Fighting Fraud with Tech – RSB, Bioledger build up blockchain for biofuels traceability  

The Roundtable on Sustainable Biomaterials and Bioledger are using blockchain technology to fight fraud and see how it can support traceability of biofuel and its feedstocks and overcome the vulnerabilities identified in securing the supply of sustainable renewables. The proposed solution — a blockchain database that enables verifiable proof of origin, secure consignment creation, process simplification, audit efficiency, data integrity, and central governance — was prototyped and trialed with project partners to process a total of 1,927,906 liters of feedstock, accurately representing real-life commercial and operational processes.

In today’s Digest, how blockchain can help prevent fraud in biofuels, details on this RSB, Bioledger project which included Greenergy and other real-world biofuels players, reactions from the stakeholders, and more.

First, what is blockchain?

A blockchain is a continuously growing list of records, called blocks, that are linked and secured using cryptography. By design, blockchains are inherently resistant to data tampering, and are typically managed collectively by a peer-to-peer network adhering to a protocol for validating new blocks.

The revolutionary potential of blockchain is evident from the success of virtual currencies such as Bitcoin but new applications for this technology are rapidly emerging across a variety of sectors, including health care, energy and real estate. For sustainability standards, blockchain’s promise of increased transparency and reduced fraud could bring a revolution in supply chain certification.

Who are the project players?

The Roundtable on Sustainable Biomaterials is an international, multi-stakeholder, independent organization that supports the development of the global bioeconomy through sustainability solutions, certification, innovation and collaborative partnerships.

Bioledger Ltd. is a software development company formed by biofuel industry stakeholders in response to the risk of fraud and noncompliance in the certified sustainable biofuels market in 2019.

ISEAL is the global membership organisation for ambitious, collaborative and transparent sustainability systems. Through the ISEAL Innovations Fund, members can practically test innovations that help systems deliver more value to their stakeholders, and effectively drive improvement over time, and at scale.

RSB and Bioledger’s blockchain project

Bioledger and RSB explored a solution to fraud risk, leading to the development of a highly innovative, simple, and secure centralized database for tracking the data generated by biofuels transactions, utilizing the powerful and incorruptible capabilities offered by blockchain technology.

To evaluate the efficiency and suitability of the database, the prototype was piloted by four partners involved in the production and distribution of fuels made from used cook oil (UCO). These partners were Greenergy (UK), Europe’s largest waste-based biodiesel producer; Rexon Energy (Singapore), an exporter of UCO to the EU; Bensons Products (UK), a UCO collector; and Valley Proteins (USA), a UCO collector and exporter.

By piloting the approach with such a diverse group of partners, the project was able to identify recommendations and observations to build out a full database to be used by industry globally to improve transparency and control in certified sustainable biofuel supply chains. These observations and recommendations are available in the final report “Blockchain Database for Sustainable Biofuels: A Case Study” available here and in the Executive Summary to the report here.

This blockchain prototype was recommended by industry stakeholders as one of the most comprehensive, credible and robust biofuel databases available to the European Commission, which is looking to develop a Union Database as part of EU RED II implementation.

RSB and Bioledger aim to support the biofuel sector in the EU and beyond to have confidence in the provenance of the fuels they use — that they are truly sustainable, that supply chains are transparent and that they are having a real, positive impact on the climate crisis.

Both organizations continue to engage with industry and regulatory stakeholders towards ensuring that the technical capabilities to mitigate fraud, restore trust, and build transparency — as outlined in this report — are integrated into industry standards and digital platforms such as the RED II database for renewable road transport fuel and international sustainable aviation fuel.

Bioledger is utilizing the lessons gained from the pilot project to provide a new blockchain database for the biofuels market. RSB and Bioledger are committed to building upon the lessons learnt through this project and making such a database — based on the principles of transparency, sustainability, and good governance — a reality.

The project was made possible by a grant from the ISEAL Innovations Fund, which is supported by the Swiss State Secretariat for Economic Affairs (SECO).

What the blockchain study found

During the piloting of the database, it was demonstrated that a significant number of transparency and accountability issues in the UCO biofuel market can be resolved by the technical solutions that a blockchain database offers — either exclusively or in a far superior manner to the typical data management methods currently used in the supply chain, such as paper and digital transactional documents, spreadsheet programmes, and relational databases.

New solutions, such as verifiable proof of origin, secure consignment creation, process simplification, audit efficiency, data integrity, and central governance were developed through this blockchain prototype, and the following recommendations and observations were made:

• A full blockchain database solution ensures true decentralization and transparent governance of trades with blockchain nodes hosted by trusted regulators and stakeholders.
• The system should be designed to enable stakeholders to easily integrate data using new digital interfaces or existing data systems, while these interfaces need to be carefully managed to control data quality.
• This solution had business rules developed in line with the specific use case (biofuel markets using the EU RED Voluntary Scheme), but a scalable solution should include the development of a configurable business logic layer to account for different markets.
• To increase the strength of evidence and minimize the risk of errors and fraud at data point of entry, the blockchain solution should include the use of biometric authentication, photos, signatures, and geolocation.
• A full blockchain solution should record all mandatory data points from EU RED requirements within its data architecture, in order to replace the currently ubiquitous paper-based chain of custody documents.
• Existing legal agreements between supply chain companies and their auditors, certification bodies, and voluntary schemes already provide the necessary protections to allow private disclosure of sensitive commercial data within the blockchain database.

The project recommendations are made with acknowledgement of the fact that a major hurdle in the development of a blockchain database for sustainable biofuels will be the cost involved in building a solution which captures the complex requirements of the biofuel regulations and their international supply chains. However, these same legal frameworks provide a firm foundation to define digitized compliance logic, governance roles, actions and responses that are permitted within the blockchain database. The pilot project is an example of how blockchain technology can be used to develop a commercially viable solution to meet industry and regulatory requirements on scalability and security within a limited time period and budget.

The database initiative and the recommended features for improving transparency and control in certified sustainable biofuel supply chains were welcomed during presentations to several European Union member state biofuels regulatory agencies, including the EU Renewable Fuels Regulators Club (REFUREC), the UK Department for Transport Renewable Transport Fuel Unit, the Dutch National Emissions Authority (NEA), and the Irish National Oil Reserves Agency (NORA).

The blockchain database prototype was also included in a scoping study conducted by Navigant on behalf of the European Commission Directorate-General for Energy (DG Energy).

Reactions from the stakeholders

Project pilot partner Greenergy added their support with COO, Paul Bateson, saying, “Greenergy has always chosen to take a pioneering role in the development of sustainable biofuel supply chains and the methods we use to evaluate and verify their sustainability.  Since 2007, we have carried out significant work on traceability, initially for Brazilian bioethanol and sugarcane audits, and then for used cooking oil audits to demonstrate traceability back to the restaurant.  We recognise the importance of technological innovation to help drive continuous improvement, and we support RSB and Bioledger in the introduction of a state-of-the-art blockchain database that will improve the efficiency of data collection and management.”

“RSB is committed to supporting the transition to low carbon transport. Transparent and credible supply chain data is key to giving confidence in biofuels and low carbon fuels,” explained RSB Executive Director, Rolf Hogan. “This project has been a great opportunity to work with Bioldeger to look at how to apply the highest standards of sustainability with a user-friendly and sophisticated database that will build transparency and confidence in the market.”

Patrick Lynch, CEO of Bioledger, was similarly optimistic, remarking on the effectiveness of the collaboration involved, “This blockchain project was successful thanks to the partner’s commitment to reach consensus on the rules and functionality that would bind them all equally in a digital marketplace – that is a fairly unique achievement for a blockchain database that spans competitors and partners in a global supply chain.”

ISEAL’s Director of Programmes, Kristin Komives highlighted the power of the project to solve real and urgent challenges in the race to decarbonise, “This project is a clear example of how ambitious sustainability systems are leveraging technology to improve data integrity and security in global supply chains. ISEAL members like RSB are leading the way in exploring how blockchain can support regulatory compliance and strengthen the reliability and value proposition of market-based sustainability tools.”

Other key stakeholders who provided support and contributions to the project are the MVO (Dutch Oils and Fats Industry), the EWABA (European Waste-to-Advanced Biofuels Association), the EBB (European Biodiesel Board), the European Commission, Peterson Control Union, SCS Global Services, and Oracle Consulting Services.

Secretary General of EWABA, Angel Alvarez Alberdi, celebrated the project, saying, “Bioledger and RSB have built upon the waste-based biodiesel industry’s collective knowledge and experience with highly complex supply chains to provide a state of the art solution that significantly improves traceability and transparency in the market.”

Bottom Line

Biofuels fraud isn’t that rampant, right? Well, it happens – just look at the UK biodiesel trader here, the Washakie Renewable Energy tax fraud here, the Colorado resident in jail for biodiesel tax credit fraud here, the Dutch raid on a biodiesel marketer suspected of fraud and forged certificates here, the Keystone Biofuels IRS and EPA fraud here, and so many others). Blockchain offers a way to prevent all sorts of biofuel fraud with its tracking and traceability, so we see this RSB and Bioledger project as a very hopeful sign that if it can be implemented in commercial settings and large-scale ways, it can have tremendous positive impact on the traceability of biofuels and help make it even more attractive to investors, buyers, sellers, producers.