Blockchain is a distributed database or ledger shared across a computer network’s nodes. The technology is best known for its crucial role in accountability, authentication, and verifiability in cryptocurrency systems, maintaining a secure and decentralized record of transactions. However, blockchain also has significant potential to address climate change challenges in the near future. Since a block cannot be modified or amended, the only trust needed is at the point where a user or program enters data. This approach considerably reduces the need for trusted third parties, such as auditors or other humans, who not only add cost but time and can create errors.
Blockchain technology offers new opportunities to enhance sustainability efforts by improving tracking and verifying emissions. Its immutability, accountability, and transparency make it possible to track carbon balances and other environmental metrics, holding companies accountable for their sustainability claims, especially preventing greenwashing.
Supply Chain Emissions
In July 2024, a class action lawsuit was filed against Lululemon, alleging that the company’s “Be Planet” campaign misleads consumers into thinking the company is environmentally friendly. The complaint claims that Lululemon’s actions and products harm the environment, which is the opposite of its “Be Planet” promises.
Lululemon’s emissions from its full supply chain, known as Scope 3, nearly doubled between the launch of the “Be Planet” campaign and 2022. This is equivalent to powering 300,000 gasoline cars for a year. Blockchain can be an effective tool in verifying the authenticity of such issues in combination with AI and bringing universal trust in this vulnerable area of value chain accountability. One Trust is currently the leading Global Trust provider for ESG data in the world, both for privacy and security.
By utilizing smart contracts, companies can automate the tracking of carbon emissions throughout their operations. The information can be reported to monitoring services and made public, with the cryptographic nature of the data ensuring it cannot be falsified or manipulated.
Moreover, the same cryptography can also protect a company’s privacy when reporting on emissions. Through zero-knowledge (ZK) technology, unfalsifiable proofs can be generated to confirm the information without revealing it. This capability allows a company to provide evidence of meeting energy usage or carbon emissions standards without disclosing the underlying data.
Another way blockchain can contribute to sustainability is through secure tokenization and digital distribution of environmental assets. A prime example is the growth of the carbon credit market, which has attracted the attention of leading organizations, including accreditation registries such as Verra and Gold Standard and international organizations like the World Economic Forum. There is a multibillion-dollar market in green finance and blockchain has the potential to clearly bring credibility, accountability, and trust both in impact investing and carbon markets.
Moreover, blockchain technology can be used in responsible supply chains locally to improve transparency and traceability. Blockchain’s decentralized, distributed ledger technology creates a secure record of transactions between parties. This allows for end-to-end tracking of goods, from packing to loading to delivery, reducing the need for intermediaries and improving supplier relationships. Blockchain can securely verify supplier credentials and performance history, which can help optimize supplier selection and management. Blockchain can help companies proactively detect and mitigate supply chain risks before they have a severe impact. Blockchain can also help businesses identify and address weak points in the cold chain by capturing temperature changes as products move through the logistics network. Blockchain can help ensure product traceability, which can minimize recalls and revenue loss. It can facilitate peer-to-peer energy trading, which can reduce reliance on fossil fuels. In addition, blockchain can provide end-to-end visibility of a supply chain, which can help ensure ethical sourcing of materials. Blockchain can create a transparent system for tracking waste from its source to its final disposal.
The United Nations is actively supporting the application of blockchain in climate action and initiatives driven by the Web 3.0 community. The UN recognizes the role of blockchain technology in tackling the pressing environmental challenges facing the world.
Advancements in Sustainability Solutions
The potential for blockchain to contribute to environmental sustainability extends far beyond just energy consumption and carbon credits. In 2024, it is anticipated that a growing number of blockchain systems focused on sustainability, such as tracking water usage and plastic production, will emerge. Governments and regulatory bodies could establish clear standards for acceptable levels of environmental impact across different industries and utilize these blockchain systems for monitoring purposes. This not only benefits the environment but also simplifies business operations by setting clear expectations for emissions. A notable feature of blockchain technology and its associated applications, such as decentralized finance (DeFi), is that they have the ability to empower communities which have been severely damaged by industrial activities that have led to environmental degradation. In sectors such as supply chain management, these communities, particularly those in developing nations, can benefit from the openness and accountability given by blockchain-based solutions. This would result in more equitable revenue distribution and improved treatment, bringing us closer to true fair trade practices in the future.
