Blockchain technology has empowered businesses with new levels of visibility into supply chain sustainability, enabling environmentally sound and efficient practices. Leading companies have moved quickly to leverage this technology. Ford, for example, has obtained ten blockchain patents as of Q2 2024 and has filed for more to enhance its decentralized strategies for minimizing waste, optimizing energy use, and ensuring ethical practices across its operations. Other industry giants like Walmart, Amazon, and UPS are likewise advancing in traceability, carbon footprint monitoring, and recycling efforts through blockchain in their supply chains.
An innovative application is seen in the Internet of Forests (IoF), an initiative that uses decentralized sensors to monitor and preserve tropical rainforests and their biodiversity.
However, while larger enterprises are progressing rapidly, many smaller businesses find blockchain technology challenging to access. The initial investment can be substantial, particularly for companies unfamiliar with the technology. Still, for those that adopt it, blockchain can yield significant savings in time and resources, supporting carbon-neutral goals and reducing operating costs by up to 60% due to improved data accuracy. With 90% of companies planning to adopt blockchain in the near future, this integration is likely to become essential for businesses aiming to remain competitive.
Incentivizing Sustainable Supply Chains
Blockchain’s precise environmental data allows companies to maximize the impact of sustainability efforts with minimal manual effort. This is especially beneficial in supply chains, where blockchain technology can incentivize all partners to meet defined sustainability targets.
For example, smart contracts can connect with IoT devices and sensors to collect real-time sustainability data. Once implemented, these smart contracts can verify compliance across supply chain points using metrics like carbon emissions, waste reduction, and renewable energy usage. Suppliers that meet these targets can automatically receive financial bonuses, increased order volumes, or access to exclusive markets and partnerships. By automating these incentives, blockchain accelerates sustainable practices across supply chains, enabling businesses to reduce their environmental footprint more efficiently and at lower costs.
Transparent and Tamper-Proof
Blockchain’s transparency enables businesses to share detailed sustainability reports with consumers and stakeholders and execute effective strategies for carbon neutrality, potentially ahead of Paris Agreement deadlines.
This transparency also substantiates a company’s sustainability claims to stakeholders with reliable, tamper-proof evidence, which can attract the 66% of consumers who consider sustainability when making purchases.
Moreover, blockchain offers businesses the opportunity to participate in sustainable activities like carbon credit trading. Tokenizing carbon credits on blockchain enhances market liquidity and facilitates international trading, reducing the risk of fraud. With smart contracts, trades can be automated, streamlining the process and eliminating intermediaries to speed up transactions.
Once fully implemented, blockchain requires minimal maintenance, allowing businesses to work toward carbon neutrality without disrupting daily operations.
Addressing the Proof-of-Work Challenge
To truly support sustainability, businesses must ensure that their blockchain technology does not excessively consume energy.
In response, many newer blockchain networks have transitioned from the energy-intensive proof-of-work (PoW) consensus mechanism to the more sustainable proof-of-stake (PoS) model. Companies should carefully research blockchain networks, considering their current energy consumption and future sustainability commitments, to ensure alignment with their environmental goals. Decision-makers should prioritize platforms powered by renewable energy sources and explore emerging applications designed for greater energy efficiency. AI tools can also help optimize blockchain energy consumption, enabling smart management of peer-to-peer energy systems, for example.
A Worthwhile Effort
Making informed decisions about blockchain adoption requires experienced teams and specialized knowledge, which may mean upskilling staff or hiring new talent. While challenging, effective implementation of blockchain for sustainability positions businesses to meet impending carbon neutrality deadlines and build a strong reputation in responsible supply chain management. By encouraging their supply chain partners to adopt sustainable practices through financial and operational incentives, companies help create a standardized global framework for sustainability. Forward-thinking businesses can play a significant role in shaping this promising future.
