What can blockchain do for corporate sustainability?
The fruits of the Fourth Industrial Revolution continue to accelerate how businesses act within society; but nestled in alongside automation and the Internet of Things, can little-known blockchain truly revolutionise sustainability?
Slowly but surely, the physical world is blurring with the virtual. Friends are devolving into followers, more job functions are becoming automated and you can even stroll through the Amazon rainforest from the comfort of your own living room.
Technology is having a transformative effect and the Fourth Industrial Revolution is driving an era of unprecedented technological change. PwC went to great lengths to map the ‘essential eight’ emerging technologies that reflect the development of increasingly autonomous, adaptive and connected machines, all of which can unlock new benefits for business and sustainability.
edie’s own readers survey into these megatrends sought to find out how applicable technologies such as the Internet of Things (IoT), Augmented reality, virtual reality, Artificial Intelligence (AI), 3D printing, drones and robots were to sustainability professionals.
Of the near 200 responses, between a quarter and a third claimed that these technologies were “on the radar”, while between 6% to 18% had already applied at least one of the technologies. But, only seven of the “essential eight” technologies have been listed so far, and the remaining one, blockchain, is a real outlier.
More than 30% of the respondents didn’t know what blockchain was – for comparison, the second highest on the survey was augmented reality at 12%. Only one of the near 200 respondents had already applied blockchain applications to their business.
Despite this lack of understanding, blockchain has been labelled as “revolutionary”, with the World Economic Forum Report stating that around 10% of GDP will be stored on blockchain by 2025. Already, more than $1bn has been funnelled into blockchain start-ups between 2014 and 2016.
It’s clearly an area with room for exponential growth, but with sustainability professionals unaware of how it works, are they missing out on a game-changing solution?
In its most basic term, blockchain is a database of transactions that can be arranged and added to in “blocks”. Each block represents and identifies previous transactions using cryptographic functions, to create an unbroken chain of custody for goods or services that, importantly, cannot be modified.
Acting as a digital ledger, blockchain creates a verifiable audit trail that can be used for any transaction, and this is where its impact on sustainability begins to take shape. Blockchain can be implemented – and in some cases, is already used – across numerous sectors, from forestry and fisheries to carbon accounting and energy.
It is a self-governing, online databased owned by no one and usable by everyone. Because the “chain” can’t be modified it can immediately provide proof of purchase for any transaction, whether that be procurement of sustainable materials to purchasing renewable energy.
Let’s take the food industry as an example. It is estimated that 400,000 people die each year due to contaminated food. Weeks can pass before the precise point of contamination is identified, resulting in further illness, lost revenue and wasted products.
IBM claims that blockchain could enable all participants in the supply chain, including growers, suppliers, retailers and consumers, to quickly trace a contaminated product to its source and stem the spread of illnesses.
Companies like Nestlé, Unilever and Walmart have all signed with IBM to trial this particular blockchain solution. IBM’s blockchain platform allows multiple parties to jointly develop, govern, operate and secure networks, and as PwC’s transformation and assurance director Patrick Spens explains, the traceability of these networks can promote best practice.
“Blockchain can tokenise the exchange of value,” Spens tells edie. “It’s like pound notes in a digitalised form, an instantaneous and automated settlement, the removes the middle man requirement. But identification becomes a really big issue. Blockchain doesn’t work without identity.
“You'll rub a pen on a £50 note to see if it is fake. In a digital world, I need the same confidence. The technology is industry agnostic, if you need to share data it is utterly suited you, so broaden your mind around the industry. Set yourself the question, not how does the technology work, that's just going down the rabbit hole, but set yourself the question what would you build?”
The first visible application of blockchain derived from the launch of Bitcoin – an online currency independent from national governance and financial institutions – in 2009. Whereas Bitcoin is a permission-less system where any one can enter, blockchain looks set to impact business sustainability through permissioned “chains”.
Users or suppliers entering into these chains would have to satisfy predetermined criteria for those who are sourcing products or services. For companies seeking to boost the credentials of their supply chain, blockchain could ensure that only certified, sustainability or ethically-sourced goods are entered into the transaction, essentially eliminating any unseen sourcing threats that have plagued cocoa and palm oil purchasers in the past.
Spens – a former regulator, hedge fund founder and city trader - claims that the technology “knows no boundaries” and in its infancy, it has already crossed into numerous sectors. Outside of improving the business ability to track the entire lifecycle of products and materials in the supply chain, blockchain can have a disruptive impact on corporate reputation.
Stakeholders, for example, would be given contractual access to the blockchain audit trail by retailers to improve transparency. Stakeholders could examine the data across previous blocks to gain access to important and immutable transaction data. This negates any aspect of corporate greenwash and places an emphasis on businesses to improve sourcing and supply chain practices as a result.
New lease of energy
From identifying illegal purchases of blood diamonds – driven by the Everledger platform - to contracting suppliers to source FSC-certified timber – one of the aims of Blockchain for Social Impact – blockchain is living up to Spen’s tag of “industry agnostic”.
But there’s one sector where the technology is making huge inroads; energy.
As smart meters and real-time data readings become integral parts of energy management both domestically and commercially, companies have been implored to interact with the grid to balance the intermittency of renewables.
In the UK, the National Grid successfully measured and monitored continuous grid stability across an entire network for the first time, and blockchain is just one technology that could autonomously enable business to capture lower prices or renewable electricity based on fluctuations.
Just two weeks ago (27 September), London-based energy technology company Electron was awarded substantial funding from the Government's Energy Entrepreneurs Fund. The fund will back a trading platform that enables consumers to be paid to adjust energy consumption based on the supply and demand of the grid.
The market for this technology is expected to reach £5bn in the UK by 2030, although this depends on the percentage of wind and solar capacity in the system. The blockchain technology is supported by National Grid and Siemens, and differs from traditional trading platforms by allowing multiple parties to share the value of a single consumer’s action.
Elsewhere, Open Utility inked a deal with Essent to create micro energy markets to purchase locally-produced renewable energy in half-hourly periods. Whereas businesses such as Google have secured long-term supply deals to be powered by renewables, smaller businesses may find the opportunity to examine micro markets in shorter timeframes more appealing and cost effective.
Microsoft has already laid out its blockchain vision, utilising the cloud and a dedicated ecosystem to drive uptake in use. Codenamed Project Bletchley, the platform provides security and scalability as part of a member-only platform.
London-based Utilidex, an online platform for the energy sector, is just one of the companies using Microsoft Azure to add blockchain elements to its system. Utilidex claims the technology has “great potential” and is working with Microsoft UK to trial concepts that facilitate energy transactions between buyers and sellers.
Utilidex’s chief executive Richard Brys notes that large corporates are switching from energy consumers to prosumers, through the deployment of onsite renewables and energy storage solutions.
Because of this, Brys believes that the energy market is becoming more valuable for businesses across “intra-day” timeframes, and that blockchain technology and real-time data will allow them to realise cost savings to send renewable energy to the grid.
“A lot of companies are installing solar power and batteries and devices onsite,” Brys tells edie. “They're producers of power as well as consumers. This fundamental shift is moving us towards renewables. Intra-day flexibility gives corporates assets that can be charged up and sold back during certain times.
“There's a capability where customers can start using the flexibility and trading it. Utilidex spotted this trend in the market place, but we also spotted that customers want to be more empowered about their energy estates. When the event happens, some will capture the opportunity, sell that energy back to the grid and get the money through quick blockchain transactions.”
While blockchain won’t forecast the peaks and troughs in energy markets, Brys notes it’s an “elegant way” to secure a contract to create immediate cashflow, rather than waiting on monthly updates to see if a business captured the opportunity.
It’s not just the monetary gains that should have energy managers paying attention to the technology. PwC hired Spens in 2016 to “explore transformational potential of blockchain”, and he notes that energy consumption could be mapped by large companies to find areas of improvement.
Take real estate as a hypothetical scenario. If a landlord or property owner wants to improve the energy consumption of its estate, it can use blockchain to map retail outlets in shopping malls to see how much electricity they sourced in a certain timeframe.
Because the data is there, and can be viewed by any outlet in that particular blockchain market, owners could use information sourced from the platform to incentivise particular retailers to improve.
“There's potential for some collective responsibility on energy usage,” Spens adds. “Once I know how much energy others are using and producing, it becomes a self-reinforcing cycle. I become more conscious of energy use and purposely use less. Blockchain provides irreputable proof of provenance.
“Because of the traceability, I can map outliers and incentivise them to become closer to the pack and because the record is there forever it makes reputations worse if they don't act.”
It’s a hypothetical example, but similar scenarios are on the horizon. A project will launch in early 2018 to create a carbon currency that enables businesses to measure the carbon footprint of transactions in real terms.
The venture will be launched by non-profit Poseidon, using blockchain software from Stella.org, to enable consumers to purchase ‘climate-positive’ products through smart contracts and a custom token on the platform. The digital ecosystem will also facilitate the transparent measuring and trade of emissions and can be used to map outliers – albeit of products – as part of a purchasing history.
Blockchain still has technological barriers to hurdle, but it is ingrained into markets to point where it is here to stay. For sustainability professionals that still don’t understand the potential of this technology, heed the advice of Spens – “we don’t need to know how it works, only that it does work, and I would encourage people to explore what they would build to exchange value with anyone in the world”.