How blockchains can solve greenwashing and contribute to climate action

As concerns about climate change and environmental sustainability continue to grow, many organizations are turning to innovative solutions to help address these issues. One such solution is blockchain technology, which has the potential to revolutionize sustainability work across a range of industries.

On April 25, a white paper from the World Economic Forum (WEF) presented blockchain as a tool to combat climate change. The white paper highlighted the benefits of using blockchains in the climate action community. From improving market transparency to democratizing access to climate action, the WEF wrote about various benefits of using blockchain in sustainability work.

Digitization of VCM is one of the leading use cases for #blockchain innovations in the room for action for climate.

“Blockchain for Scaling Climate Action” Paper by @wef explores key examples and use cases, including the Climate Action Data Trust.

More: pic.twitter.com/Ltbux5PFrh

— Climate Action Data Trust (@CAD_Trust) 27 April 2023

To further explore blockchain’s potential in sustainability, Cointelegraph reached out to industry leaders to get their insights on how blockchain can combat greenwashing, how it is currently being used in environmental efforts, and the long-term benefits it brings to the world of climate action.

Solves the “greenwashing” problem.

Greenwashing – misleading advertising that makes products seem more sustainable than they are – has become well known in recent years. In one survey, 68% of executives in the United States admitted that their companies are guilty of greenwashing.

Outside, @xrbham makes itself heard loud and clear on the samba drums

And highlighting @HSBC_UK #greenwashing with their greenwash bathroom pic.twitter.com/2740R1YCND

— Isabella Salkeld (@SalkeldIsabella) 5 May 2023

According to Daniela Barbosa, CEO of the Hyperledger Foundation, the problem lies in verifying whether a company that claims to be “green” is actually following its claimed sustainability plans and goals.

The manager believes it is necessary to set up a system that tracks and registers these things. She emphasized that digital ledger technology (DLT) is the right tool for the job. Barbosa explained:

“With the inherent transparency and immutability of DLT, companies and entire industries can capture and document transactions such as carbon credits or sustainable sourcing throughout their business, bringing new credibility to sustainability claims.”

Barbosa believes that reliable record-keeping systems will encourage companies to adopt sustainable practices, which will help them meet climate goals and build consumer confidence.

Related: Carbon market gets much-needed boost from blockchain technology – Web3 exec

Meanwhile, Chia Network CEO and President Gene Hoffman also echoed Barbosa’s sentiments. According to Hoffman, the current infrastructure in the carbon markets is restrictive and does not contribute to innovation throughout the value chain. As a result, companies are limited in their ability to be transparent about sustainability efforts across the entire organization.

Blockchain’s current use in sustainable initiatives

The days of companies pretending to be sustainable and eco-friendly may soon end due to blockchain technology and DLTs. Blockchain has already penetrated various initiatives of prominent organizations worldwide.

“There is a growing range of applications leveraging DLT and related technologies, including green finance, sustainability reporting, climate accounting and supply chain traceability,” Barbosa told Cointelegraph.

The leader highlighted efforts such as Genesis 2.0, a collaboration between the Bank for International Settlements Innovation Hub, the Hong Kong Monetary Authority and the United Nations Climate Change Global Innovation Hub. The project involved two prototypes for digitizing bonds with future carbon benefits included in the value. These were tracked, delivered and transferred using blockchain, smart contracts and other related technologies.

Aside from this, Barbosa also highlighted how the government of the Canadian province of British Columbia launched the Energy and Mines Digital Trust pilot, which builds verifiable sustainability reporting. The project uses blockchain to protect data and information.

In addition, Hoffman sees the Climate Action Data Trust (CADT) as the most impactful climate initiative using blockchain technology. CADT aims to establish trust in carbon credit-related data among multilateral and governmental organizations.

Although not led by Web3 natives, the initiative uses a public distributed ledger technology to solve the problem of promoting internal peer-to-peer collaboration.

Furthermore, Hoffman also emphasized the importance of the Carbon Opportunities Fund, which builds on the foundations of CADT. The project provides a reliable means of transparently obtaining carbon credits directly from project developers with end-to-end transparency. This approach increases efficiency and transparency in climate markets that were previously opaque, according to Hoffman.

Long-term benefits of using blockchain in sustainability work

As blockchain gains more adoption in the climate action space, the industry could reap more of its long-term benefits, according to executives. Victor Genin, senior solutions architect at BNB Chain, believes that ensuring compliance is one of the best benefits of using blockchain in the sustainability sector.

Genin explained that blockchains can provide a means to track goods, services and resources across the supply chain. “This creates an opportunity to monitor environmental compliance and ensure that sustainable practices are followed throughout the life cycle of a product or service,” he added.

Genin highlighted that there are other benefits, such as “increased transparency and accountability, traceability, energy efficiency, waste reduction and collaborative approaches.”

Despite all the benefits blockchain can bring, Hoffman believes it’s still not a “magical solution.” However, the leader believes that blockchain technology can serve as the foundation or framework for achieving greater transparency, accountability and security in climate action, when designed and implemented responsibly.

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