Blockchain: more transparency and efficiency in ESG

Blockchain technology has for some time crossed the boundaries of cryptocurrency transactions and has been gaining ground in other various sectors. In a recent article,  I mentioned here that it is one of the top disruptive technology trends for businesses in the coming years.

By enabling you to record, track and verify interactions and transactions in a decentralized manner, blockchain has been touted as a solution to give more transparency and efficiency to ESG practices – and thus contribute significantly to reducing global warming and climate change.

The  Future Thinkers platform selected seven business areas in which blockchain can be used to make a positive impact on ESG.

Some examples are promising. It can be used in Supply Chain Management to track products from manufacturing to shelf, helping to prevent waste, inefficiency, fraud, and unethical practices by making the process more transparent. On the other end, it can make consumers better informed about each product to make more sustainable choices.

Recycling and power grids

The overall volume of waste being recycled is still very small. According to the OCDE (Organization for Economic Cooperation and Development), only 9% of the world’s 353 million tons of plastic waste were recycled in 2019. With the use of blockchain, it would be possible to give a financial reward in the form of a cryptographic token in exchange for recycling plastic containers, cans, or bottles. In addition, it would provide more reliable data on volume, costs, and revenue generation allowing you to evaluate the impact at each location.

In electrical networks, technology can decentralize systems, reducing the distance in transmission and distribution, and consequently, losses along the way. Another area of application is the monitoring of compliance with environmental treaties, which gives more transparency to information related to ESG, preventing fraud. The same applies to the tracking of contributions for non-profit organizations, guaranteeing that they are destined for the purposes they were collected for. In this way improving the accountability and presentation of results. Also, enabling the transfer of financial resources directly can benefit populations and countries where there is no banking infrastructure.

Used to track the carbon footprint of each product, blockchain could become the basis for calculating tax by generating greenhouse gases. With this, a product that generates many gases in its production would have to bear an extra cost, becoming more expensive and encouraging the consumption of more sustainable items, in addition to stimulating the restructuring of supply chains by the industry to follow ESG principles.

Finally, technology can make the real impact of each person’s or business’s actions more visible by stimulating improvements that benefit the environment. By transparently tracking data such as each product’s carbon footprint, a plant’s greenhouse gas or waste emissions, or a company’s level of compliance to ESG standards, blockchain can radically change the engines of our economy by benefiting all of us and preserving the planet for future generations.