Today, sustainability receives global attention in governments, businesses and societies. However, challenges remain in sustainability based ESG, where blockchain technology can play an important role. Transparency in blockchain is a gateway to facilitate data authenticity issues in its traceability and to exercise traceability in infrastructures or smart devices that link ecosystems.
It also benefits us to avoid potential hurdles in assessing companies that want to focus their ESG efforts on real-time metrics and level of engagement in sustainability.
One of the major applications of use is undoubtedly the supply chain being highly complex due to incremental global trade. In a cross-border supply, payment and documentation scenario, decentralization marks a milestone of cohesive interoperability.
Blockchain disruption will affect every industry, with a business added value of over USD 176 billion by 2025 and USD 3.1 trillion by 2030 (Gartner, 2017)., According to the World Economic Forum (2018), the biggest global risks in 2018 in terms of likelihood are environmental risks and cybersecurity risks. Blockchain seems perfectly poised to help the world address these challenges, as it offers solutions for both types of risks.
Over the next five years, blockchain technology could upend how businesses and marketplaces operate (Deloitte, 2018) while generating social impacts, mainly in the agriculture, healthcare, insurance, public, retail and utilities sectors (Carson et al., 2018).
Blockchain is likely to become a central element of this revolution, with economic and social repercussions on par with the invention of the Internet. The convergence with the current momentum towards Web3 means that we are living in a milestone of profound digital transformation for the new decades. However, it is important to remember that technology is, by default, ethically neutral.
It is ethically neutral: it can be a powerful enabler, but it is not a solution in itself. This revolution must therefore be guided by a digital governance framework that ensures that blockchain technology is designed by and for people. This is a proof of the focus on digital identity, DAO models, and the regulatory challenges of the technology which, by being implemented globally and across borders, has also brought us into a new paradigm in digital assets and the global digital economy, including decentralized finance.
Why Blockchain technology in Sustainability?
One of the impacts that Blockchain technology can bring us is the ability to make a sustainable production and consumption in circular economies, regenerative providing real-time data on products and companies. More and more companies are looking for sustainable standards that guarantee the health of users by providing information about the productive origin, cultivation and agricultural ecosystem. As well as fair trade and sustainable certifications in the blockchain as an element of security.
The life of the recycling cycle of trade thus completes encrypted, secure, and verifiable information in a decentralized environment where governments, suppliers and players in global ecosystems are integrated including investors in green standards and bonusable for companies.
Therefore, we could define Blockchain technology as having direct sustainability implications in three key areas:
- Mainstreamed ethical consumption due to wide access to transparent products data submitted by each supply chain actor.
- Greater consumer trust and awareness due to enhanced sustainable certification.
- Increased fair trade practices across all industries due to empowerment of supply chain actors such as small farmers.
Blockchain as a technology for Sustainable lifestyle
On the other hand, one of the biggest concerns in sustainability is the lifestyle of individuals themselves. The challenges of understanding the impact or footprint, of daily activities whether in infrastructures, services, mobile devices, environment and climate change are one of the biggest daily changes on our planet and humanity, in general, and the only direction in commitment to the SDGs.
Carbon footprint concerns
Using Blockchain as a technological support for carbon markets could reduce the risks of double counting carbon credits in national and program registries, therefore, contributing to the development of effective, accountable and transparent institutions or individuals.
At the international market level, the technology could be considered a mechanism to increase the capacity for robust tracking, which helps ensure robust accounting of carbon credits of countries engaging in trade as well as their capacity regarding technology and innovation (target 17.8). Blockchain in carbon markets could also enhance it, but how?
Blockchain can be an alternative technology for a carbon credit and carbon permit registry. Although it cannot guarantee anti-theft, the decentralized and distributed nature of Blockchain can better prevent theft and offer traceability compared with the prevailing technology, making tracking easier and more robust. The technology can also help increase the credibility, transparency, and audit of carbon markets and help to address regulations without relying on rigid technology. Blockchain can benefit both large and small emission trading systems between businesses and/or countries. It can reduce managerial burden by decentralizing the credit management system without sacrificing the desired level of transparency, thereby encouraging enterprises to participate more actively. It should be noted that eventually, robust tracking is only one part of robust accounting to avoid double counting, and policymakers should also put in stronger regulations and reporting measures to avoid double counting as agreed under the Paris Agreement.
As an example, to quote the opinion of major consultancy PWC, the toolset can help companies quantify the carbon footprint of Blockchain technology at a time when companies are under pressure to balance demands for sustainability reporting, cost-cutting and the need for technology upgrades.
Peer-to-peer Blockchain functionalities make sustainability implications possible for increased environmental awareness among citizens through more transparent carbon footprint tracking or reduced carbon emissions through improved individual climate actions.
Take one example: Existing programs work in a traditional way where travelers calculate how much carbon their flights emit and how much they cost using a flexible price per ton of CO2, pay the cost by credit card or bank transfer and receive a certificate for this payment. Now, CO2 tokenization is another technological innovation that allows us to reward initiatives that support the SDGs.
Blockchain technology redefines the energy industry
Decarbonizing the global energy system also requires a sustainable future.
Blockchain can unlock the potential of a peer-to-peer electricity trading system in three ways:
- By providing it with a decentralized, fast, real-time, lower-cost, and decentralized metering and billing system (PwC, 2016).
- By providing economic incentives for being an electricity producer (and seller if desired).
- By generating a Blockchain of data related to solar energy.
Households will be free to purchase electricity from their preferred sources at the price they want and record the flow of energy on the Blockchain. Electricity retailers can benefit from the diversification of energy sources, will continue to be able to shift peak loads, and will be able to have emergency supplies available.
Both households and retailers will benefit from operational cost savings, as business activities will be automated and controlled by households through smart contracts.
Blockchain Trust Technology
The pillars of sustainability will be established in the future and the commitment to make technologies open a path is mandatory.
The use of technology in carbon footprint projects, on the other hand, leads us to a beneficial direction in climate action as another of the great challenges where technology also extends its application in forestry fields, and protected areas. Thus, we see examples of use in mining, plantations, affected communities, or the very infrastructures designed for the improvement of the industry and that move away from sustainability in decades to come, tracing not only its impact on CO2 but also the conservation of the planet in raw materials and their transformation, another of the directions to the SDGs.
Recycling and Waste Management
There can be no products and services without an appropriate and sustainable recycling and waste management environment. Industries such as the textile and fashion industries move 92 million tons of waste per year. Transparency in management, including recycling plants, trade, and its impact on the environment, especially in oceans, is a latent global concern. The lack of visibility of waste generated by organizations can trigger inefficiencies as well as negative impacts. Projects around the world are already using Blockchain technology to minimize cost and give transparency to the whole process.
Deepening Agriculture with Blockchain
The food industry is responsible for a quarter of global emissions. Its processes in the whole ecosystem of agents, from the cultivation of the land itself to fertilizers, crop protection, packaging, treatment and transportation are one of the sectors where the impact of the sustainability footprint is improvable. The integration of Blockchain technology with IoT can provide transparency from the farmer to the consumer, passing through the whole complex supply chain. The supply chain is increasingly interested in learning about farming methods, and consumers want a long-term guarantee for their food. The implementation of the QR Blockchain enables transparency in the highly complex supply chain itself and provides the guarantee of digitized standards in real-time as well as anti-fraud.
Blockchain becomes the best solution mainly when the benefits that it provides (automation, transparency, reliability, speed, etc.) are not available through other technologies. It also has a high capacity for integration with other technologies as well as functionalities of already implemented IT systems, making it a transversal layer and a technology that enhances both known and future technological resources and innovations.
Blockchain eco-friendly energy
Undoubtedly, one of the challenges of the adoption of Blockchain technology has been questioned as being sustainable because of its energy cost. However, the adoption of such innovative technologies takes years of improvement, including the interoperability of infrastructures.
Regardless of the concentration of mining farms, rewards and KwxH energy cost, the very development of research, including the advancement of the Blockchain Ethereum the Merge, has favored the creation of the Blockchain networks with much lower energy consumption, already in use today. It has also allowed us to strengthen the decentralization of architecture, interoperability, and adoption, including the strategic orientation of companies and projects with the focus of leveraging this new technology for its global sustainable impact.
The real potential is to establish these synergies of existing technologies or emerging innovation where the impact on welfare either in processes, costs, or utilities, is at the service of society in general. We speak of public-private areas and from all sectoral orientations, industries and companies. We must create research and adoption spaces that consider the long-term potential rather than the immediate technology. In fact, many of the factors that combine their potential are already highlights of research and elements from years ago, such as the encryption model, hash, time stamp and use of server power, etc. now the technology maximizes the potential with the highly traceable digitized base and highlights the inner globalization.
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