Blockchain and the Importance of Sustainability in New Age Technology
The Fourth Industrial Revolution held the promise of increased productivity through the automation of manual tasks. It envisioned a world of unleashing human creativity and unlocking technological potential. While the jury is still out on whether it will meet its promise, what is alarmingly obvious is the disastrous impact it has had on climate change and sustainability. The Fourth Industrial Revolution’s “for-profit” paradigm has caused excessive depletion of natural resources, climate change, and biodiversity loss. The need for a paradigm change from for-profit to for-benefit is pertinent.
Sustainability is a long-term, integrated, and whole-person approach that aims for a balance between the economic, social, and environmental aspects of a situation. Profit maximisation cannot be the sole metric of success in today's businesses.
Building relevant businesses needs an intrinsic connection between sustainability and profitability. Sustainability in the new age tech can be driven through disruptive innovation buttressed by societal transformations toward a more sustainable and equitable world. Blockchain is one powerful way of doing this.
Blockchain is a digitally distributed, decentralised ledger that helps to verify and trace multi-step transactions. A blockchain is a fundamentally new way to build a computer system, much like the internet in the 1990s or the smartphone in the late 2000s. It gives computers new capabilities that change the way they work.
The most important changes that blockchain technology has made are its distributed and unchangeable ledger and its advanced cryptography, which make large computer networks more trustworthy.
Blockchain technology is a distributed ledger system that uses data that is stored in a public, decentralised network of digital blocks (Moll & Yigitbasioglu, 2019). This data is used for communication or transactions. Each of these blocks contains a digital signature and timestamp, which renders the individual blocks virtually immutable (Kokina et al., 2017; Nakamoto, 2008). The digital blocks are arranged together following a complex mathematical logic—a process called ‘hashing’ (Nakamoto, 2008)—to form a chain of blocks, hence the name blockchain.
Because blockchain ledgers are secure and can't be changed, they build trust. This trust can be used for two important tasks that need to be done right away. Those two functions are Monitoring and certification of a company’s Environmental, Social, and Governance score, or the ESG score, and finding a solution for the bankless and providing them with identification.
So far, the Environmental, Social, and Governance information about a company is primarily a self-reported, individually assessed piece of data.
What’s unusual and challenging about sustainability-focused investment analysis is that companies’ sustainability disclosures needn’t conform to shared standards in the way their financial disclosures must. Standard-setting groups have worked for years to come up with nearly a dozen major reporting frameworks and standards. Businesses can choose which ones to use (see sidebar, "A short glossary of sustainability reporting terms"). Investors must therefore compare as many of a company's sustainability reports as they can before they try to compare companies.
Additionally, the problem with the current ESG reporting is the fact that there is a significant disconnect between using different standards by various companies to report their ESG performance, which is largely self-reported, voluntary, and often unreliable, and the financial reporting that investors rely on to make investment decisions. Kenneth Pucker, the former COO of Timberland, a company that cares about sustainability, said, "The disconnect between accelerating ESG activity and confidence in the results should serve as a wake-up call for both companies and investors."
What we need are ESG scores that are designed to measure a company's relative ESG performance transparently and objectively based on publicly-reported data that is in line with the underlying ESG data framework. These scores are a clear, data-driven way to compare a company's ESG performance and capacity, taking into account how important an issue is to the industry and how big the company is.
Also, the ESG performance should be based on public data that can be checked, such as the company assessments and scoring systems that are most similar.
In practice, the data on products must be updated more often, like once a week, and the ESG Scores must be recalculated. This is different from most companies, which only update their ESG data once a year, in line with their own ESG disclosure.
With the ever-evolving and innovative world of Blockchain, the new-fangled concept of a SoulBound Token or SBT might finally be the answer we need to develop, a singularly unique token, which, unlike an NFT, could only be owned by one entity and one entity alone.
Created with the collaboration of the Proof of Attendance protocol, this new Ethereum token standard combines Self-Sovereign Identity elements with a new token standard and Decentralised ID (DIDs).
DIDs and SBTs are used together to provide a full digital identity management system. Users who want to create a full digital identity management system can choose between a DID provider and an SBT provider.
With a public key, the DID provider lets users make and verify their digital identity. The SBT provider lets the user make a safe, private database that is linked to the digital identity's public key.
This could also be used to confirm a person's identity, and there are plans to put certificates (like driver's licences, university degrees, and proof of age) on-chain to provide more personal identity stakes in different institutions.
As an entrepreneur in the blockchain ecosystem and the founder of one of the world's fastest unicorns, I will always be a proponent of making a better future by combining profit with sustainability. This article talks about two ways in which we can consider this, but I’m optimistic that with increased adoption of blockchain, we’ll not just see use cases in ESG and identification, but across the ecosystem.
Source: Financial Express