PwC Germany, Merck KGaA and The Hashgraph Group said they are testing a system to track cocoa production just months before European Union rules on limiting deforestation come into play as a precursor to a more extensive provenance-checking system.
The system pairs physical markers on cocoa bags with records on the Hedera distributed ledger. The firms say it could help trace batches, support EU compliance and enable peer-to-peer payments to farmers.
Cocoa was chosen because it has one of the most fragmented supply chains in agriculture, with data trapped in separate silos and extensive mixing at the first mile. More than 2 million African farms sell cocoa through layers of middlemen. By the time it reaches store shelves, tracing the source is nearly impossible, creating cover for child labor, deforestation and smuggling.
"While cocoa is the initial showcase, the architecture is designed for broader use in sectors where provenance, authenticity, quality and regulatory compliance are critical, including food, pharmaceuticals, luxury goods, electronics and industrial components,” the three firms said in a statement shared via email.
Starting at year-end, large operators will have to meet the EU’s deforestation due diligence requirements, while smaller operators have a later deadline. Penalties for infringement include a maximum fine of at least 4% of a company’s annual EU-wide turnover.
The system, designed to track cocoa batches from the farm to the factory, combines chemical maker Merck’s physical authentication technology with a Hedera-based record of origin, quality and compliance data, which the firms say will allow processors and regulators to verify a batch’s history ahead of the EU deadline.
PwC has experience in the use of blockchain for traceability. In 2019, the Big Four global accounting firm partnered with Walmart and VeChain to address food safety concerns in China.
“Cocoa is one of the most complex value chains, where there is a lot of mixing happening, coming directly from the farm,” Husen Kapasi, enterprise blockchain lead at PwC Germany, said in a video interview. “It’s really one of the key challenges in that first mile to find out where the origin is actually coming from.”
Each cocoa batch receives a physical marker using Merck's M-Trust technology, creating a unique fingerprint on the bag. When the bag is opened, the seal is destroyed, and the authentication is invalidated, making tampering visible. The Hashgraph Group's TrackTrace platform records origin, quality and compliance data on Hedera's distributed ledger. PwC Germany designed the business processes and workflows for enterprise deployment.
The system is also designed to address a problem that has undermined previous blockchain supply chain projects.
“If you have contamination during processing, it costs manufacturers two-digit or three-digit millions of euros,” Kapasi said. “Today, that information sits in completely different data silos. By bringing them together, you don’t need to shut down the whole factory if there's a problem. You know exactly where the batch problem was and can narrow it down.”
Enterprises never touch the underlying blockchain infrastructure. The token-related elements run in the background on Hedera. Clients and suppliers only see U.S. dollars or euros.
“Anything to do with tokens is often perceived as a potential risk or compliance issue regarding crypto,” said Stefan Deiss, CEO of The Hashgraph Group. “All enterprises, clients and suppliers see traditional fiat currency. They don’t have to deal with the tokenization aspect or crypto compliance alarms.”
The project reaches beyond processors and European regulators. The firms say their goal is to bring millions of smallholder farmers onto the infrastructure, linking verified supply-chain records to digital identities and wallets.
“Through this technology, we also enable peer-to-peer transactions,” Deiss said. “A farmer sitting very far away in the most rural parts of the world would be able to receive those benefits on their digital wallet connected to their digital identity, even without needing a bank account.”
Such a digital identity linked to a verified supply chain record could help farmers document production, quality and delivery history when seeking credit, insurance and other financial services, the firms said. The Hashgraph Group said it is already deploying related infrastructure with more than 3 million coconut farmers in the Philippines.
“This demonstrates that it is a true game changer in the event of a food recall or a compliance investigation,” Kapasi said. “Ultimately, the solution empowers companies to shift their perception of compliance from a cost burden to a driver of value creation.”