Environmentally friendly blockchain
March 15, 2022
Organisations increasingly seek to add more trust and transparency into their sustainability policies for all stakeholders – from employees and shareholders to regulators, the media and consumers. Blockchain is emerging as a key technology that can help companies focus on reducing carbon footprints, ESG disclosures, and sustainability tracking by giving improved visibility into all tiers of the supply chain.
For more and more customers, sustainable practices influence the choice of products they buy. Forbes notes that around 60% of consumers are more likely to buy products with clearly defined sustainability policies. This is most evident in the success of fashion brands like Allbirds and Veja, both of which are known for their sustainable sourcing and business practices and The Circular Economy And Sustainability Powered By Blockchain (forbes.com)
With the momentum for change growing, businesses and organisations are grappling with how to rise to the ESG challenges. Inevitably, technology has a part to play and blockchain is emerging as a key enabler to increase visibility into the entire supply chain. This will allow organisations to accurately track the provenance and authenticity of products and materials and gain insight into sustainability practices through their entire lifecycle.
Transparency and trust are the founding principles of blockchain, which, along with its immutability and ability to digitally represent assets moving along value and supply chains, makes it the standout technology. By using blockchain to verify transactions, processes and actions in a way that no other digital technology can, businesses will dramatically improve their sustainability credentials and reporting procedures.
How blockchain is cutting environmental issues in food supply chains
One of the next key areas where blockchain can make a big difference when it comes to ESG is in supply chain provenance. Distinguishing authentic products from fake ones also helps combat counterfeiting and the negative strain on our natural resources, not to mention fair work practices. For example, data entered on a blockchain ledger can eliminate the possibility of a non-organic ingredient later being reported in an organic product. Everyone with permission on the network can view this data and any tampering or interference will be immediately visible. So, in a food supply chain, the record of a journey from farm to fork is available to monitor in real-time, while the disclosure of data provides accountability for trading transactions and farming practices to support claims like organic, freshness and superior quality. The data can be independently audited, further assisting in supporting the overall governance of the products and the supply chain itself.
Blockchain is streamlining the supply chain through immutable, time-based records for every stage: production, collection, transportation, arrival, and even disposal. The result is reduced operating costs, better conservation of resources and importantly, reductions in waste. The European Union (EU) wants to be a leader in blockchain technology as an innovator, including ESG, and a home to significant platforms, applications and companies. The European public sector is playing a trailblazing role in blockchain by building its own blockchain infrastructure. Over time, this will include interoperability with private sector platforms.
Blockchain for social impact
While the invention of blockchain was largely driven by the evolution of Bitcoin and other cryptocurrencies, the emergent ‘blockchain for good’ movement is harnessing the technology for social and non-commercial purposes. Humanitarian organisations and social enterprises have launched initiatives and other projects including Blockchain for Social Impact and the Blockchain for Good think tank. The EU Commission has issued ‘blockchain for social good’ calls and coalitions such as the Blockchain for Impact Coalition have been set up as a conduit for UN agencies to engage with business blockchain technology vendors.
The early generation of public blockchains are designed for the individual where no single entity is in overall control, anonymity is protected and anyone can download the software, view the ledger and interact with the blockchain. These public blockchains are largely associated with enabling the management of cryptocurrencies, which are extremely energy intensive. Much has been written about the huge power consumption used by ‘data miners’ working on the Proof of Work (PoW) consensus protocols and creating the next block for Bitcoin and other cryptocurrency chains.
B2B blockchains on the other hand are low energy applications, designed for the organisation or ecosystem to intrinsically create a single version of the truth in their transactions, processes and reporting. That’s why Haidrun has developed a B2B blockchain platform that is ‘permissioned’ and retains a level of control, so no one can enter this type of network without proper authentication. This helps eliminate illicit activities and provides a high degree of regulation. In simple terms, the blockchain acts like a secure and immutable database that is distributed and decentralised. The use of Smart Contracts, a digital means of facilitating a business process, enables automation under certain pre-defined conditions and can be used for meeting certain quality criteria.
Clearly, blockchain will play an important role in the intelligent value chain and whilst technology and sustainability do not always go together, the rise of business blockchains and demand for improving ESG reporting can change that. Companies need to take blockchain seriously as a technology with a wide array of potential applications across their organisation, particularly in addressing one of the most pressing issues of our time: sustainability.
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