Blockchain exploded onto the global scene in the early 2010s as the technology behind Bitcoin, the world's first decentralized, digital currency. Its secure and unalterable ledger has transformed the way data is accessed and structured.
In addition to its economic and informational impact, blockchain also has the potential to accelerate sustainable development.
The term "sustainable development" refers to global efforts to maintain current standards of living without compromising the future. Sustainable development rests on four pillars: human, social, economic, and environmental. To be sustainable, development practices should include all four of these pillars.
Blockchain's transparent and unalterable ledger makes it ideal for recording accurate sustainability data for environmental, sustainable, and governance (ESG) conscious investors. It can also enhance corporate social responsibility (CSR) initiatives by tracking a company's behavior against sustainability goals.
Could blockchain be the key to a sustainable future? Find out more about blockchain and sustainability using our guide below.
What Is Blockchain?
A blockchain is a chain of ordered records called blocks. Each block contains transaction data, a timestamp, and a hexadecimal number that serves as a cryptographic hashtag. These blocks are linked together in a chronological and secure manner, creating a chain, hence the name "blockchain."
The blockchain operates on a decentralized network of devices called nodes. Each node keeps a copy of the entire blockchain, thereby ensuring that there is no single point of control or failure. Transactions on the blockchain are secured through cryptographic techniques and are practically immutable.
Blockchain technology first appeared in public in 2008 when an anonymous person or group known as Satoshi Nakamoto released the Bitcoin whitepaper. Bitcoin was blockchain's first application, but over time, blockchain technology has evolved beyond cryptocurrencies and now operates in a variety of industries, including supply chain management, healthcare, real estate, and voting systems.
Today, various sectors use blockchain-based smart contracts. Some governments and organizations are even exploring blockchain to help citizens maintain secure identities and advance a sustainable development agenda.
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What Is Sustainability?
Sustainability involves maintaining ecological, economic, and social systems in a way that ensures long-term viability and resilience. Sustainability can be environmental, focused on the responsible stewardship of natural resources, or social, emphasizing equitable access to resources, justice, and fair labor practices.
Sometimes mischaracterized as incompatible with business growth and profitability, sustainable practices can actually enhance a company's long-term viability and reputation. Some companies, however, practice greenwashing, falsely claiming eco-friendly practices while not genuinely incorporating sustainable principles into their operations.
Real sustainable development, by contrast, generally follows the UN's Sustainable Development Goals. These 17 interconnected goals address issues such as poverty, hunger, and gender inequality. They promote health, education, decent work, and climate action.
To achieve these goals, governments, corporations, nonprofit organizations, and individual citizens must all work together to advocate for change, support fair labor, abide by sensible emissions standards, and engage in community development practices.
Failure to address sustainability issues often stems from a combination of factors, including economic pressures, political inertia, resistance to change, and the complexities of global challenges. In this context, technology can serve as a major driver toward a more sustainable world — provided it doesn't make things worse before it makes them better.
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Where Blockchain Technology Meets Sustainability
Blockchain created the trillion-dollar cryptocurrency market, but it required a massive infusion of energy to do so. In 2019, Bitcoin's carbon footprint equaled that of Switzerland. Recognizing this trend, governments and crypto-holders alike began working to make blockchain an ecologically sustainable technology.
In March 2022, the White House issued an executive order entitled "Ensuring Responsible Development of Digital Assets," intended to curb crypto-assets' climate impacts. The same year, Ethereum, a leading cryptocurrency, moved to a less energy-consumptive architecture. Some blockchain miners also began using green energy sources to power their devices.
As blockchain itself became more sustainable, observers started experimenting with ideas for how the technology could help advance a sustainable agenda in practical ways. For example, homeowners in the Indian state of Uttar Pradesh used blockchain to quickly and efficiently sell solar power to others on their grid, executing the transfer of solar energy at up-to-the-minute prices in real time.
Could blockchain be the key to social and environmental sustainability?
Blockchain technology can address various environmental sustainability challenges, and its applications continue to evolve.
Blockchain and Environmental Sustainability Applications
- Carbon Footprint Tracking: Blockchain can accurately measure and record carbon emissions data.
- Supply Chain Transparency: It enhances transparency in supply chains, enabling sustainable practices like fair trade and ethical sourcing.
- Waste Management: Blockchain tracks waste disposal and recycling activities, improving waste management and reducing environmental impact.
- Tokenized Green Investments: Blockchain allows for tokenized ownership in green assets like renewable energy projects or carbon credits.
- Decentralized Autonomous Organizations: DAOs on blockchain can enable community-driven sustainability projects, allowing stakeholders to allocate resources for sustainable initiatives.
- Natural Resource Management: Blockchain can enhance the traceability and sustainability of natural resource extraction.
- Smart Cities: Blockchain helps develop smart cities with sustainable infrastructure that optimize energy use, waste management, and transportation.
Companies and Organizations Involved:
Numerous companies and organizations are actively engaged in leveraging blockchain for sustainability, including IBM, Provenance, and Hyundai Motor Group.
Pitfalls and Learning Curves:
Blockchain faces several barriers to becoming a sustainable technology accelerant, including:
- Scalability: Scalability remains a challenge for some blockchain networks, especially when handling a large volume of transactions, which can impact their energy efficiency.
- Adoption: Widespread adoption of blockchain technology and industry-wide standards are essential for its effective implementation in sustainability efforts.
- Data Accuracy: The accuracy and reliability of data entered into blockchain systems are crucial. Incorrect data can lead to misleading sustainability claims.
UN Sustainable Development Goals Addressed by Blockchain:
Blockchain technology has the potential to address several UN Sustainable Development Goals, including promoting affordable and clean energy, responsible consumption, climate action, and natural resource management.
Blockchain technology can improve social sustainability and create a positive social impact.
Current Uses of Blockchain for Social Sustainability
- Identity and Digital Identity: Blockchain can provide secure, tamper-proof digital identities for individuals, particularly those in underserved or marginalized communities.
- Supply Chain Transparency: Supply chain transparency using blockchain can also address social issues such as fair labor practices, preventing child labor, and ensuring safe working conditions.
- Financial Inclusion: Blockchain-based financial services can provide access to banking and credit for unbanked and underbanked populations.
- Human Trafficking Prevention: Blockchain can track and trace goods and verify the authenticity of documents, thereby helping combat human trafficking.
Future Applications and Ongoing Developments
- Voting and Governance: Blockchain-based voting systems can enhance transparency and security in elections and governance, reducing fraud and increasing trust in democratic processes.
- Land Rights and Property Ownership: Blockchain can help establish and secure property rights, particularly in regions with unreliable land registries, reducing land disputes and promoting social stability.
Companies and Organizations Involved
Several companies and organizations actively use blockchain for social sustainability, including the ID2020 Alliance, Maersk, and BHP.
Pitfalls and Learning Curves
As with environmental sustainability, blockchain scalability remains a challenge. Navigating the complex regulatory landscape surrounding blockchain can also prove challenging.
UN Sustainable Development Goals Addressed by Blockchain
Blockchain technology can contribute to several UN Sustainable Development Goals, including poverty elimination, gender equality, decent work, economic growth, reduced inequalities, and peace and justice.
The Sustainability of Blockchain Technology
Blockchain could help create a more sustainable future, but given how much energy it takes to run, is the technology itself sustainable? The answer depends on the consensus mechanism the blockchain employs.
Classic blockchain technology uses proof-of-work (PoW) chains that create heavy environmental burdens due to their high energy use. Proof of Stake (PoS) blockchains, on the other hand, use a different consensus mechanism that doesn't require energy-intensive mining. In POS chains, validators are chosen to create new blocks based on the number of tokens they hold and are willing to "stake" as collateral.
PoS blockchains are generally considered more energy-efficient and environmentally friendly than PoW blockchains. When Ethereum moved from a PoW to a PoS system, the cryptocurrency announced it would reduce its energy consumption by 99.95%.
Proof of Authority (PoA) blockchains are permissioned networks where a limited number of known and trusted entities validate transactions. They are highly efficient in terms of energy consumption but are typically used for private and consortium blockchains rather than public cryptocurrencies.
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Next Steps and Resources
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United Nations Sustainable Development Goals: The UN SDG offers a comprehensive resource for understanding and engaging with the sustainable development goals, which serve as a global framework for sustainability efforts. -
World Economic Forum: WEF provides insights and reports on various aspects of technology, sustainability, and global challenges. -
Coindesk: This website serves as a clearinghouse of information related to the global crypto economy, including overlap between sustainability initiatives and blockchain. -
"The Fourth Industrial Revolution" by Klaus Schwab: This book explores the impact of emerging technologies on society and sustainability. -
"The Age of Sustainable Development" by Jeffrey D. Sachs: This book offers insights into achieving sustainable development through technology. -
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Sustainable Development Solutions Network: SDSN is a global network of universities, research institutions, and other organizations working toward sustainable development. They offer resources, publications, and events related to tech and sustainability.
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FAQ About Blockchain Technology and Sustainability
How is blockchain used in sustainability?
Blockchain technology helps enhance transparency, traceability, and trust in data management. Specifically, blockchain can track and trace products throughout their supply chain journey, enable peer-to-peer energy trading, and create a transparent and immutable ledger of waste disposal and recycling activities. It can also help track water and forestry management activities.
Can blockchain prevent climate change?
Climate change is a complex global challenge that calls for policy changes, technological innovations, and behavioral shifts. Blockchain can contribute to these efforts by recording carbon information, securing climate-related data, and enabling global collaboration.
Does blockchain improve ESG initiatives?
While blockchain has the potential to improve ESG initiatives, it's important to note that technology alone is not a guarantee of ethical or sustainable behavior. Blockchain can provide the tools and infrastructure to support and verify these efforts, but the success of ESG initiatives ultimately depends on the intent and actions of the organizations implementing them.
What role does blockchain technology play in CSR?
Blockchain technology can play a significant role in CSR initiatives by enhancing transparency, accountability, and traceability — improving trade, labor, human rights, and food security.
Is blockchain environmentally sustainable?
It depends on what kind of blockchain you are referring to. PoW blockchains require miners to solve complex mathematical puzzles to validate transactions and add them to the blockchain. This process consumes an average of 1,449 kilowatt hours, or about as much as it takes to run the average U.S. household for 13 years, to mine a single Bitcoin. Other forms of blockchain, such as PoS and PoA, tend to be more energy efficient.
Page last reviewed on September 29, 2023.
