Decrypt: Time to embed blockchain technology in ESG agenda

3 views 7:03 am 0 Comments December 19, 2023

CHENNAI: Delegates from nearly 200 countries gathered in Dubai recently, for the COP28 climate conference which resulted in nearly every country in the world agreeing to transition away from fossil fuels. Besides this, the spotlight was on ESG and leveraging technology to align with the ESG agenda.

The emphasis on Environmental, Social, and Governance (ESG) elements in the modern business landscape has never been more prominent. Companies are rapidly recognising the value of sustainable and responsible business practices, not only for ethical reasons but also because consumers and investors want it. As technology advances at an unprecedented rate, two significant players emerge as possible game changers in the ESG space – Blockchain and artificial intelligence.

Not surprisingly, they complement one another seamlessly. Blockchain is fundamentally about trust and transparency.

A Blockchain transaction is permanent, transparent, and immutable. This trust machine ensures that whatever happens on a Blockchain is permanent, creating an unalterable record that is available to everybody. The power of AI, on the other hand, resides in its unrivaled data processing capability, which enables it to forecast and solve increasingly complicated issues. However, AI systems frequently struggle with the ‘black box’ problem, leaving customers wondering how a certain conclusion was reached.

To be genuinely transformational in other technologies, where major advances usually take place in the ESG space, AI must be fed with high-quality data. When multiple technologies are joined, something interesting happens. Nonetheless, the possibility for tools like ChatGPT to be educated on curated AI and Blockchain marriage is not without obstacles that must be addressed.

A new level of traceability is now brought into AI-driven decision-making by documenting AI models and inputs on a Blockchain. Such an approach helps in demystifying AI decisions by providing insights into the decision-making process and then refining it. Furthermore, despite their capacity, AI models frequently reinforce existing prejudices, such as the unfair or biased treatment of people based on their membership in certain groups or categories. Blockchain technology can provide a transparent framework for monitoring and correcting these biases.

Integrating blockchain and AI into the ESG agenda would revolutionise sustainable practices by creating an immutable ledger for recording and verifying ESG-related data, such as supply chain practices, carbon emissions, and impact investments. This transparency fosters trust among stakeholders and facilitates ethical decision-making. Concurrently, AI enhances the analytical capabilities of ESG initiatives by processing vast datasets and extracting valuable insights. Machine learning algorithms can assess ESG performance, generate scores, and predict environmental and social impacts.

Smart contracts, powered by blockchain, automate compliance mechanisms, ensuring that organisations adhere to established ESG standards and triggering penalties for non-compliance. Additionally, decentralised autonomous organisations (DAOs) on the blockchain can involve stakeholders in ESG decision-making processes, fostering inclusivity.

This synergy not only streamlines ESG reporting but also catalyzes a paradigm shift towards a more accountable, transparent, and environmentally conscious global business landscape.

In conclusion, the integration of blockchain and AI into the ESG agenda propels sustainability efforts, fostering transparency, accountability, and informed decision-making. This synergy empowers businesses and stakeholders to navigate a complex, interconnected world while driving positive impacts for a more resilient and responsible global economy. Let’s get ready for a new world.. now!