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What Is A Blockchain?
The use of blockchain in sustainable business is highly beneficial. It promotes sustainability and sustainable practices in a business’s supply chain. But before we learn about how businesses can enhance sustainability via blockchain, let us first understand what a blockchain is.
You can imagine a blockchain as a digital ledger of transactions. A blockchain records transactions made in bitcoin or other cryptocurrencies. The blockchain duplicates and distributes the transactions across the entire network of computers connected to the blockchain. It tracks assets in a business network. The purchase can be tangible (such as land, a house, a car, etc.) or intangible (copyrights, branding, intellectual property, etc.). A blockchain tracks and allows the trade of almost anything of value on the network.
Businesses need the information to run smoothly. Their functioning depends on how fast they receive information and how accurate that information is. Blockchains are ideal for delivering information to businesses. They provide permissible network members with immediate, shared, and wholly shared information. A blockchain network can track payments, orders, production, accounts, and much more. All members on the blockchain can see all details of a transaction end-to-end. This develops confidence and trust between the members and provides opportunities for new efficiencies.
The main elements of a blockchain are:
1. Distributed Ledger Technology
All participants connected to the network have access to the ledger and its transactions record. Because this ledger is shared, the blockchain records the transaction only once. This eliminates the extra efforts traditional business networks have to put in to duplicate the transaction and share it with their business chain members.
2. Immutable Records
Immutable means that participants cannot change, alter or tamper with a transaction after the shared ledger records it. If a member wants to correct an error in a transaction record, they must add a new transaction to reverse that error. All members on the network can view both these transaction records.
3. Smart Contracts
The blockchain stored a set of rules called a smart contract. Smart contracts help speed up transactions. The blockchain will execute the smart contract automatically. A smart contract usually defines conditions for bond transfers between corporate bodies. It can also include terms for travel insurance payments, etc.
How Does A Blockchain Work?
1. The network records each transaction as a ‘block’ of data. The transactions depict the movement of a tangible or intangible asset. The data block records information such as who, what, when, where, and how much. It can also record the condition of an asset, such as the temperature of a food shipment.
2. Each block is connected to its preceding and succeeding blocks. These blocks collectively form a chain of data. The chain grows as assets move from place to place or as ownership changes hands. The sequence of the blocks corresponds to the sequence of transactions and confirms the exact time of transactions. Their secure linkage prevents any person from altering the data on a block or inserting a new block between two existing ones.
3. With each transaction, the blockchain forms a more secure, irreversible chain. Every additional block reinforces the verification of the previous block, thus strengthening the whole blockchain. The chain eliminates the possibility of an outer actor tampering with it. It builds a digital ledger of transactions you and the members of your network can trust.
Blockchain: A Key To Supporting Sustainable Business Practices
The use of blockchain in sustainable businesses plays a crucial role in promoting a circular economy:
1. It fosters collaborations between consumers and producers.
2. It helps companies identify their unsustainable ways of production or inefficiencies in their production chain.
3. Companies can correct their manufacturing methods and improve their sourcing and recycling practices with this information.
4. It assists people in adopting sustainable lifestyles by revealing to them how a product was manufactured.
A significant benefit of using blockchain is transparency. A blockchain provides a record of who bought what from whom. With blockchain, companies can no longer make false claims about being resource-positive and having minimal environmental impacts. Blockchain forces companies to really adopt sustainable practices in their methods of production because they have no way to lie about it. Also, because of blockchain’s transparency, the environmental impacts of businesses can be counter-checked and verified.
Every day, more and more consumers demand sustainable practices during the manufacture of products they buy. Approximately 60% of customers will purchase products from businesses with clearly defined sustainability policies.
Blockchain helps in building a circular economy. Besides transparency, blockchain technology allows traceability. Traceability enables consumers to distinguish authentic products from fake ones. It helps combat counterfeiting and the strain on our natural resources. It also ensures that businesses pay and treats their employees fairly.
Because of the use of blockchain in sustainable business practices, consumers can make informed and responsible choices by gaining adequate information about truly sustainable products:
1. Blockchain transaction records at every stage in supply chains like production, collection, transportation, arrival, and disposal help businesses optimize their processes and increase productivity. Therefore, no one in the supply chain can lie about implementing sustainable practices at that particular stage.
2. It also helps them create new innovative designs that increase the efficiency of their products. This results in reduced operating and production costs.
3. More importantly, it results in reduced waste, thereby conserving resources. For example, MonoChain, a company promoting circular fashion, uses blockchain technology to keep 460 billion USD worth of clothes out of landfills every year.
Blockchain can even find its way to the forefront of our battle against climate change. It finds applications from tracking how sustainable a product is to the real-time monitoring of pollution levels. The UN Environment Programme considers blockchain technology a key to innovations in the energy and climate-oriented industries. Blockchain technology can help us accelerate the transition to clean energy. It can help developing countries combat climate change. In the coming years, it will play an essential role in tackling climate change with its accurate load monitoring in the grid.
For example, Power Ledger, an Australian technology, established a project in Uttar Pradesh that allowed homeowners with solar panels on their rooftops to sell their power to other people on the grid. Systems like these help accelerate the deployment of renewable energy in developing countries. It helps people move away from the unsustainable generating of electricity.
However, even with its incredible practical uses and potential in promoting a circular, sustainable economy, the use of blockchain in sustainable business is relatively new. It is still in its initial emergent phase. It will take a while before most businesses worldwide realize the scope of blockchain technology in saving our planet.
Dr. Emily Greenfield is a highly accomplished environmentalist with over 30 years of experience in writing, reviewing, and publishing content on various environmental topics. Hailing from the United States, she has dedicated her career to raising awareness about environmental issues and promoting sustainable practices.