Blockchain technology has the potential to revolutionize sustainability efforts across various industries, as highlighted by a World Economic Forum (WEF) whitepaper on April 25th. The whitepaper featured blockchain as a tool to fight climate change and improve market transparency while democratizing access to climate action. With the ever-growing concerns about climate change and environmental sustainability, blockchain can offer innovative solutions to address these issues.
One challenge blockchain could address is “greenwashing,” a form of deceptive advertising that makes products appear more sustainable than they truly are. Approximately 68% of U.S.-based executives admit their firms are guilty of greenwashing. The root of the problem lies in verifying whether companies claiming to be “green” are genuinely following their proclaimed sustainability plans and goals. In this context, digital ledger technology (DLT) could be an efficient tool for tracking and maintaining records.
The transparency and immutability of DLT allow companies and industries to capture and document transactions, such as carbon credits or sustainable sourcing throughout their operations, bringing credibility to sustainability claims. Trustworthy record-keeping systems incentivize businesses to adopt sustainable practices, helping them achieve climate goals and build consumer trust.
Presently, various prominent organizations are leveraging blockchain technology and DLTs in their sustainable initiatives. Examples include Genesis 2.0, a collaboration between the Bank for International Settlements (BIS) Innovation Hub, Hong Kong Monetary Authority, and United Nations (UN) Climate Change Global Innovation Hub. In this project, two prototypes for digitizing bonds with future carbon benefits included in their value were tested, tracking and transferring these bonds using blockchain technology, smart contracts, and related technologies.
Blockchain’s long-term benefits in sustainability efforts can be significant if it garners more adoption in the climate action space. Victor Genin, the Senior Solution Architect at BNB Chain, considers the primary advantage of using blockchain in sustainability to be ensuring compliance. Monitoring environmental compliance throughout the entire lifecycle of a product or service would ensure sustainable practices are followed. Additional benefits could include increased transparency and accountability, traceability, energy efficiency, waste reduction, and collaborative approaches.
Despite all the gains blockchain potentially offers, it is not a “magical solution.” Nevertheless, when responsibly designed and implemented, blockchain technology can serve as the necessary framework for achieving greater transparency, accountability, and security in various climate action efforts.