Sustainability with decentralized data | Opinion

Blockchain technology has enabled businesses to gain unprecedented visibility into the sustainability of their supply chains, becoming more environmentally sound and efficient. Industry giants have sought to take full advantage.

Ford, for example, has held ten blockchain patents since Q2 2024 and has filed for many more as it continues to develop methods to use decentralized technologies to minimize waste, optimize energy usage, and ensure ethical practice across its operations. The company is joined by the likes of Walmart, Amazon, and UPS in their respective missions to improve traceability, carbon footprint monitoring, and recycling initiatives in their supply chains.

A more unusual example is the Internet of Forests, or IoF, an initiative that used a system of decentralized sensors to monitor, report, and ultimately preserve tropical rainforests and their biodiversity.

However, while the rate of adoption in these enterprises is heartening, many smaller businesses find the technology too inaccessible to take advantage of. The investment required to implement the technology can be considerable, especially for businesses that are unfamiliar with the technology. Nevertheless, if that hurdle is overcome, the result is significant savings in time and resources in the race to carbon neutrality.

By integrating blockchain tooling for long-term sustainability, businesses can reduce operating costs by up to 60% without the trial and error that comes with less accurate data management. And, with 90% of businesses planning to implement blockchain in the near future, it will be a required integration for companies that want to compete.

Incentivising sustainable supply chains

The precise environmental data afforded by blockchain tech removes a lot of the legwork from maximizing the impact of green initiatives. This is especially true for supply chains, as blockchain can incentivize all suppliers and partners to reach predefined sustainability goals. 

Smart contracts, for example, can integrate with IoT devices and sensors to collect real-time information on sustainability performance. Once implemented, businesses can use them to verify compliance across all points within the supply chain, using predefined metrics such as carbon emissions reduction, waste reduction, and renewable energy usage, in alignment with their broader strategies. When suppliers meet these targets, they can be automatically rewarded with financial bonuses, increased order volumes, and even access to exclusive partnerships and markets.

These incentives, automated with blockchain technology, encourage broader sustainable activity and result in exceptionally quick improvements across supply chains, allowing businesses to easily and cost-effectively reduce their environmental impact in a fraction of the time it would otherwise take.

Transparent and tamper-proof

The transparency and precision of blockchain data allow businesses to share comprehensive impact reports with consumers and shareholders and drive effective strategies to achieve carbon neutrality well ahead of impending Paris Agreement deadlines. 

This clarity also enables businesses to substantiate their sustainability claims to stakeholders and supply chain partners with concrete, tamper-proof evidence, attracting new customers from among the 66% of consumers who consider sustainability in their purchases. 

Blockchain also gives businesses the opportunity to venture into market-based sustainable activities like carbon credit trading. Tokenizing carbon credits on a blockchain increases liquidity in the market and allows for easier and simpler trading across borders and jurisdictions. Decentralized carbon trading also reduces the risk of manipulation or fraud in the carbon credit market, increasing trust among participants. Smart contracts can then automate trades in a process similar to automated compliance rewards, eliminating intermediaries and accelerating transaction speeds. 

When fully implemented, this technology needs only a light touch, helping businesses to work towards carbon neutrality without taking much time away from usual operations.

Solving the proof-of-work problem 

Finally, when choosing a blockchain to aid in sustainability, businesses must first ensure that the energy consumption of the technology itself doesn’t undermine their efforts.

Newer blockchain networks have attempted to address the issue of excessive energy consumption, with many major networks transitioning from the energy-intensive proof-of-work consensus mechanism to the more environmentally friendly proof-of-stake alternative. 

In addition to adjusting consensus algorithms employed, even among POS-based networks, factors such as the energy mix used for electricity generation and the potential emergence of new energy-consuming processes can also have a significant impact on sustainability. 

Blockchain networks must be thoroughly researched, especially their current energy usage and future sustainability plans, to ensure they are aligned with the intent and strategy of the business. Decision-makers should look for platforms that use renewable energy sources and stay informed about emerging blockchain applications that may offer even greater energy efficiency. AI applications can be useful in analyzing and optimizing energy consumption on blockchain platforms, such as by facilitating smart energy management on peer-to-peer energy trading systems. 

It’s hard work, but it’s worth it

Making and implementing these decisions effectively will require experienced teams and specialized knowledge—whether by leveling up existing staff or bringing in new talent to facilitate a business move to the blockchain. This may not be simple, but if done right, it will be a wise move in view of impending deadlines for complying with international rules around carbon neutrality.

With decentralized sustainability efforts, businesses not only build trust and a good reputation around their operations and supply chains but also encourage supply chain partners to improve their own sustainable activities with financial and operational incentives. Blockchain has the potential to completely standardize sustainable initiatives around the globe, and forward-thinking businesses will help to shape what that future looks like. 

Kostas Chalkias

Kostas Chalkias, chief cryptographer and co-founder of Mysten Labs, leads cryptography innovation, research, and development of new product features. Prior to Mysten Labs, Kostas was the lead cryptographer for many big tech companies, including Meta and R3.  Founder of the largest Big Data Meetup group in Athens, Greece, with a healthy and growing community of over 2,000 members. Received a Best Paper award three times, filed eight US patents, ranked 1st in Computer Science MSc studies, received one of the most appreciated national scholarship programs (four years in a row), and ranked in the top three in National IT Innovation Contests twice.