What the heck is the blockchain and how can it improve your business’ sustainability?

blockchain

You might have heard the hype about the blockchain and how far-reaching its benefits could be. Although it’s in its infancy, there’s some hugely beneficial applications that could make operating sustainably that much easier. Here’s some of the key ideas…

Recently the Greenhouse, a collaboration between WWF Australia, GreenUps and EnergyLab, held an event, neatly titled: “What the heck is the blockchain!? and is it planet-saving tech?” There are far-reaching implications for the sustainability industry and it was very interesting to hear from those working at the fore of this cutting-edge technology.

Blockchain revealed

A blockchain is essentially a shared record book, storing a complete ledger of economic (or other) transactions across a network. Most importantly, each transaction, or ‘block’, exists in perpetuity and can never be tampered with. See Jamie Skella’s LinkedIn post for an easy-to-understand explanation.

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” – Don and Alex Tapscott, Blockchain Research Institute

A copy of the complete ledger is stored by every party in the network, so the blockchain doesn’t rely on one organisation (such as a bank or government body) and doesn’t have a single point of failure. Any user can view the entire ledger, allowing for complete transparency and the ability to trace an item from creation to its current state.

Blockchain can also enable smart contracts that can trigger transactions once certain conditions have been met.

Traditionally used as a cryptocurrency technology, it’s uses are now expanding farther afield.

What does it mean for supply chains?

Can you see what we’re seeing? Blockchain has enormous potential for sustainable procurement, because of its undeniable transparency and validation.

If the organisation behind every transaction along a supply chain uses a blockchain, then buyers can view the entire history of the product and make educated decisions about its provenance. Producers can ensure that their product maintains its condition and enforce payment contracts.

Translated into sustainability: producers can see if their tuna is being mixed with less sustainable fish, for example; or if their cotton is being used to make garments in factories that support modern slavery. Producers can then choose to sell to those who support their values and have the same regard for their product.

Sustainable consumers can then validate a green claim on a label, because they can see exactly where their tuna was caught and the production methods it went through.

Blockchains are also being used in the energy space for micro transactions in electricity grids, allowing solar energy to be sold household-to-household rather than selling back to energy providers. There are similar applications available for tracking the transfer of carbon credits, for the sale of heat generated in data centres and for the charging of communal electric vehicles. We see interesting applications in tracking carbon emissions, which links to our extensive work in life cycle assessment.

Are there any cons?

There are some environmental concerns for the use of blockchain. Blockchain was created as a component of Bitcoin, which uses massive amounts of energy worldwide to validate its transactions. It’s estimated that one Bitcoin transaction uses enough energy to power an average Australian household for 14 days.

The good news is that this energy intensity is due to the need to validate transactions between anonymous users and isn’t an intrinsic part of Blockchain. As the technology matures, new techniques are reducing this energy use or excluding it altogether.

In blockchains where users aren’t anonymous, validation can be done using specific endorsement, bypassing the need for energy intensive ‘mining’. These blockchains are often private, and most commonly applied to business applications where it’s important to know the identities of parties that you’re trading with.

Where to from here?

Blockchain is a young technology, particularly outside cryptocurrency applications, and is still in a process of optimisation and evolution. Without doubt, it will find ways to increase efficiency and reduce environmental impact although, for now, environmental factors should be considered when choosing a blockchain application.

In the meantime, the technology is making huge advancements in enabling transparent, verifiable and incorruptible transactions and changing the way that the world creates and interacts with supply chains, energy grids and other social records.

If you have ideas about other blockchain applications for sustainability, we would love to help so please get in touch.

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