Sustafy—Origin Supply Chain Data at Scale

Problem

The presenting problem is many creators of the world's most beautiful and delicious things export to the European Union. As early as March 30th, 2024—a new European Union "Eco Design for Sustainable Products Regulation", requires Digital Product Passports for any products entering the EU excepting pharmaceuticals, animal feeds and food. Digital Product Passports (DPPs) are issued by GS1 and require documentation for a product's supply chain, circularity, sustainability and marketing claims.  

India exports 36% of its craft output to the European Union, so there is urgency. We'll begin in India because we know a lot about the Indian craft sector. Making the project work with India's challenges around literacy, language, digital divide and price tolerance should smooth project adoption for growers of raw materials and creators of handmades globally.

Multi-Stage Rollout

This is a multi-stage project that can be built in "chunks", starting with a legislative requirement for transparent supply chains, circularity data and verified marketing claims. Transparency will change consumers.

The Big Idea

The big idea relies on network effects of a new, P2P value-innovated, blockchain-like technology that drives transaction costs to almost zero.  Very low transaction costs could bring 2 billion smallholders into the formal economy.   Activated smallholders with the same tools as the global north will change markets. 

Until now, technology choices were conventional tech or blockchain. There are solid competitors in the space that focus on global north issues of customers or compliance. However, blockchain may never be simple, cheap, reliable or flexible enough for origin growers and makers. Blockchain works for top-down applications in the developed world but breaks in the developing world, mostly because of high transaction costs. If we exclude smallholders, the ambition won't fulfill the promise of policy regulations or the scope of climate challenges.

European Union Policy and Strategy

The European Commission claims that digitized supply chains are the foundation of their "twin transitions" to sustainable economies and carbon neutrality. Preferring bottom-up supply chain transparency would generate robust, real-time climate and economic data sets from those best positioned to act on food security, regenerative agriculture and climate resilience. "Paying" smallholders in free, Web3 services for origin supply chain data, SDGs and other desirable policy goals support the global south to remediate shared concerns. 

When consumers and suppliers both have more structural power, market forces could flip into healthier capitalism.  In Porter's terms—when makers and consumers both have stronger bargaining power—higher rivalry decentralizes power and transfers value away from the center. Freer, fairer capitalism might even be a counterweight to rising authoritarianism.

Other Support for Transparent Supply Chains

Until February 2022, EU regulations were focused on long-declared climate goals. Muscular updates in March 2022 respond to Russia's invasion of Ukraine, a newly swaggering China, and the pandemic. Collectively, these forces pushed Western countries into defensive postures that de-link from full globalization. Increasingly, the West regards material and energy supply chains as vital to economic policy and national security. Transparent supply chains are the sea change.

We document origin supply chain data, obtain Digital Product Passports, surmount new EU trade barriers and activate the genius of 2 billion smallholder making and farming families by driving transaction costs towards zero on a Holochain UI/hAPP.

Differentiation

We differ from current alternatives in ambition, technology, strategy and other ways that matter. We're building on Holochain, a new Web3 tech which has the best features of blockchain without the high costs and problems of scale.  Holochain is cheap, powerful, fast, private and built for developing countries. It features baked-in ethics along with new, Web3 services like: smart contracts and data roll-ups.

Legacy competitors approach Digital Product Passports, mostly, from the top-down and use conventional or blockchain tech that won't reach down into the bottom 2 billion. Top-down methods use estimates and approximation. Competitors seem satisfied to meet the letter of the new regulations without reaching for new Web3 possibilities— even though bottom-up documentation converts sustainability into operational actions.

First Results

We expect the first pilot's proof-of-concept results in July. The Phase One deliverable writes and demos Open-Source-code to trace silk from farmer > transport > dyer > weaver > transport > tailor > customer.  A unique, cryptographic number documents the supply chain from origin raw materials to finished goods, with visual trackability and traceability. We hope to include circularity data like water usage, transportation energy use, the creator's family size and quality-of-life dimensions. We also hope to include at least one smallholder service. We'll create early audiences and money to pay for code development with a Kickstarter that sells documented silk jackets.

A second, more capable pilot collects and passes origin supply chain data of raw wool and woven wool cloth yardage, acquires the DPP number and follows goods from our Indian cooperative partner to EU customers. The large maker pool will verify that the technology is fit-for-use in rural communities of developing countries.

About the Technology

Holochain and hREA reached viability in February 2023. There are sixteen medium-to-large-ambition projects on Beta v0.1.0. Over 1000 developers are trained and ready to build on the platform.

Applications create self-owned identities and encrypted peer-to-peer networks between you and other users—on your own device. Not depending on data centers is already a win in terms of energy use, carbon footprint, speed, privacy and services delivered to rural craft clusters. 

Sustafy's UI is based on Resources, Events, Agents (REA). REA is an ISO accepted flow-state accounting system and supply chain documentation methodology. REA is expressed as Resource Description Framework (RDF), which is the standard Web3 data interoperability model that lets different platforms "talk" to each other for harmonized data sets.

We'll document the distributed economic networks with ValueFlows. Open Source modules magnify the freedom to use, study, modify and share copies of the software to grow the capabilities fast. Success brings everyone in.

The Audience

We began the Sustafy project for India's 200 million makers. Over the four years we have been waiting for Holochain's maturity and thinking through how to help, we realized the need for a bigger vision that includes the world's 2 billion smallholders. The new EU regulations are the shock that moved us into action.

Digital Product Passports

The European Commission is reaching for a Green and Digital future.  The stated policy is that digitized supply chains, supported by Digital Product Passports (DPPs), are the eyes that unlock self-reinforcing "Twin Transitions" of sustainable economies and a carbon/climate-neutral single market by 2050. The EU has pretty good reasons for moving forward even though Digital Product Passports are a trade barrier that, in the case of India's makers, could be an extinction event.  Smallholders need a low-transaction-cost scale solution. Sustafy could be that solution.

The Vision

What if technology were cheap, powerful and pervasive enough to bring the global north’s tools to 2 billion smallholders who create the world’s most beautiful and delicious things? These tools would have the potential to activate the ignored bottom 25% in accessing new markets, finance, land security, bargaining power, cooperatives, greater inclusion, equity and other services academics say they need. For the first time, intelligence and opportunity would be uniformly distributed.  Over time, smallholders could join the formal economy and begin to agitate for more of the pie for themselves and others at the bottom of the value chain.

The Services Smallholders Need to Rise

Smallholders can't rise without the same tools as the global north and very low transaction costs to access goods and services.  High transaction costs, like those of blockchain, limit smallholder market participation. Smallholders need:

Access to Services

• Transparent, secure, direct transactions eliminating intermediaries and reducing the risk of exploitation
• Improved market access
• Direct connections to buyers that bypasses intermediaries
• Higher selling prices that arise from transparency/traceability on origin, quality and impact
• Smart Contracts that automate administrative tasks and ensure timely payments

Access to Finance

• Peer-to-peer lending, microfinancing, insurance and investment opportunities
• Real-time visibility into their inventory for lower spoilage and theft
• Documentation of land ownership, production history, and creditworthiness
• Data sharing and stakeholder collaboration farmers, researchers, suppliers, and buyers

We need to serve consumers, smallholders and regulated firms equally. 

Makers

Sustafy is a project of The Jaipur Crafts Festival, which touches 13000+ maker lives and unifies 7000+ sustainable, fair trade, craft and social enterprises in 558+ countries, territories and villages. We focus on long-term projects in neglected areas like strategy, technology, data, urban planning and market development. Everything we do activates a differentiation strategy to repair broken markets. Aiming for the level of causation brings the potential for change-making at scale. 

The festivals support ongoing structural analysis of Indian crafts, which points towards the need for a crafts differentiation strategy with a matrix of long-term projects that emerge through high-impact events. We inform, entertain and connect stakeholders of Indian handmades with new thinking on the business of crafts, culture and heritage.

Consumers

Sustainability consumers are everywhere.  However, they don't have complete information or a path to action. Engaging consumers to see the impact and real value of the things we buy and use every day—untied from marketing and branding—is transformational. Transparency, traceability and realigned incentives are likely to power countless, new, positive consumer choices and drive different consumption patterns. For example, a 2017 study reports 76% of consumers will refuse to purchase a product if they learn it was not made ethically. When incentives are aligned—the ethical behavior you want—is rewarded.  When unethical behavior is punished by consumers, over time there is less of it.

Field Work

We spent a month in Indore helping a women's empowerment network with a garment initiative. We gained first-hand experiences overcoming issues around language, literacy, culture and digital divide.  BBC Media Action, which works on bringing women into the technology mainstream, confirmed the approach we will use in training and rollout. We spent two months in Kolkata and Murshidabad talking to over 25 designers, retailers, educators, creators and origin makers to trace supply chains for cotton, silk and wool from source to store. We are in frequent contact with brands, academics and makers for ongoing projects. 

Current Events and Recognition of Supply Chain Work

• The Jaipur Crafts Festivals 
• Open Letters | Our Open Letter on Crafts asks big tech to stop burying handmades in e-commerce sales. Supporters include World Fair Trade Organization, Jaipur's Craft Council of Weavers & Artisans, Aid to Artisans, Sutra Textile Studies and Catalyst 2030. 
• Original Research | Our ongoing Structural Analysis of the crafts sector.
• Impact Calculations | A handwoven rug takes less than 4% of the lifetime carbon as a commercially produced rug. Differentiation captures 16% more money for makers.
• Presented Prosper or Perish-Handmades in 2024 on May 6th at Catalyst 2030 Change Week
• Presenting for a G20 & C20 conference on Indic Wisdom for Sustainable Lifestyle Saturday, May 27th at Indus University in Ahmedabad.
• Selvedge Magazine Working Group on Structural Challenges to Indian Crafts.  Ongoing. 
• Board of Studies Indus University

Zero now.  In July, there will be a chunk of Open-Source code to document natural silk from its origins. Fast-following, there will be code chunks to document other sustainable raw materials like cotton, wool and mixed fabrics. Open-Source code could serve many makers quickly.

We're partnering with one of India's well-regarded craft cooperatives of 12,000 nomadic and pastoral peoples.  This tranche of work qualifys raw wool, weaving and origin data collection for Digital Product Passports that maintain trade flows by getting goods over the EU border.

Extractive capitalism is not permitted under the Holochain software license. Venture money and the demands of maximizing shareholder value would kill the project's promise. Consequently, our revenue, investment and growth models are likely to be unconventional. 

Projections

We expect that build-out costs will lead revenue until there is scale. But, there are non-profits all over the world that would see this as part of their mission.  Roll-out may not have the same costs, challenges and money requirements as, say, Uber did.  We need help with projections.

Technology

Building services brick by brick, chunk by chunk is still valid although being able to obtain Digital Product Passports for origin products in time for the deadline is desirable. We will have marketing, technology, training, revenue, culture and data feed challenges for sure.  We need help to make sure a fully functional smallholder service is available in time for the EU deadlines.

Training

We're solid for first stages in India, but there are very organized NGOs and governance firms in every making country.  We could use introductions which, over time, could facilitate services to smallholders who want them.  Subsequently, there are opportunities for community credit swap "banks" and raw materials cooperatives that could arise out of broader adoption.  We could use help imagining services tailored to local needs.

Communications

This is a bigger and more international COMMS project than anything any of us have done before.  We could use help with a communications plan for smallholders in each maker country.  We could use support for communications to consumers and regulated companies who will build the revenue model. That likely includes high-level advice and possibly PR services.

Data Feeds

We need strategic thinking about who gets to see quarantined data and who doesn't. Your partners will have experience to work through the practical and ethical challenges of what could become the world's most robust climate and economic data sets. We could also use advice on how to provide regulated firms with what they need for full EU compliance. There are at least thirteen buckets of supply chain regulation under consideration, including the New York Textile Act and the congressional Fabric Act.  We could use public policy advice about how to be ready on the USA side.

Legal

The IP is in an LLC.  We need legal knowledge about the global footprint and in-country operations.

Future-Proofing

Part of the task is what others will need If we're successful.  For example, do transparent products still need audited designations like "Certified Organic"? Do ESG departments need to continue the kinds of money and direct services they supply to smallholder and climate causes?  Or, are there higher and better uses for the resources of engaged firms?

There are strategy, competitiveness and GPD dimensions too. If marketing is a lynchpin of a firm's sustainable competitive advantage, where do they go when products de-link from marketing? A lot of companies will need a re-think.  We need help ideating how to help MSMEs and larger firms prepare for the transition.

We covered Holochain, hREA, top-down vs bottom-up reporting and the drawbacks of blockchain.  The most significant innovation may be the vision to include smallholders. Durable change comes from transparency consumers who can decide to buy more sustainably and shift toward a carbon neutral lifestyle.  But, regenerative practices, circularity, bio-diversity and other on-the-ground actions reside with smallholders. Leaving them out of the shift is shortsighted and more than a little dumb.  So, let's build a foundation with low transaction costs that brings everyone in.

Bringing in smallholders engages other positive outcomes.  If we have consumers (customers) agitating on one side and smallholders (suppliers) agitating on the other—markets might become truly freer and fairer capitalism.

Nothing we say here could stand up to any level of scrutiny.

Nothing we say here could stand up to any level of scrutiny.

Sustafy is a Web3 project that aims to work on financial inclusion by activating the UN Sustainable Development Goals and the economic genius of 2 billion smallholder maker and farming families with bottom-up reporting data. Sustafy will be accessible via web browser and eventually a mobile app.

The first step of the solution is to design and develop the UI and create chunks of Open-Source code to document raw materials.  Subsequently, we'll build toward more complex, global use cases until smallholder products can cross any border in very high-trust ways.  The project will launch in India, where we will collect origin supply chain data from South Asian makers to solve an urgent economic/legislative challenge. The European Union will enact new regulations in less than a year, which will prevent products without Digital Product Passports from entering the EU. 

We aim to provide the services to obtain Digital Product Passports horizontally to more makers in more places as fast as we can.  Robust, more capable service will follow.  Those will include customized data feeds for firms and governments that need the collected data.

The theory of change behind this solution is based on the premise that including smallholder access to financial services requires transaction costs that approach zero.

I described the unique aspects of Holochain in a previous section of the application. It would be awkward to paste standard language for Holochain and hREA here because they're both well documented.  We're choosing to share the reasons we think this is the right choice for smallholders and the developing world.

• Holochain is an ethical ecosystem that is written for the way people and groups interact, as opposed to blockchain, which was created with money in mind. 
• It is Peer-2-Peer, which removes the need for data centers, surveillance capitalism and security layers that are necessary for concentrated, database-driven interactions.  These differences solve for privacy, high-costs, heavy carbon footprints and some dimensions of security.  
• P2P has Edge features that should make using Holochain really fast, even in low bandwidth locations.
• Privacy features include "sharded" data that live on distributed machines. Users can recall their data at any time except from already completed transactions.
• Users can "fork" anytime.  In other words, Sustafy users could recall their data and make their own groups at any time.  This feature is bad for network effects but good for users.  It is also the reason we're hoping to create robust services that glue smallholders to Sustafy.
• Holochain has its own, purpose-built distributed hardware.
• The Holochain native coin or competitive crypto can be placed on hAPPs.

For clarity, I'll mention that Sustafy is not a new technology.  It is an UI/hAPP built on top of a new technology. Holochain and hREA reached viability in February 2023. Holochain is ready now, and the EU regulation deadline of March 30th, 2024 means we are compelled to move forward without delay.

There are sixteen medium-to-large-ambition projects on Beta v0.1.0. Beta 0.2.0 just released. Over 1000 developers are trained and ready to build on the platform. 

Here is a link to the Roadmap.

The Sustafy project is intended to bring 2 billion smallholders into the formal economy to support origin supply chain data, the SDGs and other desirable policy goals.  Scott is a gay founder. Diversity, equity and inclusivity are foundational to the people who work on this project.

The business model is also our strategy and tag line: Origin Supply Chain Data at Scale. Regulations mean there will be ready customers and money for customized data feeds. We intend that the sustainable competitive advantage will be sourcing robust, high-quality data from smallholders, which makes them clients, too.

Our vision is a consumer-led, market-based solution to document smallholder products globally. Preserving current handmade trade flows after the March 30th, 2024 deadline is a key project driver. 

Bootstraps

We'll support code development, operations and audience development with focused Kickstarters that sell the world's first truly transparent products.  Longer term, customized data feeds and data-based products are the revenue model.

Currently we rely on ready resources, skills and team members, plus independent Holochain/Rust developers.  Phase Two turns Phase One learning into more capable code modules—that qualify traced products for Digital Product Passports from GS1.

Phase two collects and passes origin supply chain data of raw wool and woven wool cloth yardage for a 12,000 smallholder NGO.  Open-Source, Web3 technology demonstrates the comprehensive Digital Product Passport qualifying process. 

Freemium Model

Phase Three is a freemium model that gives away basic services to bring everyone in.  We will charge regulated organizations for their compliance data. This stage engages buyers, retailers, designers, wholesalers & middlemen in the creation, distribution & exchange of data that qualifies for the EU's Digital Product Passport and legal sale in European markets. Each of these groups are potential revenue customers because customized data streams and market intelligence have ongoing value to lots of potential partners and clients.

We envision a future when every public facing company will display dashboards of their comprehensive climate and SDG posture on their website. 

Extractive capitalism is not permitted under the Holochain software license. Venture money and the demands of maximizing shareholder value would kill the project's promise. Consequently, our revenue, investment and growth models are likely to be unconventional.  

Here is one model— of many—potential data feeds and revenue opportunities from custom data flows: "Wool farmers and weavers (free) >white-label blanket maker (potential revenue) >DPPS>the blanket brand>La Samarttaine>LVMH>EU Bourse/stock exchange>Regulatory bodies like consumer protections for marketing claims, financial markets on ESG posture and trackers of the Green Deal."

The revenue model sells customized data feeds to firms that need these for regulatory reporting or that want the data for halo effects on their products.  Over time, there will be revenue from  data-reliant products.

Costs are front-loaded because it is a technology project that needs to deliver very low transaction costs to work.  That said, we're building "chunks" or code and capabilities while testing as we go.  Speculatively, we're taking on maybe a third of the development costs and one-tenth of the ongoing operational costs of blockchain apps.  Our evangelizing cost may be lower than other efforts because there are are in-country NGOs who will see the need of becoming Digital-Product-Passport-Ready. Growth, COMMS and training expenses occur when there is already revenue. We should not need as much operating capital as similar Web2 or blockchain apps.  

The ideal partner would be a trust/think tank aligned with the notion of bringing 2 billion shareholders into the formal market.  The best fit already has a global footprint and is willing to be a managing trust at some point in the future.

We are building Kickstarter products now.  There will be examples of financial sustainability before the program selection date.