April 25, 2023

Blockchain: A Game-Changer for Environmental Stewardship and Sustainability

Many see 2023 as the year of sustainability in the business world - not least driven by the importance of ESG values for companies, the blockchain plays the decisive role here.

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As we have pointed out in previous articles, blockchain has caused quite a stir in the tech and finance world in recent years. The reason for this is the disruptive way we store, verify and exchange data. Blockchain is also extremely powerful in terms of sustainability, as it offers the possibility of converting existing solutions and systems in all industries and sectors to a low-carbon infrastructure. We look at these areas and the use cases of blockchain in this article and can already say: it is an exciting future!

Due to the large number of blockchain use cases in the area of sustainability, we group in terms of focus and see the following five categories:

  1. Sustainable Finance and Investment
  2. Energy and Emissions Management
  3. Agriculture and Biodiversity
  4. Supply Chain and Resource Management
  5. Circular Economy and Material Life Cycle

Continuing from our last article on blockchain and finance, let’s have a look at how blockchain is making finance more sustainable.

Social equity and the rise of ReFi

About 1.7 billion people in the world are unbanked globally. Blockchain can be used to help these people by providing a secure and transparent platform for managing financial services. It can be used to provide access to banking services such as savings, loans, remittances and payments in even the most remote areas. The decentralised nature of blockchain helps ensure that these financial services are accessible, secure and immutable, meaning that individuals and businesses can trust them. On top of that, blockchain-based financial services have the potential to reduce costs and provide low-cost alternatives for countries with limited access to traditional banking systems.

Another hopeful sustainable development is ReFI –  in the realm of finance, Regenerative Finance (ReFi) is an emerging and swiftly growing field, holding considerable potential to influence the crypto sector and the world of finance. Contrary to conventional finance, which has been criticised for favouring short-term gains over enduring sustainability, ReFi emphasises the welfare and robustness of ecosystems, communities, and the Earth itself above monetary profit.

ReFi got attention at the last WEF (World Economic Forum) meetup in Davos, and was perceived among the hottest topics for the future to come.

Energy and Emissions Management

The monetary aspect in terms of green finance also interacts beautifully with the next sector: Energy. Green finance is a type of finance that promotes environmental sustainability. It focuses on investing in projects and assets that have positive environmental impacts and support the transition towards cleaner energy sources. Carbon credits, renewable energy and emissions trading are all aspects of green finance.

Renewable energy trading

Renewable energy trading allows for the buying and selling of renewable energy credits (RECs) between buyers and sellers, allowing for more efficient use of renewable energy sources such as solar, wind, and hydroelectric power. This type of trading allows for an easy as well as a more cost-effective way to purchase renewable energy, as well as providing an incentive for companies to invest in renewable energy sources. This is especially helpful for emerging countries, which lack the resources or money to create renewable energy facilities.

And there are numerous more benefits of renewable energy trading. It can help reduce emissions from traditional sources of electricity generation, increase access to clean and affordable electricity, create jobs in the renewable energy sector, and provide a financial incentive for companies to invest in renewable energy projects. Additionally, it can help stabilise electricity prices by creating a market where buyers and sellers can compete on price.

Renewable energy trading also has the potential to open up new markets for investors looking to capitalise on the growth of this sector. By investing in RECs or other forms of green finance, investors can benefit from the increasing demand for clean and affordable electricity while also helping to support the growth of renewable energy sources around the world

Another really interesting aspect is peer-to-peer (P2P) energy trading using blockchain technology in the energy sector. P2P energy trading enables consumers to buy and sell energy directly to each other, creating a more decentralised and flexible energy market. The various benefits of P2P energy trading are cost savings, increased efficiency, and greater consumer control over energy usage. The challenges are regulatory barriers that need to be addressed to enable widespread adoption of P2P energy trading.

Carbon credits and emissions trading

Carbon credits and emissions trading is a system that allows companies to buy and sell the right to emit carbon dioxide into the atmosphere. It is designed to incentivize companies to reduce their emissions by providing them with an economic incentive to do so. The most common type of carbon credit trading system is known as “cap-and-trade”. Under this system, each company is given an emission allowance or “cap” which limits the amount of carbon dioxide they are allowed to emit into the atmosphere each year. If they exceed this limit, they must purchase additional allowances from other companies who have not used up all of their allotted allowances. This creates a market where companies can buy and sell these allowances in order to meet their emission target.

The goal of this system is to create a market-based approach for reducing greenhouse gas emissions. By creating a financial incentive for companies to reduce their emissions, it encourages them to invest in new technologies and processes that will help them become more efficient and less polluting. Additionally, it creates a way for governments and businesses to collaborate on climate change solutions, as they can use carbon credits as a form of currency when negotiating agreements.

By providing a secure, transparent, and immutable ledger of transactions, blockchain can be used to track and verify carbon credits and emissions trading in real-time. This could enable governments, businesses, and individuals to more accurately monitor their environmental impact while also creating new opportunities for investment in green energy initiatives.

Agriculture and Biodiversity

The Suez Group, a company that is mainly involved in water cycle management and waste recycling & recovery, states that by 2050 two billion more people have to be fed by agriculture. Therefore agriculture needs as well as other industries to be more sustainable – that means the downscaling of chemical and fossil-based inputs in the form of pesticides, fertilisers, plant health products and of course reducing the carbon footprint.

The Blockchain also plays out quite helpful when it comes to sustainable agriculture and biodiversity conservation. By its use, farmers can track the provenance of their food and create trustworthy food supply chains that build trust between producers and consumers. This technology also helps to level the playing ground for small-scale farmers by simplifying transaction processes. Suez for example recently launched its CircularChain platform, a blockchain-based platform that supports the circular economy. The platform encourages businesses to invest in more sustainable practices by providing them with digital representations of their products and services as well as insights into resource usage patterns. Suez is also planning to use the platform to support agricultural transition towards sustainable food production.

What’s more, blockchain technology can be used to store data in one place, allowing for easier access by those who need it. This simplifies the entire process and allows farmers to keep better track of their crops, soil health, and other important information related to their production. Therefore they are able to manage an often overwhelming agricultural enterprise or farm. Blockchain can also be used to weed out counterfeits in agri-food production and increase transparency in the agricultural industry.

Not to mention the potential of managing agricultural supply chains. With blockchain, we can track all types of information about plants from seed quality to crop growth which will help us improve our agricultural techniques and make them more efficient. Thanks to the blockchain we are able to monitor food safety standards throughout the entire supply chain from farm to fork which would help ensure that only safe products are reaching consumers.

Biodiversity

In the realm of  biodiversity,  the blockchain is being used to protect biodiversity conservation by making it easier to track the provenance of species and ensuring that they are not being poached or sourced illegally. Now conservationists can create a digital token for every individual species, allowing them to track its movements in real time and take necessary steps if any suspicious activity is detected. And this is also true for wildlife. Governments and organisations alike can take steps towards better understanding the global wildlife trade market and reducing unsustainable practices.

Additionally, blockchain technology can be used to help identify areas where biodiversity needs to be protected or restored. By collecting data from multiple sources such as satellite imagery and remote sensing devices, conservationists can create a comprehensive picture of the landscape which can then be used to determine where specific species are thriving or struggling.

Traceability for Sustainability – Supply Chain meets Blockchain

Supply Chain Transparency

In our blockchain in supply chain management article, we touched on the importance of traceability and transparency and how it can be used to track products from origin to destination, helping to ensure that companies are adhering to sustainable practices. This could include tracking the materials used in production, where they were sourced from, and how they were transported. Blockchain also offers organisations the opportunity to store data on their supply chains so that they can provide evidence of their sustainability. That in turn is a vital building block for creating a solid ESG score (Environmental, social, and governance), which is becoming a more and more crucial aspect of how companies are valued in the future.

Waste management

When it comes to waste management, blockchain can be used as a tool for monitoring and managing waste streams. Companies can use blockchain-based systems like the CircularChain platform  to track the amount of waste they produce and where it goes after disposal. This helps them identify areas where they can reduce their environmental impact by reducing their waste output or finding more sustainable ways of disposing of it.

Water management

Finally, blockchain technology can also be used for water management. By tracking water usage throughout the supply chain, companies can identify areas where they are using too much water and take steps to reduce their consumption. Additionally, blockchain-based systems can help ensure that companies are following regulations related to water usage and pollution prevention.

(Fig 1: the circular economy model, WEF)

Circular Economy and Material Life Cycle

In our recently posted article “The future is sustainable: companies embrace renewable energy and ethics” we name the circular economy as a significant trend in 2023. The same applies to the blockchain in that combination.

Also, the circular economy is big business – according to Accenture's report, "Waste to Wealth", the value at stake could reach $4.5 trillion by 2030. This would account for between 4-5% of the projected global gross domestic product (GDP) and is greater than the current size of the entire German economy, which ranks fourth in the world.

The use of blockchain in the circular economy is becoming increasingly popular as it offers a range of benefits. It can help to reduce transaction costs, enhance performance, improve traceability, increase reliability and security, and enable smart contracts.

For instance, blockchain technology can be used to track materials throughout their entire life cycle. The Suez Group's CircularChain, which has been mentioned here several times, was created specifically for the circular economy - as the name already reveals. This platform enables companies to track materials throughout their life cycle and create digital representations of their products, services and assets. This helps to reduce transaction costs, improve compliance and enable smart contracts that automate processes such as payments or deliveries. The platform also provides insights into resource use patterns and enables more efficient waste identification and management.

It also helps to ensure that materials are recycled correctly and sustainably. Furthermore, it allows companies to identify where the materials come from and how they are being used.

(Fig. 2: CircularChain and SludgeAdvanced pioneering strategy for organic waste management and digitalisation, Suez Group)

In conclusion, the use of blockchain technology offers a range of benefits for creating a more sustainable future in virtually all industries and sectors. It helps to improve traceability, enhance performance, increase transparency, and provide smart contract automation. With the growing importance of ESG scores, it is crucial for organisations to look for and implement blockchain solutions to create a better future for all. Let's embrace, use and explore this technology in order to work together towards a more sustainable future.

Many see 2023 as the year of sustainability in the business world - not least driven by the importance of ESG values for companies, the blockchain plays the decisive role here.
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