Making a product sustainable is often more challenging than it seems. That’s because behind every item is a supply chain involving multiple parties with their own carbon footprints. Because supply chains are so complex, they’re difficult to track and make green, but new technologies may help shoppers identify low-impact products.
Blockchain is one of the more promising solutions. These accounting-like technologies could provide the transparency and traceability consumers need to make more informed, environmentally responsible buying decisions — as long as companies implement them effectively.
We Need Cleaner Supply Chains
Environmental, social and governance (ESG) initiatives are important to companies today, but many miss the mark. Many sustainability projects focus on using recyclable materials or powering facilities with solar energy to reduce Scope 1 and 2 carbon emissions. Those are essential steps, but they miss indirect supply chain emissions — known in the business world as Scope 3 emissions — which often account for most of a company’s CO2 impact.
Take smartphone manufacturing, for example. Mining operations use energy to extract metals, trucks and ships emit emissions when shipping parts between factories, and the facilities making semiconductors and other components generate their own pollution. This often takes much more power than the final assembly of the phone.
Consumers may find it hard to understand these emissions because they happen behind the scenes. People may realize the impact of the phone’s final manufacturing, but the transportation and energy consumption from third parties are less clear.
Many companies want to produce cleaner products. Studies show 72% of CEOs today have increased their ESG spending after the COVID-19 pandemic. However, if they want these efforts to be effective, they must reduce Scope 3 emissions. Blockchains could help.
What Is Blockchain?
A blockchain is an encrypted digital record that verifies and secures transactions to provide a public record of exchanges of money, information or anything else. The public record can include carbon emissions data about a company’s products. So, for example, a company that sells paper used in packaging could pass along data about the carbon footprint of every pound or ton of paper that its customers can use to calculate their Scope 3 emissions. Anyone can look up blockchain records, but no one can change them. Blockchain is built on a distributed network of computers; like the internet, it will continue to operate even if parts of the network are unavailable.
For most people, the Bitcoin cryptocurrency is the most familiar example of blockchain. Crypto transactions use encrypted digital wallets to transfer money on the currency’s blockchain. Someone who buys something with crypto will receive a transaction ID when the network verifies their purchase. That ID or their wallet’s history on the blockchain will include the purchase, its price, which wallets were involved and when it happened. Because the network locks them in a ledger of similar transactions, they’re virtually impossible to change.
That immutable record can be the foundation for complex business networks, and it provides the level of security a global corporation or government can audit conveniently.
How Blockchain Could Enable Sustainable Supply Chains
The benefit of blockchain in supply chains is that they can provide transparency into a product’s origins. It’s hard to grasp all the energy, emissions and other environmental impacts that go into a product as a consumer. Blockchains could offer a reliable, clear record of the item’s materials, where they came from, how they were extracted, refined, and shipped to close that gap. Other information, such as how laborers were treated, the ports a product passed through, and much more could be collected for ESG reporting purposes.
Consider how blockchains can be used to track transportation. If companies recorded their logistics data on a publicly available blockchain, buyers could see how many trucks or ships were involved, how far products traveled and how much fuel they burned. Other solutions could monitor businesses’ energy consumption and emissions, so when someone looks at a product’s blockchain, they can see its true, full-scope emissions.
Solutions like these could hold companies and their supply chain partners to higher standards. They’re slowly rolling out, too. The EU announced the Digital Product Passport (DPP) program in late 2022. The DPP uses blockchain to track products through the supply chain and provides access to these records with a QR code.
When buyers scan the code on a product’s tag, they can see its origin, material sources and similar information. It’s then easier to make informed, sustainability-minded purchase decisions.
Companies Are Using Blockchain
A few businesses have already started using blockchain technology to promote transparency in their supply chains. In 2019, Ford began testing blockchain tracking solutions to ensure the cobalt in its electric vehicles comes from ethical mines. The system lets Ford see every party involved between original mining and production to verify sources.
Manufacturing giant Unilever implemented a similar system in 2022. The company uses blockchain to ensure its more than 188,000 tons of palm fruit come from verified sustainable sources before turning it into palm oil.
Some companies offer this information directly to consumers. French retailer Carrefour lets consumers see where their food comes from by scanning a QR code on product labels. The code pulls up the products’ origins, transportation methods, harvest date, organic certifications and more.
Roadblocks
Despite these advantages, blockchains still have some ground to cover before they become a sustainable part of the supply chain that delivers your peanut butter, smartphone, or a new blouse.
Blockchain systems can consume a lot of energy because they use a “proof-of-work” method to verify transactions. Proof-of-work blockchains verify records by requiring participants — called miners — to solve complex mathematical equations. The first miners to solve an proof-of-work challenge receive cryptocurrency as a reward. However, the calculations involved require a lot of computational effort, and that consumes electricity that is often generated by burning fossil fuels. This is the reason Bitcoin has been criticized for using more energy than many countries do annually.
A new generation of blockchains, notably Ethereum, use an alternative to proof-of-work called proof-of-stake. In these systems, users verify transactions by staking their own resources against them; it’s like vouching for the transaction by sharing an embarrassing secret that will be disclosed to the public if the transaction proves to be fraudulent. Proof-of-stake blockchains don’t require as much computing power and uses 99.9% less energy, resulting in lower emissions.
Several studies indicate that blockchains can effectively reduce supply chain emissions but acknowledge more work is needed to reduce the blockchain’s environmental impact. Using proof-of-stake methods and powering blockchain networks with renewable energy can help, but the reduction in waste and emissions in the supply chain matter most to lowering human environmental impacts.
What Blockchain Means for You
Businesses will adopt greener practices if they are profitable. Consumers can demand more supply chain transparency about products they buy. The most powerful way to do that is by choosing brands that offer more clarity about the sources of materials, the environmental impact of manufacturing and shipping, and other things that can be tracked using a blockchain.
It’s important to watch for and use programs like the digital product passport as they roll out. Products that include these digital records will encourage businesses to embrace transparency. While laws penalize environmentally harmful practices, money speaks even louder. When people spend more on sustainable companies, others will follow suit to capitalize on the movement.
You can also advocate for companies to use low-energy proof-of-stake blockchains and renewable energy to deliver information at the lowest cost to the environment. Choosing these technologies will save companies money compared to electricity-hungry proof-of-work blockchains that run on coal- or oil-based energy.
While blockchain technology is still new, its benefits hold promise. It could track emissions, labor practices, modes of transport, material sources, energy consumption and more. Blockchains can provide a clear, fraud-proof record of process data.
If business embraces data transparency, consumers can better understand products’ real environmental impact. Consider asking the companies you shop with to provide visibility into the supply chains they use, it will lead to a cleaner future.
About the Author
As the Features Editor at ReHack, Zac Amos covers sustainable tech, AI, and cybersecurity. He is also a contributor at EE Power, e27, DZone, and more. You can find his newest articles on Twitter or LinkedIn.