Environmental, social and corporate governance (ESG) has become one of the most discussed, debated and divided topics over the years. Globally, organisations are raising their standards, and prioritising ESG agendas across the board.
FTI Consulting’s 2022 Resilience Barometer survey found that 86% of corporate leaders said they have been spending more on ESG and sustainability, furthermore, most agreed they were under ‘extreme pressure to improve ESG’.
More than two-thirds revealed they feel that they lack adequate expertise to deal with new regulations and ESG goals. Especially, given the fear of ‘greenwashing’ labels and consequent fines in excess of $1 million in some cases.
There is no one global ‘golden’ standard for ESG metrics – each country has their policies and methodologies – each of varying strength and enforcement. Organisations often don’t know what they should be measuring, what metrics to focus on and what to report. Simply put, ESG remains ambiguous and subjective, leaving it liable to greenwashing, malpractice and extremely difficult to measure progress. Blockchain offers a solution to these concerns.
Blockchain is a digital ledger that records transactions securely and transparently. It is essentially a database that is distributed across a network of computers, and every participant of the network has a copy of the ledger.
Each transaction in the blockchain is verified and added to the ledger through a consensus mechanism, which ensures that the information is accurate and tamper-proof. Once a transaction is recorded on the blockchain, it cannot be altered or deleted. Given this high level of security and inability to alter, blockchain protects against fraud, green-washing, and miss-handling of data.
Given this, blockchain has emerged as an ESG and sustainability tool, providing immutable certification and automated reporting of any ESG data points. These data points can then be benchmarked against goals to track progress.
For example, with carbon credits and offsetting, blockchain can be used to create a marketplace for carbon credits, allowing companies accurately record their emissions and then purchase credits from verified sources to offset their carbon emissions. Currently, this process is riddled with inaccuracies – blockchain technology offers an accurate, transparent, and traceable alternative. Similarly, blockchain has begun to unify the renewable energy sector, being used to create a peer-to-peer energy trading platform, allowing individuals and businesses to buy and sell renewable energy directly, reducing reliance on fossil fuels.
These unalterable records of ESG data points can then be efficiently shared with all stakeholders. The data is shared automatically, such as with a third-party regulatory organisation, where it can be independently verified to ensure a company is for filling its claims and meeting standards. As summarised by Forbes, “This ultimately becomes a self-reinforcing process—providing proof of an organization’s true ESG position, as well as demonstrating that the organisation is willing to be transparent and engaged in public discourse”.
Overall, blockchain can be a powerful tool for promoting sustainability and responsible business practices by enabling greater transparency, traceability, and accountability in various areas of ESG. This technology can be used to integrate a greater sense of trust and assurance – both from a regulatory standpoint and ensure companies are not at risk of human accuracy errors – providing companies that are leading the way with the acknowledgement that they deserve.
Georgina Murrin is a Sustainability Analyst in Itriom’s London Office.
Itriom is the global impact platform helping leading families shape a better world. Itriom’s platform enables families to refresh and redesign their values, aligns them with the right UN Sustainable Development Goals, combining them in an agreed purpose and a Family Impact Charter. Itriom’s platform supports the development of impact initiatives and whilst providing discrete and secure spaces for peer-to-peer messaging and collaboration. Itriom’s core practices in Leadership, Geostrategy, and Sustainability benefit clients by developing strategies to engage and support the Next Generation in building a lasting legacy of which families can be proud.
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Alizah is an ESG Consultant and researcher. She supports Itriom developing sustainability related products and services, helping our clients identify potential opportunities for creating positive environmental, social and sustainable impact.
Georgie is an ESG Analyst and researcher. She researches trends, develops insights and reports, and writes insight articles on sustainability and ESG related topics to ensure Itriom’s clients are up to date on the latest policy, progress and initiatives to inform the platform and help our clients maximise their positive impact.
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