Blockchain technology brings transparency to reveal companies’ ESG status

There is an increasing focus on the Environmental Social Governance (ESG) credentials for organisations as  governments, shareholders, staff and consumers are challenging companies to be able to authenticate and  prove that the business practices they employ are sustainable for the wider economy and society. The EU  has announced that it is looking to issue €250billion of Green Bonds (debt instruments to fund projects  that have positive environmental and/or climate benefits) and this helps to explain why the Green Bond 

market, which only started in 2007, has grown by 95% p.a. The chart below indicates that the demand  from investors seemingly continues to grow as they allocate an ever-rising proportion of their capital to  sustainable investing. 

% of High Net Worth’s portfolio allocated to sustainable investing 

Source: Capgemini 

According to EY: “Blockchain technology provides distribution and trust to serve ESG needs and should be  provided as a utility, to focus on value instead of technology.” Indeed, in analysis carried out by EY, it also  found that: “98% of institutional investors now evaluate non-financial metrics for investment decisions”,  

adding further, “Financial metrics will be combined with ESG data type, providing insights and forward looking information for the decision-makers. As a consequence, blockchain will play an important role in  the intelligent value chain”. The reason EY can make such a bold claim about blockchain-powered  platforms is because this technology has the ability to bring transparency to the very complex supply  chains which transport the plethora of raw commodities and manufactured goods around the world. The  ability to track and trace commodities dug from the ground or grown in fields and then shipped thousands  of miles to another country is now made possible using blockchains, together with other technology such  as Internet of Things (IoT) QR codes, Radio-frequency identification, barcodes etc. 

Companies such as Minehub and Covantis are good examples of how Blockchain technology is being used  to solve the challenge of tracking goods, whereby enabling organisations to assure their customers of the  provenance of the goods they are buying and their ESG credentials. Minehub, established in 2019, allows  the buyers and sellers of minerals and metals to see, in real time, where their commodities physically are  as opposed to relying on analogue-based procedures that historically required couriering or having 

documents emailed. Meanwhile, Covantis is a trade organisation that is run on the Ethereum Blockchain  and has worked closely with ConsenSys. It is designed to help the agriculture industry be more efficient  and be able to track and trace goods that are being moved across the world. To learn more about how  Covantis functions, ConsenSys has complied a useful case study about which you can see more information  by clicking here. 

With its website stating, “Guaranteeing Authenticity and Quality”, AgriLedger is another firm that has  actually implemented a blockchain-powered solution resulting in farmers across Haiti receiving up to 7.5  times the amount they would have been paid to grow mangos, avocados etc. AgriLedger’s blockchain powered platform enables farmers to track and trace the whereabouts of their produce is as it is shipped  from Haiti to the USA. Recently, when talking to Genevieve Leveille, CEO of AgriLedger, she said: 

Traditionally, when designing equitable systems, we often focus on the consumer. If we were to start with  the smallest or the most removed members of the supply chain, we find they often don’t see much  transparency in the value chain that they are a part of. This can be acerbated by the lack of record  management, and this creates great opacity that limits their ability to participate in the financial ecosystem  and creates a great disadvantage. With AgriLedger we aim to promote the aspect of ‘Clear Trade’ – this is  not about what is fair as fair can be something that is relative to an individual’s sense of  entitlement. However, if we can achieve a mechanism where data is trusted and immutable, then we can  look to rebalance the stakes and create a system where rewards are based on effort not just risk  taking. Blockchain Technology allows for a record of what has happened and removes the doubts allowing  for better collaborations among parties that normally would not be willing to have faith and trust in one  another”. 

Everledger was one of the first companies to use Blockchain technology to track and trace supply chains, so shining a light on the sustainability practices of the firms that use its platform. Recently, the Everledger  platform has been harnessed by Cygnet Bay Pearl farmers so its clients will be able to have a digital  certificate that records the history and provenance of the pearls they have bought. 

Source: Cygnet Bay Pearl farmer 

Meanwhile, a company that is using Blockchain technology to help monitor and assist organisations in  meeting their ESG targets is Watr. This is worth keeping an eye since one of its co-founders, Maryam Ayati, has huge experience in the commodities business (having been ex-chairperson of the highly successful  Vakt) and has led Shell’s LNG and Marine businesses. Furthermore, Watr’s co-founder, Clint Nelsen, also  established Startup Weekend, which has a following of over 2 million developers and people looking to set  up their own businesses. 

However, it is not merely a question of being more efficient and therefore waste less food or minerals etc  but being able to monitor the sustainability of farming and mining methods and enabling the end  consumers to be more aware of the original source of the goods they are consuming. Simply by using QR codes on a product the end consumer can see who has grown the produce/made the item etc and, in time, it could show the carbon footprint or other ESG information. The question actually is, how long will it be  before we see governments insisting that such information is made available as they tackle the challenges  around climate change and monitor companies’ ESG credentials? 

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