Blockchain – a type of distributed ledger comprised of unchangeable, digitally recorded data in packages called blocks – has come a long way in recent years since it first burst into public consciousness in 2017. The landscape is ever-evolving. Cryptocurrencies, which use the technology to record and secure every transaction are only the beginning, as distributed ledger technology will play a significant role in developing the Metaverse and Web3 – a decentralized version of the internet.
However, back on planet earth, blockchain technology is being used to tackle the most significant issue we face today – climate change.
Improving climate action transparency
Blockchain technology can be a game-changer in combatting greenwashing, a term first coined by environmentalist Jay Westerveld in 1986, which describes the deliberate and misleading claims about the environmental benefits of a product or service.
Blockchain tackles greenwashing in supply chains by providing a transparent and decentralized way of recording lists of transactions. Businesses can use the technology to verify environmental claims and because all transactions on a public blockchain are open for public viewing, an unprecedented layer of accountability is added. For instance, online beauty retailer Cult Beauty has partnered with Provenance to use blockchain to certify product claims, a first in the beauty industry.
It doesn’t stop there. Companies are using the technology to collect and report ESG data. As the demand for corporate disclosure increases, so does the requirement for reliable and verifiable data. Marrying blockchain with data collected through connected devices and analyzed using artificial intelligence (AI) makes it possible to aggregate energy usage and emissions data on the blockchain. Notably, it allows companies to demonstrate proof of progress towards metrics while protecting sensitive data.
Companies can extend this same process to their whole value chain to help companies build a picture of their scope 2 and 3 emissions. By reporting supply chain-wide emissions on a blockchain, companies create a single platform for carbon emissions data that fosters traceability and accountability between supply chain entities.
Shining a light on carbon trading
Carbon trading is the buying and selling of credits that permit a company or entity to emit a certain amount of carbon dioxide. They have always been controversial; adversaries are against the idea of letting polluters pay their way out of the issue, and standardization and transparency remain an issue.
The United Nations has identified carbon emission trading as an area in which blockchain can help fight climate change as it ensures transparency during transactions. For instance, Energy Blockchain Lab and IBM have created a blockchain platform to trade carbon assets in China. The University of Cambridge is developing a blockchain-based market for trading carbon credits to support reforestation projects and preserve biodiversity.
Blockchain is only one of several tools to tackle climate change
The technology alone will do little to achieve net-zero by the middle of this century, and there is a whole web of levers that need to be pulled if we are to achieve that aim. Decarbonization technologies need to be scaled up and finance needs to be redirected in order to scale up decarbonization efforts. However, according to the European Commission, “blockchain is a powerful tool that can significantly improve the transparency, accountability and traceability of greenhouse gas emissions.”