepting or assuming any responsibility or liability to any third party users save where we have agreed terms with them in writing.

Our consent is given on condition that before any third party accesses our auditors’ report via the webpage they first document their agreement to the following terms of access to our report via a click-through webpage with an 'I accept' button. The terms to be included on your website are as follows:

I accept and agree for and on behalf of myself and the Trust I represent (each a "recipient") that:

  1. PricewaterhouseCoopers LLP (“PwC”) accepts no liability (including liability for negligence) to each recipient in relation to PwC’s report. The report is provided to each recipient for information purposes only. If a recipient relies on PwC’s report, it does so entirely at its own risk;
  2. No recipient will bring a claim against PwC which relates to the access to the report by a recipient;
  3. Neither PwC’s report, nor information obtained from it, may be made available to anyone else without PwC’s prior written consent, except where required by law or regulation; and
  4. PwC’s report was prepared with Hermes Property Unit Trust's interests in mind. It was not prepared with any recipient's interests in mind or for its use. PwC’s report is not a substitute for any enquiries that a recipient should make. The financial statements are as at 25 March 2017, and thus PwC’s auditors’ report is based on historical information. Any projection of such information or PwC’s opinion thereon to future periods is subject to the risk that changes may occur after the reports are issued and the description of controls may no longer accurately portray the system of internal control. For these reasons, such projection of information to future periods would be inappropriate.
  5. PwC will be entitled to the benefit of and to enforce these terms.
I accept
CLOSE

1. Select your country

  • United Kingdom
  • Austria
  • Australia
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Iceland
  • Ireland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • USA
  • Other

2. Select your investor type

  • Financial Advisor
  • Discretionary Investment Manager
  • Wealth Manager
  • Family Office
  • Institutional Investor
  • Investment Consultant
  • Charity, Foundation & Endowment Investor
  • Retail Investor
  • Press
  • None of the above

3. Accept our terms and conditions

By clicking Proceed I confirm I have read the important information and agree to the terms of use.

Proceed

The Hermes Investment Management website uses cookies to remember your preferences and help us improve the site.
By proceeding, you agree to cookies being placed on your computer.
Read our privacy and cookie policy.

Blockchain for good?

Improving supply chain transparency and human rights management

Home / EOS Blog / Blockchain for good? Improving supply chain transparency and human rights management

Following the launch of bitcoin futures on 10 December 2017, it is a good time to look at the technology that has enabled their ascent and application in many sectors – blockchain.

Bitcoins originate from Satoshi Nakamoto’s 2008 paper called Bitcoin: A Peer-to-Peer Electronic Cash System. The standardised, decentralised blockchain registration process serves as an ongoing cryptographic proof-of-work, providing transparency of the value chain.

Application
The development of bitcoin technologies has led to an increase in applications. Two Australian banks, for example, use the technologies as a bank guarantee for commercial property leasing, eliminating the need for physical documents for multiple transactions. The technology is also increasingly more frequently used in the management of supply chains – from seafood and tea to diamonds.

From January 2018, the Seafood Import Monitoring Programme requires specific data about seafood imports to be provided electronically to the US Customs and Border Protection. The origin of seafood, for example, is recorded in a global tracking system. In trade, fish from Europe could be sent to China, get filleted and then be shipped to freezers in South Korea for large retailers. Without such a transparent monitoring process, we are exposed to significant food safety risks, as well as the possibility of the involvement of child or slave labour.

A group of companies, including Nestlé and Unilever, joined a food supply chain project in August 2017. As part of this, due to improved data, small-scale farmers are able to get bank loans with more favourable terms, thus improving their productivity and quality of life. Blockchain technology is also used to ensure certification, for example when it comes to organic food.

Engagement
In November 2017, we participated in the International Council on Mining and Metals (ICMM) roundtable on the application of blockchain technology in the minerals supply chain. Technology company Everledger described its experience in monitoring the diamond supply chain. Knowing the origin of a diamond helps to reduce counterfeits, insurance fraud and smuggling from conflict regions because digital certificates are more difficult to forge than their paper counterparts. As the only investor representative at the roundtable, we urged companies to find reliable, transparent and cost-effective ways to certify that their supply chains are sustainable and free from slavery and corruption.

We have long highlighted the challenges of monitoring the cobalt supply chain engaged to understand the root causes of human rights violations in the chain. Since then, cobalt prices have rocketed by over 40% as demand for cobalt continues to rise, boosted by an increase in the number of electric vehicles whose batteries require the mineral.

The companies we have engaged with have done well in improving their cobalt supply chain. US technology company Apple, for example, has expanded its responsible sourcing efforts beyond tin, tungsten, tantalum and gold to include cobalt. Samsung SDI, a key battery manufacturer for Apple and Samsung Electronics, has published a supply chain responsibility report, in line with the OECD Due Diligence Guidelines for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. Together with other members of the Responsible Cobalt initiative (RCI), the two companies also led a collaborative academic study in order to create sustainable societal impact on local communities.

The Chinese cobalt smelter and refinery, Huayou Cobalt, which had been heavily criticised by Amnesty International for allowing child labour in its mines, conducted a detailed presentation at the OECD Responsible Supply Chains Conference in Paris in May 2017. The presentation gave an update on the company’s engagement with the local community, as well as on improvements on training and health and safety improvements in its operations in the Democratic Republic of Congo. While we were pleased to see this progress, the application of blockchain technology still failed to meet our expectations. Fortunately, RCS Global, the responsible sourcing advisory and audit group that has worked with many of the aforementioned companies on this issue, came up a potential solution. It has mapped out a 12-step blockchain-based chain of custody system for the minerals supply chain. To make it work, the key players in the chain must agree a set of input data to define its features. The system can, for example, create a mineral fingerprint of cobalt, which is a by-product of copper, that analyses its content for impurities.

Stewardship
During the multiple stages of transformation of minerals, there needs to be a clear approach to ensure that all the materials used are child and slave labour-free, not just cobalt. Downstream buyers should therefore agree common production and material stewardship standards and associated purchasing terms to promote best practices.

With improved traceability, companies can also improve the quality of the end product and the use of recycled materials, thus contributing to the circular economy. We are only at the beginning of this journey, although I am confident that given the progress in many sectors on blockchain applications, we are closer to our goals than ever before.

By using the links above, you will be leaving the Hermes website. Hermes has no control over the content on third party websites.

Share this post:
Christine Chow Dr Christine Chow is responsible for the financial services, technology and extractive sectors in Asia ex-Japan. She has 19 years of experience in portfolio management, research and investment consulting. Christine's PhD thesis on shareholder engagement for responsible investment was short-listed for a UN award in Sweden for industry relevance and academic excellence. She is an adjunct associate professor in the Department of Finance at the Hong Kong University of Science and Technology. She is a governor of the London School of Economics and a member of the university’s investment committee. She was also a member of the greater China committee of the Hong Kong Retirement Funds Association between 2014-2016. Christine has worked at a number of multinational corporations such as Merrill Lynch, Schroders and Hewitt. In the 1990s, she was responsible for establishing strategic partnerships in fund management for the Schroders Group, especially in Mainland China. Christine is a graduate of the London School of Economics and the University of Melbourne. She also completed an executive education course on financial engineering at Stanford University.
Read all articles by Christine Chow

Find posts by author

  • Alex Knox, ACA
  • Bill Mackenzie
  • Bruce Duguid
  • Christine Chow
  • Claire Gavini
  • Colin Melvin
  • Darren Brady
  • Dominic Burke
  • Dr Michael Viehs
  • Emeric Chenebaux
  • Emma Hunt
  • Geoffrey Wan, CFA
  • Hans-Christoph Hirt
  • Harriet Steel
  • Ilana Elbim
  • Jaime Gornsztejn
  • Jonathan Pines, CFA
  • Joseph Buckley
  • Justine Lutterodt
  • Leon Kamhi
  • Louise Dudley
  • Mark Sherlock, CFA
  • Maxine Wille
  • Michael Russell, CFA
  • Michael Vaughan
  • Michael Viehs
  • Natacha Dimitrijevic
  • Nick Spooner
  • Nina Röhrbein
  • Peter Hofbauer
  • Philip Nell
  • Rochelle Giugni
  • Roland Bosch
  • Sachi Suzuki
  • Saker Nusseibeh
  • Silvia Dall’Angelo
  • Tatiana Bosteels
  • Tim Goodman
  • Tommaso Mancuso
  • Yasmin Chowdhury

Find posts by category

  • eos
  • governance
  • social
  • stewardship