The public has a burgeoning love-hate relationship with blockchain technology. The democratic and decentralized nature of this cryptocurrency-powered ledger has been hailed by many, but others are worried that enterprise blockchain uses too much energy to maintain and therefore cannot have a sustainable future.
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However, part of the beauty of blockchain is its ability to solve problems, even its own energy efficiency. Blockchain can provide unique solutions to sustainability issues in business, so it is important that developers and company leaders start using blockchain to target their business and sustainable development goals.
Why Is Blockchain Particularly Useful For ESG Goals?
Blockchain is different from other technologies in that it enables the immutability of data while ensuring transparency and security. This unique combination of characteristics makes it an unbeatable tool for verifying and improving sustainability ratings and reporting.
For example, companies with complex supply chains could leverage blockchain technology to create more trusted records throughout the product journey while maintaining transparent communication with consumers. It could even be used to “score” different components and contractors involved in a supply chain, allowing for credible sustainability assessment.
Follow this to its logical conclusion and you can easily picture a world in which consumers can decide where to put their dollars based on how well the farmers were treated at the start of the supply chain. When data is immutable, trust is possible.
It is important for those using blockchain to connect blockchain technology and sustainability. We need the kind of transparency and democratization that it can lend to such an important and contentious subject. And with commercial suppliers making up a hefty proportion of business’ environmental footprint, better supply chains should be front and center of sustainability strategies.
Who's Using Blockchain Right?
Thanks to certain companies, large and small, the use of blockchain to achieve ESG goals is becoming a reality.
IBM is one example of a large company connecting automation and sustainabilitywork. The IBM team is implementing blockchain solutions to improve transparency in their supply chain to improve sustainability credentials.
Smaller companies are also playing their part. In fact, small companies have the potential power to drive change because they’re nimble. Provenance is a company using blockchain to tell consumers directly about the sustainability of supply chain touchpoints. Consumers can follow the journey of a product and trust that the information they’re seeing is accurate and unbiased.
ESG is an important global consideration, and international organizations are also stepping up to address sustainability needs. The World Economic Forum and Boston Consulting Group have collaborated to develop OpenSC food provenance using blockchain technology, with one of the goals being to improve sustainability.
Blockchain Applications In Business That Could Impact Sustainability
Smart contracts are how the blockchain functions. They are part of the overall strategy of blockchain technology and sustainability because they’re the heart of blockchain’s immutability. Essentially, a smart contract is an if-then statement (trusted logic) written in code that determines when a viable transaction has occurred. These contracts are so valuable because, once written, they can’t be tampered with.
Smart contracts empower sustainability goals in two main ways:
- Efficiency: Because smart contracts are so much more efficient and less prone to human error, businesses can trust them implicitly. Using them will then free up tons of time. Business processes become quicker and smarter, leading to adoption and ultimately enabling and improving sustainability capabilities.
- Trust and motivation: Automated transactions based on a secure and immutable blockchain immediately enable trust. Entities in the supply chain can therefore receive compensation for appropriate behaviors and are incentivized to take the “right” actions (i.e., actions that contribute positively to sustainability goals).
By leveraging trusted data and trusted logic within the blockchain, companies of any size can improve sustainability reporting and help maintain ESG credentials and push their sustainability goals. At the same time, they can create better, more transparent relationships with suppliers and consumers.
Blockchains continue to mature, as do the solutions built on top of them. Even as projects are seeing good traction, mass adoption has not yet occurred. Early adopters find themselves in a powerful position to influence change and increase the efficacy of sustainability goals.
About the Author
Gigo Joseph is the vice president of international business development at Chainyard, a blockchain consulting company focused on delivering production solutions that address supply chain, transportation, manufacturing, government, and financial services pain points. Gigo is a recognized strategic business leadership, engineering, and business process consultant who has built complex software solutions from ideation to end-of-life.