Blockchain for Environmental Sustainability: A Path to a Greener Future
The urgency of addressing environmental sustainability in the corporate world has grown exponentially, demanding accountability from all industries. While the blockchain sector has faced criticism for its environmental impact, it possesses the potential to revolutionize sustainable practices. This research report explores how blockchain technology can play a crucial role in creating a sustainable future, highlighting opportunities in utilizing blockchain for environmental preservation.
Why Sustainability is essential for Blockchain
The pressing need for sustainable business practices has garnered significant attention in recent years. However, some companies resort to greenwashing, obscuring genuine sustainability efforts. Blockchain, often criticized for its environmental impact, presents new possibilities for enhancing sustainability initiatives. This report delves into blockchain’s potential in tracking emissions, verifying environmental metrics, and digitalizing environmental assets.
Blockchain technology offers significant advantages in promoting sustainability, particularly in the areas of cybersecurity, accountability, transparency, and traceability.
Cybersecurity: For sustainability-related applications to thrive, a robust digital infrastructure capable of withstanding cyberattacks is crucial. It is essential to integrate cybersecurity into the foundational technologies such as the Internet of Things (IoT), Augmented Reality (AR), and Artificial Intelligence (AI) to ensure a secure environment.
Accountability: This aspect revolves around organizations, whether corporate entities or individuals, acknowledging the impact of their actions and taking responsibility for them. Quantifying the internal and external effects of these actions and reporting them to stakeholders is a vital component. The reporting should be understandable, relevant, reliable, and comparable across different organizations and over time.
Transparency: Transparency entails providing external stakeholders with access to impact reports . It ensures that the effects of organizational actions are open to scrutiny and accessible to relevant parties.
Traceability: The ability to trace and identify assets, such as products, processes, data, and materials, throughout their entire lifecycle is crucial for sustainability. In Sustainable Supply Chain Management (SSCM), traceability extends to human rights aspects, such as fair trade, labor safety, and privacy. This capability plays a pivotal role in fostering sustainability. Traceability can be categorized into two main types : internal, which involves tracking and tracing assets within an organization, and external, which aims to understand the flow of information and assets across various logistics systems and processes involving multiple organizations.
Use Cases that leverage Blockchain towards SDG
Currently, limited instances of academic research explore the utilization of blockchain for achieving Sustainable Development Goals (SDGs). One notable study conducts a comprehensive assessment of recent academic and commercial applications of “blockchain for good.” These applications encompass diverse areas such as supply chain, governance innovations, sharing economy, and financial inclusion. This section provides some relevant use cases of blockchain-based applications toward each of the SDGs (see figure below).
Blockchain and Environmental Impact: Proof-of-work (PoW) chains like Bitcoin are known for their energy consumption, but proof-of-stake (PoS) chains like Ethereum offer higher energy efficiency. The Ethereum Climate Platform (ECP) was established to address Ethereum’s carbon consumption, leading to a substantial reduction in energy use. Blockchain’s immutability and transparency enable accurate tracking of emissions, holding companies accountable for their environmental claims.
Smart Contracts for Emission Tracking: Blockchain’s smart contracts can automate carbon emission tracking across business operations, providing accurate data to monitoring services while safeguarding against falsification. Zero-knowledge (ZK) technology allows for privacy protection in reporting emissions, offering unfalsifiable proofs without exposing sensitive data.
Tokenization and Carbon Credit Market: Blockchain facilitates the tokenization and digital distribution of environmental assets, like carbon credits. Accreditation registries such as Verra and Gold Standard, along with international organizations like the World Economic Forum, have shown interest in this market. The United Nations recognizes blockchain’s potential in addressing environmental challenges.
Blockchain’s Expanding Role in Sustainability: The scope of blockchain’s impact on sustainability extends beyond energy consumption and carbon credits. Predictions for 2023 suggest a rise in blockchain systems focused on tracking water usage and plastic production. Governments and regulatory bodies may establish standards using blockchain for monitoring and enforcing environmentally friendly practices.
Empowering Communities and Fair Trade: Blockchain’s transparency can empower communities affected by industrial activities and environmental degradation. Supply chain management can benefit from equitable revenue distribution and improved treatment, leading to fair trade practices.
While blockchain technology cannot single-handedly solve climate change, its potential to drive environmental sustainability is undeniable. The misconceptions surrounding blockchain’s impact need to be addressed, and industries should recognize the technology’s capacity to enhance accountability and foster sustainable practices. Blockchain offers a path to a greener future, providing a dynamic toolset for mitigating environmental challenges and creating a lasting impact on the planet. It can be used to develop secure peer-to-peer platforms for exchanging assets without intermediaries and in a trustworthy, sustainable, accountable, and transparent way to fulfill UN SDGs and the objectives of the EU Green Deal.
Blockchain has the potential to radically change many societal sectors and to foster open innovation in all types of organizations, including supply chains, or the enforcement of governance in a completely innovative way.
Written By: Sarah Abuagela
Additional Sources: Faga-Lamas and Fernandez-Carames, UN SDG Report, OECD, WEF, PwC