Creating a sustainable world isn’t something you can do single-handed, obviously. Although lots of companies are making laudable efforts individually, this isn’t enough – especially if an organisation’s supply chain isn’t as sustainable as the company itself. Help comes from an unexpected source, in the form of technology that makes environmental efforts traceable and transparent: blockchain.

The term ‘blockchain’ immediately conjures up thoughts of cryptocurrencies such as Bitcoin. These days, though, this technology has many more applications. You can read all about them in this blog article. Sustainability is one of the areas in which blockchain looks promising. But before we come to that, we first need to take a quick look at what exactly blockchain means.

Blockchain is a digital, decentralised and immutable ledger that securely stores and shares transactions and data without any one entity having complete control. Every addition to this ledger is recorded permanently and transparently using cryptographic techniques. This makes it impossible to manipulate data, as each node in the network keeps a copy of the entire blockchain and modifications are perfectly traceable. All these qualities are crucial in the context of transparent reporting on sustainability.

The power of blockchain

The rise of blockchain in reporting on CO2 emissions is an important step towards greater transparency and accountability between companies. And that in turn helps environmentally conscious consumers to make an informed choice when buying a product. Here are some reasons why blockchain and sustainability go hand in hand:

• As every transaction is immutable and transparent, blockchain makes it possible to accurately monitor the provenance of products and materials in the supply chain. In areas such as reducing CO2 emissions and combating deforestation, this is essential. It allows you to make reliable and verifiable claims about the environmental activities of your company. What’s more, you can be confident that other parties won’t make false claims about their efforts, making it easier for you to work with the right partners.
• Blockchain ensures that you can ‘tokenise’ sustainable assets. Specialised non-fungible tokens (NFTs) provide indisputable proof that your company has adopted a given practice. For example, if an organisation claims to fully recycle plastic bottles, NFTs will show that this has actually happened. This is how blockchain offers an unprecedented level of transparency in a product’s recycling process. The technology is also speeding the transition to a green, circular economy.
• Thanks to blockchain, companies can use smart contracts concerning sustainability. These are contracts that are automatically triggered once a certain condition is met. Let’s return to our plastic bottles example. If an organisation wants to reward stakeholders for recycling their bottles, it can issue tokens that other parties can exchange for goods and services. A smart contract eliminates admin and encourages sustainable behaviour such as reusing, repairing or recycling products.
• Finally, blockchain is also very useful in the context of security and privacy. It means that businesses can confidently share sustainability data, while guaranteeing the integrity of their data.

The future of sustainability

This all sounds promising, but how sustainable is blockchain technology itself? Like other technologies, blockchain has a significant footprint, of course. In fact, in 2019 Bitcoin was found to have a footprint comparable to that of Switzerland. Blockchain has made considerable progress since then, however. For example, Ethereum, another well-known cryptocurrency, switched two years ago to an architecture that consumes much less energy.

Meanwhile, blockchain’s positive applications are also starting to gain traction. For example, the energy sector can use the technology for trading sustainable energy, without the need for an intermediary. Anyone with a surplus of solar energy can sell that electricity efficiently and at the right price to other parties on the network.

In addition to energy consumption, scalability is another challenge for which blockchain will have to find solutions in the coming years. Nevertheless, the technology appears to be a crucial ingredient for the future of a sustainable business world. In particular, with the reporting of CO2 emissions and sustainability efforts increasingly subject to regulation, blockchain will continue to make its mark. The new CSR Directive that the European Union will soon introduce (about which you can read more in this blog) is just one example of this.

Every organisation needs to make thorough preparations. Much of the solution lies in the hands of blockchain experts, which is why having a professional with blockchain skills on your team is a must.

Does your organisation already have a blockchain expert in-house? Check out what we have to offer and find an IT professional to prepare your organisation for a sustainable future.