Since the emergence of blockchain in 2008 as a distributed ledger to store transactions, there has been an upsurge in literature exploring the capabilities of blockchain technology. The recent explosion of interest in blockchain-based applications is due in part to its innovative nature, strong underlying theoretical cryptography foundations, distributed consensus algorithms, and decentralized databases. However, there’s a more fundamental attraction to blockchain technology in its inherent accountability, also called its value chain. In the value chain, every blockchain transaction is verified and kept within the blockchain, building the chain itself and affording complete transparency for all users.
Meanwhile, with increasing consumer access to information and the international obligations to fight global warming, corporations have realized that corporate social responsibility (CSR) is no longer a nice-to-have but a crucial requirement. Blockchain can support a beneficial, circular economy on a large scale. The idea of a circular economy entails reducing materials, waste, and reusing products to ensure a “closed-loop” or “cycle” and protect resources.
As blockchain technology gains familiarity and adopters further establish its functionality, new ideas about possible applications are becoming widespread. These ideas are taking shape as proposals and projects already underway in different market sectors. Financial institutions, healthcare organizations, and governmental offices are keen on investing in emerging blockchain implementations.
Blockchain can encourage a circular economy within businesses by utilizing blockchain’s inherent high transparency and traceability. Companies implementing blockchain can confidently authenticate social responsibility claims and track resources via records on the blockchain from the point of extraction through distribution and consumer purchase. Applying blockchain’s high point-to-point accountability to CSR standards offers consumers tranquillity and trust, from business customers to individuals. Individuals could monitor activities and assure themselves of their integrity without relying on any other party. Further, consistent adoption of “know your customer” (KYC) guidelines, a perfect fit for blockchains’ detailed record keeping, would reinforce a company’s image and commitment to human rights and the fight against possible fraud or corruption in the most transparent manner possible.
The story doesn’t end here. Modern supply chains create mountains of paperwork. Just take the ocean freight industry, which accounts for shipping 90% of goods in global trade. IBM estimates that shipping requires, on average, 30 signatures from different organizations and 200 instances of communication. The environmental implications of international shipping are layered on top of paper-based, resource-heavy processes. In addition, fraud, manipulation of data and products, human error, a high vulnerability to delays, and lack of transparency are additional shortcomings affecting international supply chains.
Blockchain technology gives businesses the ability to back up their claims, from the success of their environmental programs to their track record on human rights throughout the value chain. Additionally, it makes the client experience easier. Because compliance is built-in and the data in each block can only be improved upon, not changed, making it dependable and irreversible, blockchain technology makes transactions easier at every stage of the supply chain. Blockchain technology can eliminate human error and corruption, improving process efficiency and fairness while lowering costs and transactional delays.
Subsequently, independent blockchain reporting tools enable individuals and organizations to prove transactions, provide audit trails, and comply with environmental, social, and governance (ESG) reporting requirements. There are potentially game-changing gains for businesses that want to minimize risk and media headlines. Of particular interest are efficiency and reputation-management advances resulting from automatically showing proof of customer interactions and purchases, certifying ESG and policy compliance, and providing reliable real-time incident data online.
Final Thoughts
Blockchain technology enables a high level of transparency and visibility. The internal rewards of adopting blockchain technology are significant, from increased consumer trust and loyalty and improved efficiency and safety. Beyond that, there is potential for government and private sector support for sustainability initiatives and innovation.
Is your company considering blockchain technology to improve CSR-related disclosure?
Disclaimer
Views expressed above are the author’s own.
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