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Blockchain and Environmental Applications

Written by Equilibrium on 31 January 2018

Digital disruption applied to environmental objectives holds great potential to build transparency across the supply chain

The need to confirm, verify and certify processes and outcomes is a major element in responsible and measurable environmental management, be it to establish accurate disposal paths, quantify recovered materials or document a robust chain of data and activity.

From forestry and fisheries through to energy, carbon reduction and abatement programs and the recycling and recovery of waste, the need for unassailable digital tools is an essential part of responsible environmental management and business sustainability in the broadest sense.

How often do we hear about the need for effective ‘chain of custody’ for materials or a particular product, or for certified recycling outcomes?

Digital solutions that are free of any single vested interest, and have the architecture to enable transparency and widespread adoption, will allow organisations, and their sustainability practitioners to reach new levels of knowledge transfer, environmental performance, supplier accountability and customer confidence.

Blockchain 101

There are plenty of definitions with a recurring theme but it’s all about decentralization through a platform ‘owned by no one and useable by everyone’.  In very simple terms it’s a ‘shared record book’.

Some succinct explanations further describe its essential characteristics:

“Blockchain is a decentralized digitized database that maintains a list of records of a complete history of transactions or movements of a product.”

“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.” Read more: Don & Alex Tapscott, authors Blockchain Revolution (2016)

Because the “chain” can’t be modified it can immediately provide proof of purchase for any transaction, whether that be procurement of sustainable materials to purchasing renewable energy.

Fundamental to the structure of blockchains is the ability to maintain encrypted copies of any information stored on every server or “node” in the network.

Blockchain systems record all transactions, enabling a transparent trail that can be easily audited, even automatically which can be used to validate transactions preventing double counting and the authenticity of chain of custodies around products and materials.

Relevance to sustainability and environmental objectives

So could the blockchain be part of the transparency revolution that business sustainability demands?

Heather Clancy, the editorial director of GreenBiz talks about the blockchain’s emerging role in sustainability in a manner that is both plausible and compelling. The scenarios she describes are clear candidates highlighting how a ‘shared record book’ can bring noteworthy environmental benefit and customer confidence through the ultimate in transparent platforms.

“Picture, if you will, a tracking system that discreetly verifies the provenance of products as they move across a supply chain — sending proactive alerts about unexpected detours that could signal potential tampering or environmental conditions that might pose safety issues. Or, imagine a database that monitors the clean electricity generated by on-site solar panels, issues renewable energy certificates as certain production thresholds are achieved, then distributes them according to predetermined contracts. Automatically.”

Clancy however is a realist and acknowledging the hype but certainly not dismissing the blockchain and its future applications. While lavish claims and embellishment are the norm for early innovations and over-excited entrepreneurs, there is a logic and clarity around why and how the blockchain can address data and verification gaps not always possible or reliable via conventional methods and systems.

“While the hype level seen during 2016 isn’t likely to last — it sometimes seems every other tech headline is rife with blockchain promises — the next few years will usher a wave of experiments. Where sustainability professionals are likely to see the most action: among utilities or renewable energy developers seeking a more efficient way of pricing and selling clean power; at consumer products companies and retailers seeking a better way of validating supply-chain claims; and among banks and insurance companies interested in verifying the provenance of minerals, commodities or raw materials.”

In support of her insights, Clancy shares some specific examples of companies to watch and how they are utilising the blockchain to address a diverse range of energy, environment and supply chain imperatives from conflict minerals and product life-cycle management all the way through to renewable energy trading:

IBM — sells a private cloud service that could help organizations develop and get blockchain applications up and running quickly. Its technology is behind pilots by retailer Walmart, for food safety, and Everledger, which certifies the origins of diamonds.

LO3 Energy — its TransactiveGrid system helps automate the trading of power across microgrids. The startup just scored a notable strategic partner, German energy management company Siemens. (A similar company is Australia’s PowerLedger.)

Nasdaq — has been investing in blockchain technology for more than three years. Its Linq service could be the foundation for new business models, such as a system for issuing renewable energy credits automatically.

Provenance — a relatively low-key London firm has piloted the use of blockchain to track tuna supply chains in Indonesia and to monitor produce for British grocer Co-op Food. It wants to make it simpler for companies to verify sustainability claims.

Skuchain — the California startup’s software is behind a test by Commonwealth Bank and Wells Fargo initially focused on trading cotton between Texas and China.

Heather Clancy’s article complete with more detail can be viewed at GreenBiz. It is a reader-friendly excerpt from a more comprehensive report published in partnership with Trucost in 2017. Read more: https://www.greenbiz.com/article/blockchains-emerging-role-sustainability

Indeed we have local examples. Power Ledger based in Perth has launched a successful ICO (Initial Coin Offering). The company uses a blockchain platform that allows neighbours to trade surplus energy from rooftop solar panels and batteries at prices that exceed feed-in-tariffs, as well as sharing solar panels and batteries on multi-dwelling apartment blocks and community facilities. Read more here: http://www.afr.com/news/power-ledger-builds-energy-business-amid-bitcoin-mayhem-20171215-h05c5v#ixzz55AxqIDbH

The World Economic Forum has also been proactively discussing the relevance of the blockchain and its role in helping deal with climate change and resource conservation.

In relation to climate change the WEF speculates on what’s possible, desirable and necessary staying that the blockchain features benefits for both producer and consumer, as well as other players throughout the supply chain:

“Imagine a world in which carbon emissions and credits can be tracked transparently and reliably. Retailers will be able to sell a product and take into account the carbon impact it creates at the same time. Governments will be able to measure, track and trade emissions transparently. And crucially, for the first time consumers will be able to understand the environmental impact of the products they are buying – both positive and negative – at the point of sale, and will be able to mitigate this in an instant, with millions of micro-transactions scaling up to make a huge collective impact.”  Read more: https://www.weforum.org/agenda/2017/09/carbon-currency-blockchain-poseidon-ecosphere/

New uses and applications emerge weekly which also highlights that the platform has captured the imagination of innovators and entrepreneurs, as well as the major financial institutions who have much to gain and lose should they not understand its potential.

The here and now of the blockchain is mostly being used in cryptocurrency because of its two main advantages i.e. the highly secure nature of the platform, and its transparency. These attributes have been quickly identified by users as the ‘shared record book’ reaches into new markets and solutions, including:

> Plastic Bank: uses blockchain technology to pay for the collection of plastic in poverty-stricken areas reducing the overall waste.

> Poseidon+: carbon credit market that will allow consumers to purchase climate positive products and having the confidence to trust it because of blockchain tracking.

> Catenaut: is blockchain made for a timber supply chain, knowing where the timber comes from and the amount coming in accurately.

Ultimately the blockchain delivers a degree of transparency that in fact spawns new uses, or improved uses compared to conventional, less-secure methods and systems.

A blockchain future will be able to:

> track energy in a decentralized system
> track products from cradle to grave/ tracking products that may be reused/recycled
> track food sources i.e. consumers knowing where it comes from. Seeing food miles and other information
> continually track products across and throughout the supply chain
> accurately audit supply chains as it provides a clear paper trail of products that cannot be tampered

Its success and widespread application will in part depend on compelling, evidence-based case-studies that stimulate thinking across sectors and industries, including energy, water, waste, mining, agriculture and fisheries.

If the blockchain can achieve a step-change improvement in relation to accurate data sharing, verification, monitoring and tracking, then we are likely to see greater uptake over the coming months and years. And if its application can directly and indirectly contribute to achieving a more resource efficient and productive sustainable future then its value-adding capacity is noteworthy.

It could also be the platform that helps to underpin the circular economy and its focus on extending the life of products, components and materials to unprecedented levels.

Transparency combined with closed loops is a powerful partnership in pursuit of regenerative and restorative solutions.

Authored by: John Gertsakis and Tom Pollock from Equilibrium
31 January 2018