There is still a misconception when it comes to blockchain and sustainability, and it is easy to see why. The energy-intensive process of bitcoin mining is no secret, with recent analysis by the University of Cambridge discovering that the annual energy usage of the technology exceeds that of Argentina. The negative perceptions of this are often misattributed to blockchain.
In reality, blockchain is as well-placed to make a positive sustainable impact as any other emerging technology. Organisations are increasingly able to look past blockchain’s association with bitcoin and realise its significant positive environmental impact.
This trend is clearest in the banking and financial services industry. The types of private blockchains used in this sector are not only devoid of the energy-intensive mining processes of bitcoin, but are helping banks increase transparency and efficiency while reducing their impact on the environment. By storing sustainability-related data in a blockchain, you are providing that data with another level of transparency, traceability and shareability, going beyond what is possible with more traditional systems.
The successful adoption of blockchain in banking bodes well for other industries. Most organisations have sustainability requirements, and the pressure to meet them will continue to grow in line with public awareness and demand. Organisations are realising that they cannot achieve these goals with traditional systems. Once a use-case is presented where it is clear how blockchain can help meet these requirements, it will be hard for businesses to ignore the technology.
Blockchain and energy
The energy sector is one such industry where we are beginning to see perceptions change around blockchain. The development of Ethereum in 2015 brought about the introduction of smart contracts, providing a way for energy companies to validate transactions without the need for a human intermediary. This not only encourages peer-to-peer trading but also increases the traceability of how our energy is sourced and distributed. With many energy provision systems comprising of numerous disjointed steps and siloed data, blockchain can help create a unified system that streamlines the supply network in a transparent and tamper-proof fashion.
We are still in the early stages of this innovation. Blockchain has more historical use with digital assets, so the measurement of something as intangible as electricity remains a challenge. But the technology’s potential in streamlining supply and providing a secure, standardised way of sharing data is beginning to be realised, and looks set to take off in the coming years.
Blockchain and carbon emissions
Blockchain’s ability to provide a standardised method of data sharing can have real benefits when tackling carbon emissions. Almost all organisations are taking an increased interest in their carbon footprint yet lack the technology to provide much needed clarity in this regard. Across supply chains, there is rarely a standardised system that can measure and track carbon emissions, making the process of tracking this information both time consuming and expensive. This data standardisation perpetuates simplified reporting of performance, both for a firm internally over time and for financiers who must evaluate their portfolios.
The production of smart phones is one such example. Any single phone may be comprised of five different raw material components that are constructed in different locations. Each component will produce a certain amount of carbon dioxide during both production and then shipment. Tracking data across such a supply chain carries significant cost . Blockchain, through the use of smart contracts and secure data recordings, can help produce a standardised metric system that can measure carbon emissions in a single and easy to use platform. The technology can facilitate the connections between all the different parties involved in the process and provide an immutable and proof audit trail while ensuring privacy, security and traceability.
Growing consumer demand
One of the biggest drivers that is changing perceptions of blockchain is consumer demand for transparency. In retail industries, businesses are coming under increasing pressure from consumers to provide clear and easy to access information regarding how goods and products are brought to market. Blockchain is emerging as a solution to this demand. The technology can be leveraged to create a digital identity for products, increasing traceability across the value chain and providing consumers with a clear picture of where their products come from. This added transparency can expose unethical trading practices and provide the necessary clarity for businesses to become more sustainable, in line with increased consumer expectations.
Blockchain and sustainability in the future
Perceptions around blockchain are changing. Even amidst the disruptive circumstances that characterised much of 2020 where many businesses were forced to prioritise staying afloat over disruptive innovation, blockchain-based solutions continued their rise in popularity. It is predicted that 30% of blockchain products will make it into production in 2021.
This continued progress despite challenging circumstances can be attributed in part to the changing perceptions of blockchain’s relationship with sustainability. Its ability to provide transparency across supply chains matches a rising demand from consumers for traceability of goods. With innovations continuing in banking, energy, and other industries, bitcoin-related misconceptions are slowly fading into insignificance. Business leaders need to take blockchain seriously as a technology with a wide array of potential applications across their organisation, particularly in addressing one the most pressing issues of our time: sustainability.