We’ve previously written about how other modern technologies like AI might be used in sustainability.
But, in this guide, we outline how Blockchain might be used in sustainability, how it might help, and it’s potential limitations and shortcomings.
Summary – Using Blockchain In Sustainability
Blockchain is essentially a digital record/ledger of information and transactions
It has several unique features that present benefits over other methods of data and transaction recording, with two examples being that the data reliably stays intact, and also that it’s hard to alter or hack the data
Three ways that Blockchain may help with sustainability might include 1. Transparency, consumers being able to cross check the sustainability claims of companies, and consumers being able to make more informed purchasing decisions, 2. Traceability, and businesses being able to more clearly see where their supply/production is coming from, and where their waste is going to – potentially improving areas like recycling and waste disposal, and 3. Increases in resource efficiency and conservation
Four potential limitations and downsides to Blockchain right now might include 1. Being able to use Blockchain effectively, 2. The energy requirements of Blockchain as a digital technology, 3. Some countries not having finances or infrastructure to use Blockchain, and 4. It taking time to get all parties and stakeholders to sign up to and use Blockchain i.e. there are scalability of use problems
What Is Blockchain, & What Does Blockchain Do?
Blockchain creates a digital record of transaction [like a digital ledger] where ‘nodes see, manage, and record transactions’ (sustainability-times.com)
Thebalancesmb.cm notes ‘[Blockchain] can be used autonomously with the use of a distributed time-stamping server and a peer-to-peer network’ and ‘[it is an] open and distributed ledger that captures transaction data between two parties in a permanent and verifiable way’
The lexology.com resource in the resources list provides a more detailed explanation on what Blockchain is and what it does
What Makes Blockchain Unique Or Valuable?
According to sustainability-times.com, there’s two key things that make blockchain technology unique or valuable:
1. Digital records reliably stay intact
‘These records create digital blocks … that remain intact despite the failure of a node or two’
2. Hard to hack or alter/change
[Blockchain offers] a system of recording information in a way that makes it very hard or near-impossible to alter or hack … because records of every new transaction need to be added to each of several ledgers … before the transaction is verified and recorded
To change anything in that transaction, therefore, would require changing details in every ledger
Again, the lexology.com resource in the resources list provides some additional features of Blockchain technology, such as decentralization, and ‘institutional authentication as well as intermediaries such as banks’
Walton College of Business, via karmaimpact.com, says ‘because blockchains … are uniquely suited to verifying, securing and sharing data, they’re ideal for managing multiparty, inter-organizational, and cross-border transactions’
How Blockchain Might Help With Sustainability In The Future
Ways that blockchain may help with sustainability in the future are:
1. Transparency, & Proof Of Activities In The Supply Chain (Or Other Stages Of The Product Or Service Lifecycle)
Companies may make claims of the ways in which they are sustainable, or they may present policies, statements and reports on various aspects of their sustainability goals and results
Short of an independent third party certifying body verifying some or all of these claims, it can be hard to verify which companies are actually being sustainable, and which ones might be ‘talking the talk, and not walking the walk’ or engaging in heavy ‘greenwashing’
Blockchain offers a way to record and check on a company’s transactions, such as in the supply chain for example, and this can be cross checked with a company’s sustainability claims and reporting to see how accurate it is
It essentially is a way to check process integrity, and hold businesses more accountable
As sustainability-times.com puts it ‘… blockchain provides a verifiable record as to who buys what from whom’
When this information is available to consumers, consumers can make more accurate (and more informed) decisions on what they buy, and why
2. Traceability, & Improving Sourcing & Waste Disposal
In addition to being transparent, blockchain allows traceability.
This enables companies to more accurately see where their materials, products, labor, supply and manufacturing are coming from and going to.
This may allow companies to better and more quickly make decisions about their supply and production stages, and also their waste disposal stages.
One thing they may be able to do is increase the amount of waste they recycle or re-use, if they find out that they are unnecessarily sending recyclable waste to general waste skips, just as one example
Another thing they can do is detect issues in their supply chain a lot sooner, such as issues with what might be unsuitable or unethical suppliers
3. Increased Efficiency
Increased efficiency leads to more efficient use of resources (and ultimately better conservation of resources) – which is good for sustainability.
Blockchain can help streamline (i.e. increase efficiency of) the supply chain, or entire stages of the product or service lifecycle, with time stamped databases.
This results in ‘companies optimiz[ing] processes, com[ing] up with innovations, and increas[ing] productivity … [as well as reducing] operating costs and … reducing waste (sustainability-times.com)
It may also result in faster response times at each stage of the product/service lifecycle, and eliminating errors
A Few Specific Examples Of How Blockchain May Help With Sustainability
Specific examples may include:
– ‘… food safety, efficient recalls, the elimination of counterfeits, and the assurance of ethical trading partners [, as well as] better assurance of human rights and fair work practices’ (thebalancesmb.com)
– In recent years, blockchain technology has helped link philanthropists’ dollars more quickly and securely with their chosen charities, facilitated the distribution of cell phones to aid workers in Nepal after a 7.8-magnitude earthquake in 2015, and helped pinpoint a toxic lettuce source instantly for Walmart (karmaimpact.com)
– Blockchain technology has been used to track food products from farm to shelves, improve transparency in medical supply chains and provide aid or stimulus to rescue people in a time of a disaster (medium.com)
The ibm.com resource below goes into more specific examples of how Blockchain can be used in sustainable sourcing
Are There Potential Limitations Or Downsides To Using Blockchain In Sustainability?
There could be four potential limitations or downsides:
1. Using blockchain effectively
Because it’s still a relatively new technology, and it isn’t used widely in sustainability yet, there might be issues around companies having the knowledge and practical experience in using blockchain effectively for sustainability, or implementing systems to do so
2. Blockchain currently uses a lot of energy
Blockchain is digital and needs to use a lot of computers and electricity to function, similar to technology like AI.
It ‘requires vast amounts of energy that is generated mostly from fossil fuels’ (lexology.com)
Lexology.com notes that even using less fossil fuels and more cleaner energy for Blockchain might be an issue ‘… even in the case of a mixed energy source, it is also likely that the carbon footprint of Blockchain transactions is high’
This could be an issue in the future in terms in terms of a) producing enough energy to meet demand, b) greenhouse gas emissions, and c) air pollution
3. Some countries don’t have the finances or infrastructure to use blockchain yet
‘… developing countries do not have the adequate infrastructure or ability to provide high-speed Internet or digital accessibility’ (karmaimpact.com)
4. Low adoption rate in scalability terms
Karmaimpact.com also explains that all suppliers and parties who will have their data logged on the Blockchain network have to sign up to and use the network, and this adoption can take time and convincing.
The sciencedirect.com resource below further emphasizes the adoption barriers for blockchain.
Sources
1. https://www.sustainability-times.com/sustainable-business/blockchain-can-be-a-vital-tool-to-boost-sustainability/
2. https://www.lexology.com/library/detail.aspx?g=5b24eabe-ae87-4db7-ad81-205d04c9c14b
3. https://www.thebalancesmb.com/blockchain-and-supply-chain-sustainability-4129740
4. Mahtab Kouhizadeh, Sara Saberi, Joseph Sarkis, Blockchain technology and the sustainable supply chain: Theoretically exploring adoption barriers, International Journal of Production Economics, Volume 231, 2021, 107831, ISSN 0925-5273, https://doi.org/10.1016/j.ijpe.2020.107831. (https://www.sciencedirect.com/science/article/pii/S0925527320302012)
5. https://karmaimpact.com/how-blockchain-technology-can-advance-sustainability/
6. https://www.weforum.org/agenda/2020/09/3-ways-blockchain-can-contribute-to-sustainable-development/
7. https://www.ibm.com/blogs/blockchain/2020/12/blockchain-and-sustainability-through-responsible-sourcing/
8. https://medium.com/akeo-tech/how-blockchain-can-boost-environmental-sustainability-fa8a5303b711
