Imagine if you could trace the journey of that can of coke and see where it was shipped from, where the aluminum came from, where the water and sugar used came from? That’s the promise of blockchain and it can give us more control of sustainability in our own lives.
Why is Blockchain Technology Needed?
New sustainability initiatives such as net zero and carbon positive set high expectations for consumers and corporations alike. With such high expectations, more companies are likely to greenwash their marketing and product messaging. When these companies get caught it erodes trust of their consumers and of the concept of sustainability. Greenwashing is something being looked at today by governments, companies, and nonprofits, and will only increase in 2025.
False marketing that claims products are sustainable hurts the value of green products and the companies that make them. It also weakens consumer preference and trust for eco-friendly products. Ultimately a huge impact to companies is that people could boycott these companies, something seen increasingly amongst Millennials.
We often look at labels for trust, like the organic labels, but even these can be false. These ecolabels are often difficult to track and enforce. Governments are taking steps to develop new anti-green washing laws that limit this behavior, but a comprehensive approach to tracking green claims is needed.
That’s where blockchain comes in.
What is Blockchain Technology?
Blockchain is a decentralized digital ledger that records transactions across multiple computers. Basically the way it works is by using QR codes or sometimes materials inserted into the product, like that coke can, to track and scan in the product as it goes from the manufacturer to your home or business. Through blockchain, companies can track and verify every step of the supply chain, from sourcing raw materials to manufacturing, distribution, and disposal.
Benefits of Blockchain Technology
Blockchain is known for its security, transparency, and immutability, making it ideal for applications that demand trust and accountability. In an ideal situation you can take that soda can you bought, enter a code on a website and see the journey of the can. You can track the exact materials used, the factory where they were manufactured, and even the carbon footprint associated with their production and transportation.
These characteristics guarantee that the products are indeed truthful to what they claim to be, with the consumer being able to verify the product’s data details through the blockchain. This way, consumers will be better protected against false claims, misinformation and unfair commercial practices.
Blockchain can provide modern solutions to combat greenwashing. Stakeholders like auditors, regulators, and NGOs can access and analyze blockchain data to identify potential greenwashing activities.
Transparency
Transactions on the blockchain are irreversible and publicly accessible, which increases supply chain transparency and allows consumers to verify the authenticity of environmental claims. This makes it more difficult for companies to hide unethical practices and falsify sustainability information.
Each validated transaction is recorded in a block, forming an unchangeable chain (this is like the ledger in a checkbook or a signature in Docusign). This transparency ensures that stakeholders can trace the product’s origins, verifying their legitimacy and preventing duplicity.
Traceability
Blockchain allows for tracking the origin of products and materials step by step, from the extraction of raw materials to the final sale. This allows consumers to find out whether a product actually comes from sustainable sources and whether environmental standards were met in its production.
Through transparent traceability, stakeholders, including consumers, investors, and regulators, can access real-time, transparent data about a product's or company's environmental impact. This level of transparency prevents false claims and encourages accountability.
Verifiability
Smart contracts on the blockchain can be used to automate and verify environmental claims. Smart contracts are self-executing rules on the blockchain that can automate controls and prevent greenwashing data from being uploaded. For example, a company could store data on energy consumption and emissions on the blockchain and a smart contract could then automatically verify whether the company is meeting its sustainability goals.
This means the data are verified. Giving equal access to independent (decentralized) verifier of the records minimizes the risk of misleading information.
Immutable Records
Blockchain creates an immutable ledger where environmental data and certifications are recorded. Once information is added to the blockchain, it cannot be altered or deleted, ensuring data integrity - meaning it is immutable or unable to be changed.
This feature safeguards the integrity of records, eliminating the risk of manipulation or fraudulent activities. Consequently, stakeholders can trust the accuracy and authenticity of sustainability information, fostering credibility in ESG initiatives.
Holding Brands Accountable
Blockchain is a decentralized technology that is not controlled by any single entity. This increases the trustworthiness of data stored on the blockchain and reduces the risk of manipulation.
Thanks to the transparency and traceability of the blockchain, companies become more accountable for their environmental impacts. Consumers and investors can more easily monitor companies that do not behave responsibly.
With each step etched onto the blockchain, brands and manufacturers become accountable for their environmental and social impact throughout the entire supply chain.
Examples of Blockchain Technology to Address Greenwashing
Carbon Accounting
When we think of climate change, we typically think of the emissions produced directly by us, like the amount of gas used in a car, the amount of energy used in a building, or the amount of emissions from taking a flight. These are called Scope 1 or Scope 2 emissions.
Another more complex way of measuring carbon emissions is to look across the entire supply chain for any product, known as Scope 3 emissions. More governments and consumers are asking companies to measure Scope 3 emissions.
Most companies are required to disclose certain aspects of their carbon footprint through the Environmental Protection Agency's Greenhouse Gas Reporting Program as well as for the European Union’s Corporate Sustainability Reporting Directive. Similarly, all publicly traded companies in the US must disclose information regarding their impact on the environment in SEC filings, including statements about climate change risks, in accordance with Regulation S-K Item 101(c)(1) and 101(h). According to the Science Based Targets initiative (SBTi), the number of companies setting science-based targets for Scope 3 emissions has increased by 250% since 2019.
But Scope 3 emissions are much more complex, and include everything from the mining of materials to the transportation and ultimate disposal of products. Unlike Scope 1 and 2, Scope 3 emissions require companies to look beyond their immediate operations and consider the practices of their suppliers and customers, who may operate in countries with less strict reporting regimes. Unsurprisingly, that means these Scope 3 emissions usually constitute the largest segment of a company’s carbon footprint and all these years we have been missing them. However, it’s difficult to gather reliable data on these emissions, and without solid evidence, this reporting can be an exercise in greenwashing.
Fortunately, blockchain technology can effectively track these complex Scope 3 emissions throughout the entire manufacturing process and product lifecycle, including consumer use, by leveraging its decentralized and immutable ledger capabilities. Sensors and Internet of Things (IoT) devices can collect real-time data on emissions at each stage of the manufacturing process, from raw material extraction to production, transportation and distribution. Throughout the product’s lifespan, each transaction or data entry can be securely recorded on the blockchain, creating a tamper-proof history of emissions.
Digital product passports can provide detailed information about the product’s lifecycle emissions, including its use and disposal. Consumers can contribute data on product usage, which can then be added to the blockchain to complete the emissions profile. Independent auditors can verify the recorded emissions data, ensuring its accuracy and reliability. Companies can use this verified data to meet regulatory requirements and report on their sustainability efforts.
A number of companies are now racing to be the preferred platform for this including EY OpsChain ESG on the EY Blockchain SaaS platform, BanQu’s carbon accounting software, TraceX Digital Monitoring, Reporting, and Verification (DMRV) platform, and Altana.AI’s supply chain platform. The big challenge will be tracking how effective these tools are and whether they just become another vessel for greenwashing.
Fashion Industry
The fast fashion industry is known for its challenges with sustainability. Take the greenwashing cases against Shein for example. Blockchain can increase consumer trust in green claims made by companies.
Blockchain-native brands like IYK, Arianne, and Aura are already implementing a way to authenticate and trace the provenance of luxury goods, specifically with the blockchain. Papertale is another great example with more of a focus on the social aspects of the supply chain and monitoring labor practices. They ensure that employees are paid fairly and legally, then the data is visible to brands and consumers.
Security Matters, a company that digitally and molecularly marks, tracks, and verifies materials for production, has collaborated with leading brands to solve many of these issues. They insert a marker deep into the fabric of your pants or dress that can be traced back to its source. They have done this for plastics, electronics, precious metals, agriculture, and food and beverage, creating complete visibility along the entire supply chain. Utilizing SMX’s technology, manufacturers can create circular value chains, allowing their materials to be accurately authenticated on a singular, sustainable platform.
What’s Next For Blockchain and Sustainability
Because the tracking of materials through the supply chain is only a few years old it will take some time to see which companies are successful with block chain. The growing number of policies and mandates requiring tracking of emissions throughout the supply chain will accelerate the development of effective tools. Governments and consumers will need to be watchful in assessing truth in advertising and will need to be aware of double or triple counting. Lastly, as block chain use increases, so will the need for improved cyber security to reduce the chance of scams and corruption.
Marcus Griswold has 15 years of experience working on climate and sustainability initiatives and is passionate about reducing greenwashing risks on his blog Little Green Myths.
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