Corporations That Claim To Be Sustainable Must Prove It. Here's How To Do It
Investors, consumers, and policymakers are increasingly focused on verifiable climate credentials and environmental and social governance (ESG) reporting standards. However, the system for evaluating ESG-based sustainability criteria is in chaos.
Blockchain technology's core competencies, transparency, efficiency, and data-driven objectivity, can be used to improve ESG reporting and supply chain tracking.
Companies are being forced to verify their environmental performance with reliable measurements due to a range of financial and societal constraints. International climate agreements, such as the Paris Agreement, are crucial in determining climate change targets.
Policymakers in the EU and the United States are also rushing to pass strict legislation. The Securities and Exchange Commission (SEC) proposed guidelines in March to improve and standardise climate-related disclosures for investors. The guidelines would require publicly traded corporations to incorporate certain climate-related disclosures in their registration statements and periodic reports, such as greenhouse gas emissions.
The Carbon Border Adjustment Mechanism (CBAM) and the Corporate Sustainability Reporting Directive have also been accepted by the EU. This is done to put pressure on businesses to take a more sustainable path.
Corporations that want to be considered both environmentally and commercially viable are responding quickly to these recommendations. Over half of the S&P 500 corporations have science-based targets for decreasing greenhouse gas emissions built into their business plans.
Even more impressive is the fact that over 2,600 businesses have joined the Task Force on Climate-Related Financial Disclosures.
All of this points to one conclusion: climate disclosures are influencing policy and strategy. They are becoming increasingly crucial in deciding how a company's market value is maximised.
It will be important to innovate our current ESG procedures to adopt climate disclosures. Data quality concerns, measurement and reporting inconsistencies, siloed platforms, and infrastructure challenges are now plaguing them.
ESG systems are difficult to develop because they aim to solve a global problem that necessitates global cooperation. They are also not managed by a single corporation or country. Blockchains offer a potential answer to this problem because they can handle worldwide coordination without relying on a single corporation or team.
Blockchain could be used to create a solid ESG strategy with reliable data reporting. Environmental data must be measured and reported reliably by businesses. It includes everything from the mining of raw materials to the manufacture and use of common items.
The blockchain infrastructure provides a platform that can facilitate data transparency while allowing for data standards.
Without a doubt, technology has an impact on the environment. However, a lot of this is unique to Proof-of-Work consensus techniques. Improvements are being aided by commitments to alternative consensus procedures. Rather than discarding it completely, we must evaluate the technology's crucial use cases that go beyond economic rewards.
Due to their tamper-resistant nature, blockchains are a reliable and transparent approach to secure data integrity. Blockchain networks' technologies are built to allow businesses to collect verifiable data and provide reliable reports. It demonstrates their ESG expertise. As a result, it has the potential to change the way ESG and supply chain reporting is done for the better.
Currently, supply chains account for 90% of a company's emissions and environmental effects. The decentralised digital infrastructure of blockchain would allow supply chain partners to account for all commodities travelling across connected supply chains and their accompanying emissions.
Corporations can improve openness and verifiability in the ESG reporting process by investing in blockchain-based monitoring and reporting systems. They will be able to better comprehend their supply-chain emissions. As a result, businesses will no longer have to rely on erroneous data from prone-to-error vendors to assess their environmental impact.
The entire scope and interconnectedness of the climate issue are only now becoming clear to humans. The reality is that we all share one planet, and we can't fight climate change in separate countries. To achieve net-zero energy by 2050, worldwide solutions will be required.
ESG reporting systems can be replaced with something that is considerably more open and verifiable by leveraging blockchain networks as an alternative tool.
Blockchain networks are especially well adapted to providing this greater openness and verifiability, allowing businesses to track supply chain operations and emissions.