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As worries regarding climate change and environmental sustainability intensify, numerous organizations are seeking innovative approaches to tackle these urgent challenges. One such approach is blockchain technology, which holds the promise of transforming sustainability initiatives across various sectors.
On April 25, a whitepaper from the World Economic Forum (WEF) presented blockchain as a mechanism to combat climate change. The document emphasized the advantages of employing blockchains within the climate action community. The WEF discussed multiple benefits of integrating blockchain into sustainability initiatives, ranging from enhancing market transparency to broadening access to climate action.
Digitisation of the VCM is one of the leading use cases for #blockchain innovations in the climate action space.
The “Blockchain for Scaling Climate Action” Paper by @wef explores key examples & use cases, including the Climate Action Data Trust.
More: https://t.co/0JqAhUMTqy pic.twitter.com/Ltbux5PFrh— Climate Action Data Trust (@CAD_Trust) April 27, 2023
To delve deeper into blockchain’s potential for sustainability, Cointelegraph consulted industry leaders to gather insights on how blockchain can address greenwashing, its current applications in environmental initiatives, and the long-term advantages it presents for climate action.
Tackling the “greenwashing” issue
Greenwashing, a marketing tactic that misleadingly portrays products as more sustainable than they are, has gained attention in recent years. A survey revealed that 68% of executives in the United States acknowledged their companies engage in greenwashing.
Outside, @xrbham are making themselves heard loud and clear on the samba drums
And highlighting @HSBC_UK #greenwashing with their greenwash bath pic.twitter.com/2740R1YCND— Isabella Salkeld (@SalkeldIsabella) May 5, 2023
Daniela Barbosa, executive director of Hyperledger Foundation, stated that the challenge lies in verifying whether companies claiming to be “green” genuinely follow their stated sustainability objectives and plans.
She emphasized the need for a system that monitors and records these claims, asserting that digital ledger technology (DLT) is the appropriate solution. Barbosa elaborated:
“With the inherent transparency and immutability of DLT, companies and whole industries can capture and document transactions such as carbon credits or sustainable sourcing throughout their operations, creating new credibility to sustainability claims.”
Barbosa contends that reliable record-keeping systems will motivate businesses to embrace sustainable practices, aiding them in reaching climate objectives and fostering consumer trust.
Related: Carbon market gets a much-needed boost from blockchain technology — Web3 exec
Similarly, Gene Hoffman, CEO and president of the Chia Network, echoed Barbosa’s views. He noted that the existing infrastructure of carbon markets is limiting and does not promote innovation throughout the value chain. Consequently, companies face restrictions in their ability to be transparent regarding their sustainability efforts across their organizations.
Current applications of blockchain in sustainable initiatives
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The era of companies falsely claiming sustainability and environmental friendliness may soon conclude due to blockchain technology and DLTs. Currently, blockchain has made inroads into various initiatives undertaken by leading organizations worldwide.
“There is a growing range of applications leveraging DLT and related technologies, including green finance, sustainability reporting, climate accounting and supply chain traceability,” Barbosa informed Cointelegraph.
She pointed out initiatives like Genesis 2.0, a partnership involving the Bank for International Settlements (BIS) Innovation Hub, Hong Kong Monetary Authority, and United Nations (UN) Climate Change Global Innovation Hub. This project included two prototypes for digitizing bonds that incorporate future carbon benefits into their value, tracked, delivered, and transferred using blockchain, smart contracts, and other related technologies.
How blockchain can help fighting against climate change. Source: UNEP DTU
Additionally, Barbosa mentioned the pilot project launched by the Government of British Columbia, which is developing verifiable sustainability reporting. This initiative employs blockchain to safeguard its data and information.
Moreover, Hoffman regards the Climate Action Data Trust (CADT) as the most significant climate initiative utilizing blockchain technology. The CADT seeks to establish trust in carbon credit-related data among multilateral and governmental entities.
Although not spearheaded by Web3 natives, the initiative employs a public distributed ledger technology to tackle the challenge of fostering internal collaboration among equal partners.
Furthermore, Hoffman underscored the importance of the Carbon Opportunities Fund, which builds upon the foundation of the CADT. This project offers a dependable method for transparently sourcing carbon credits directly from project developers, ensuring end-to-end transparency. According to Hoffman, this approach enhances efficiency and transparency in climate markets that were previously unclear.
Long-term advantages of blockchain in sustainability initiatives
As blockchain sees increased adoption in the climate action sector, the industry could benefit from its long-term advantages, as noted by the executives. Victor Genin, senior solution architect at BNB Chain, believes that one of the primary benefits of utilizing blockchain in the sustainability domain is ensuring compliance.
Genin explained that blockchains can facilitate the tracking of goods, services, and resources throughout the supply chain. “This creates an opportunity to monitor environmental compliance and ensure that sustainable practices are followed throughout the entire lifecycle of a product or service,” he added.
In addition to these advantages, Genin pointed out other benefits such as “increased transparency and accountability, traceability, energy efficiency, waste reduction, and collaborative approaches.”
Despite the numerous benefits that blockchain can offer, Hoffman maintains that it is not a “magical solution.” However, he believes that when designed and implemented responsibly, blockchain technology can provide the essential foundation or framework for achieving enhanced transparency, accountability, and security in climate action initiatives.
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