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The TYS platform will be temporarily unavailable due to maintenance from July 26, 8:30 pm GMT, to July 27, 12:30 pm GMT. We apologize for any inconvenience.
Continuing my exploration of the Super Bowl supply chain, what becomes of the championship shirts and hats for the losing team? These brand-new garments, seemingly destined for obscurity, lead into the next part of our series, A Second Chance at Glory: Turning Defeat into Compassion and Inspiration.
In a heartwarming twist of fate, the losing team’s championship gear transforms from a symbol of defeat into an extraordinary opportunity for compassion and inspiration. Here’s how this second chance at glory unfolds:
Upon the conclusion of the Super Bowl, humanitarian organizations and charitable foundations swiftly step into action. Partnering with the league or the sports apparel companies responsible for manufacturing the gear, these organizations see beyond the game’s outcome and recognize the transformative potential of these items. The losing team’s championship gear embarks on a new journey, transcending borders to reach communities facing hardships around the world. Whether it’s in regions affected by natural disasters, impoverished areas, or communities dealing with various challenges, the gear becomes a beacon of support and inspiration.
Distributed by these humanitarian organizations, the gear takes on a new purpose: to empower and uplift. T-shirts and hats that once symbolized a moment of disappointment now become symbols of resilience and shared humanity. The recipients, often facing adversity, find warmth and encouragement in the unexpected gift, fostering a sense of community and connection. Each piece of championship gear carries with it the stories of determination, teamwork, and sportsmanship that define the Super Bowl. These narratives resonate with individuals who receive the gear, reminding them that, even in the face of setbacks, there is a shared human spirit that unites us all.
While it’s uplifting to see these garments finding a meaningful second purpose, authentic corporate responsibility begins by ensuring that every procurement decision resonates with a commitment to ethics and sustainability. Visibility into a company’s supplier base is crucial and Trust Your Supplier’s integration with strategic partners, such as EcoVadis, Verisk Maplecroft, Dunn and Bradstreet, and Moody’s Analytics, brings together all the necessary components for procurement organizations that are on the path toward ethical sourcing. In this way, these garments will make an impact on both ends of their life—beginning with sustainable sourcing and concluding with a profound social impact.
As the Super Bowl spectacle unfolds on the field, another grand performance is taking place in the stands and concession areas—a culinary masterpiece of epic proportions. Let’s delve into the food consumed and the waste generated during this colossal event.
Super Bowl Sunday is not just a showdown of athletic prowess; it’s a gastronomic celebration. Millions of fans in the stadium and watching at home indulge in a culinary feast, devouring an astonishing array of food ranging from classic hot dogs and nachos to gourmet treats and stadium specialties. The sheer scale of the Super Bowl translates to mind-boggling food consumption. Think thousands of pizzas, millions of chicken wings, and enough nachos to build a culinary fortress.
Yet, behind the scenes of this culinary symphony lies a challenge—food waste. The sheer volume of meals served, and snacks consumed contributes to a significant amount of waste, including packaging, uneaten portions, and disposable utensils. The challenge is not only to satiate the appetites of millions but also to do so responsibly, minimizing the environmental impact.
In recent years, there’s been a growing awareness of the environmental footprint of major events like the Super Bowl. Stadiums, vendors, and organizers are increasingly adopting sustainable practices, from sourcing compostable utensils to implementing recycling programs. These efforts aim to strike a balance between the grandeur of the occasion and the responsibility to our planet.
Fans, too, play a crucial role. The Super Bowl experience extends beyond the field, and conscious choices by attendees—like using designated recycling bins and opting for eco-friendly alternatives—contribute to the overall sustainability narrative.
The need for conscientious choices echoes far beyond the stadium, reaching into the core of procurement organizations. Trust Your Supplier (TYS), as a pioneer in SaaS blockchain networks, offers invaluable tools and insights for procurement organizations of any size to navigate the labyrinth of ethical choices. By leveraging TYS’s platform, we empower these organizations to make sustainable choices, ensuring that every procurement decision contributes to a dedicated commitment to our planet’s well-being.
Scope 3 emissions, often referred to as “value chain emissions,” are a part of the Greenhouse Gas Protocol’s corporate standard for greenhouse gas accounting. These emissions are generally the most significant share of an organization’s carbon footprint but are also the most complex to manage and mitigate, as they involve activities not directly owned or controlled by the reporting company. Scope 3 includes both upstream and downstream emissions and encompasses a wide range of indirect emissions sources.
The regulations and guidelines around Scope 3 emissions vary depending on the region and the specific regulatory framework. However, there are some general aspects to consider:
Voluntary vs. Mandatory Reporting: In many regions, reporting Scope 3 emissions is still voluntary but is increasingly being encouraged or required as part of broader sustainability reporting frameworks. For example, the European Union’s Non-Financial Reporting Directive (NFRD) encourages companies to report on their Scope 3 emissions.
Standards and Protocols: The Greenhouse Gas Protocol provides the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions, including Scope 3.
Corporate Sustainability Reporting: Companies may choose to report Scope 3 emissions as part of their sustainability or corporate social responsibility (CSR) reporting. This is often done to improve transparency, manage risks, and identify opportunities for reducing emissions in the supply chain.
Investor and Stakeholder Pressure: There is increasing pressure from investors, customers, and other stakeholders for companies to report and reduce their Scope 3 emissions. This pressure often drives more detailed and rigorous reporting and reduction strategies.
Sector-Specific Guidelines: Certain industries have specific guidelines or expectations for Scope 3 reporting. For example, the Science Based Targets initiative (SBTi) provides methods and guidance for companies to set science-based targets for reducing greenhouse gas emissions, including Scope 3.
Local and National Regulations: Some countries have specific regulations or guidelines for Scope 3 reporting. These can vary significantly and may be more or less stringent than international standards.
Integration with Broader ESG Goals: Scope 3 emissions reporting is often part of broader environmental, social, and governance (ESG) strategies and goals within organizations.
Technological Approaches for Measuring Scope 3 Emissions
Measuring Scope 3 emissions involves complex data collection and analysis due to the broad range of indirect emission sources across a company’s value chain. Technology plays a crucial role in this process, with several key approaches:
Life Cycle Assessment (LCA) Tools: These software tools analyze the environmental impacts of products or services throughout their entire life cycle, from raw material extraction to disposal. LCA tools can be instrumental in quantifying Scope 3 emissions related to product use and end-of-life stages.
Supply Chain Analysis Software: These platforms focus on mapping and assessing emissions within a company’s supply chain. They help identify hotspots of high emissions and opportunities for reduction by analyzing supplier data and activities.
Carbon Accounting Platforms: These comprehensive tools enable companies to track and manage their carbon emissions across all scopes, including Scope 3. They often feature dashboards, reporting capabilities, and scenario analysis to support strategic decision-making.
Energy Management Systems (EMS): While primarily focused on direct energy consumption (Scope 1 and 2), EMS can also contribute to Scope 3 analysis by providing insights into the energy use and associated emissions of leased assets, franchises, and outsourced activities.
Blockchain and IoT: Emerging technologies like blockchain and the Internet of Things (IoT) offer new ways to track and verify emissions data across complex supply chains, enhancing transparency and accuracy.
Data Sources for Scope 3 Emissions Measurement
Scope 3 reporting platforms gather data from a variety of sources:
Supplier Surveys and Self-Reporting: Direct communication with suppliers to collect data on their emissions and environmental practices.
Industry Averages and Benchmarks: Utilizing established databases and benchmarks to estimate emissions for common processes or products in the absence of specific data.
Public and Proprietary Databases: Accessing government or commercial databases that provide emissions factors and environmental impact data for a wide range of activities and materials.
Sensor and IoT Data: Collecting real-time data from sensors and IoT devices embedded in products or supply chain operations to monitor emissions.
Reliability and Approaches
The reliability of Scope 3 measurement can vary significantly based on the data quality, the methodologies used, and the comprehensiveness of the analysis. Approaches that incorporate primary data from direct suppliers and use robust, widely recognized methodologies (like those recommended by the Greenhouse Gas Protocol) tend to be more reliable. However, even with the best tools and intentions, Scope 3 measurements often involve a degree of estimation and uncertainty, especially when relying on secondary data or industry averages.
Watch-Outs When Sourcing Scope 3 Reporting Software
Data Quality and Transparency: Ensure the software supports high-quality, verifiable data collection and offers transparency about its methodologies and data sources.
Customization and Scalability: The platform should be adaptable to your specific industry and supply chain complexity and scalable as your business and reporting needs evolve.
Integration with Existing Systems: The software should integrate seamlessly with your existing ERP, CRM, and other management systems to streamline data flow and avoid silos.
Compliance and Standards Alignment: Verify that the software supports compliance with relevant regional regulations and aligns with international standards like the Greenhouse Gas Protocol.
User Support and Training: Adequate user support, training, and resources are essential to ensure the successful implementation and ongoing use of the platform.
In conclusion, technology offers powerful tools for measuring Scope 3 emissions, but the choice of platform and approach requires careful consideration of your company’s specific needs, the quality and source of the data used, and the ability to integrate and align with broader sustainability goals
Complying with the global standards set by the International Sustainability Standards Board (ISSB) involves aligning your business’s sustainability reporting with internationally recognized guidelines. The ISSB, operating under the IFRS Foundation, aims to provide a global baseline of high-quality sustainability disclosure standards to meet investors’ information needs. Here’s a guide for your business to align with the ISSB standards:
Understand the ISSB Standards and Their Objectives
Overview of ISSB Standards: Familiarize yourself with the ISSB’s aim to standardize sustainability disclosures, focusing on providing relevant, reliable, and comparable information to investors.
Scope and Relevance: Understand how these standards are relevant to your business, particularly in communicating sustainability-related financial risks and opportunities to investors.
Assess Current Sustainability Reporting Practices
Gap Analysis: Evaluate your current sustainability reporting practices against the ISSB standards to identify gaps.
Stakeholder Engagement: Engage with key stakeholders, including investors, to understand their needs and expectations regarding sustainability information.
Integrate Sustainability into Governance
Governance Structure: Ensure your board and management are equipped to oversee sustainability issues in line with the ISSB standards.
Accountability and Responsibility: Assign clear roles and responsibilities for sustainability reporting and disclosure within your organization.
Enhance Data Collection and Management
Robust Data Systems: Develop or enhance systems to collect accurate and verifiable sustainability data.
Quality and Consistency: Focus on the quality, consistency, and reliability of the data collected for sustainability reporting.
Align Reporting with ISSB Requirements
Disclosure Practices: Adapt your sustainability reporting practices to align with the ISSB’s disclosure requirements, focusing on materiality, clarity, and completeness.
Continuous Improvement: Regularly review and update your reporting practices to align with evolving ISSB standards and best practices.
Prepare for External Assurance
Assurance Readiness: Prepare for external assurance of your sustainability disclosures to ensure they meet the ISSB standards.
Transparency and Credibility: Use external assurance to enhance the credibility and transparency of your sustainability reporting.
Implement Effective Communication Strategies
Investor Communication: Develop a strategy to effectively communicate your sustainability performance and risks to investors.
Public Reporting: Ensure public disclosures are clear, concise, and provide meaningful information to investors and other stakeholders.
Monitor Developments and Participate in Dialogues
Stay Informed: Keep abreast of developments and updates in ISSB standards and related regulatory changes.
Industry Collaboration: Participate in industry forums and dialogues to stay informed and influence the development of sustainability standards.
Train and Educate Staff
Internal Training: Provide training for staff involved in sustainability reporting to ensure understanding and compliance with ISSB standards.
Building Expertise: Develop internal expertise or seek external support for interpreting and applying the ISSB standards.
Conclusion Aligning with the ISSB standards is a strategic move towards globally consistent and comparable sustainability reporting. It not only aids in meeting investor demands but also enhances the overall credibility and transparency of your business’s sustainability efforts. As these standards evolve, staying proactive in adapting and improving your sustainability reporting practices will be key to maintaining alignment and demonstrating your commitment to sustainable business practices.
Complying with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) involves a strategic approach to climate-related risk management and disclosure. The TCFD aims to improve and increase the reporting of climate-related financial information. Here’s a comprehensive guide for your business to align with the TCFD recommendations:
Understand the TCFD Framework
Framework Overview: Familiarize yourself with the TCFD’s four core areas: Governance, Strategy, Risk Management, and Metrics and Targets.
Applicability and Benefits: Understand how the TCFD recommendations apply to your organization and the benefits of enhanced climate-related financial disclosures, including better risk management and more informed strategic planning.
Integrate Climate-Related Risks into Governance
Board Oversight: Ensure your board of directors is informed about and oversees climate-related risks and opportunities.
Management’s Role: Establish management-level roles responsible for assessing and managing climate-related issues.
Incorporate Climate Change into Organizational Strategy
Impact Assessment: Assess the potential impact of climate-related risks and opportunities on your organization’s businesses, strategy, and financial planning.
Scenario Analysis: Conduct scenario analysis to understand the resilience of your organization’s strategy under different climate-related scenarios.
Manage Climate-Related Risks
Risk Identification and Assessment: Identify and assess climate-related risks to determine how they could affect your organization.
Risk Management Processes: Integrate climate-related risks into your existing risk management processes, ensuring an organization-wide approach to addressing these risks.
Develop and Disclose Climate-Related Metrics and Targets
Metrics Selection: Choose appropriate climate-related metrics that are relevant to your organization.
Setting Targets: Set and disclose targets your organization uses to manage climate-related risks and explain how these targets align with your strategy.
Enhance Transparency and Disclosure
Reporting: Prepare to disclose climate-related financial information in your organization’s annual financial filings or other public documents.
Continuous Improvement: Regularly update and refine your disclosures as practices and knowledge evolve.
Engage with Stakeholders
Stakeholder Communication: Communicate with stakeholders about your organization’s approach to managing climate-related risks and opportunities.
Feedback Incorporation: Use stakeholder feedback to enhance your climate-related financial disclosures.
Monitor Regulatory Developments
Regulatory Awareness: Stay informed about current and upcoming regulations related to climate disclosure in the jurisdictions where your organization operates.
Compliance Preparation: Prepare your organization for potential regulatory changes or requirements related to climate reporting.
Provide Training and Build Capacity
Internal Training: Ensure relevant employees and management are trained on the importance of climate-related risks and the TCFD recommendations.
Expertise Development: Develop in-house expertise or seek external support to understand and implement TCFD-aligned disclosures effectively.
Conclusion Aligning with the TCFD recommendations is essential for forward-thinking organizations committed to addressing climate change risks and opportunities. It facilitates compliance with emerging regulations and positions your business as a leader in sustainable practices, enhancing investor confidence and public trust. By taking proactive steps in governance, strategy, risk management, and transparent reporting, your organization can effectively navigate the challenges and opportunities posed by climate change.
Complying with the EU Corporate Sustainability Reporting Directive (CSRD)involves several key steps and considerations for businesses. The CSRD significantly expands the sustainability reporting requirements for companies in the EU. Here’s a guide to what your business needs to do:
Understand the Scope and Applicability
Determine Eligibility: The CSRD applies to all large companies, whether they are publicly listed or not. Specifically, it targets companies with more than 500 employees.
Timeline Awareness: Be aware of when the CSRD requirements will apply to your business. The directive is expected to be applied in stages starting from 2024 for reports published in 2025.
Develop Robust Data Collection Systems
Data Collection and Management: Establish or enhance systems for collecting a wide range of ESG (Environmental, Social, and Governance) data. This includes environmental impact, social practices, and governance structures.
Technology Integration: Consider implementing technology solutions that can help in accurately collecting and managing sustainability data.
Align Reporting with CSRD Requirements
Understand Reporting Criteria: Familiarize yourself with the specific reporting standards and formats that the CSRD mandates. This includes details on sustainability-related matters such as environmental protection, social responsibility, and treatment of employees.
External Standards and Frameworks: Align your reporting with recognized sustainability frameworks and standards that are consistent with CSRD requirements.
Integrate Sustainability into Business Strategy
Strategic Alignment: Ensure that your company’s strategy reflects a commitment to sustainability, as the CSRD aims for sustainability to be integrated into the business model.
Stakeholder Engagement: Engage with stakeholders, including employees, customers, and suppliers, to understand their perspectives and incorporate their feedback into your sustainability practices.
Establish a Sustainability Governance Structure
Governance Framework: Set up a governance framework for sustainability reporting, ensuring that there is oversight and accountability within the organization.
Training and Awareness: Train relevant staff on CSRD requirements and the importance of sustainability reporting.
Prepare for Assurance and Verification
Assurance Readiness: Prepare for external assurance of your sustainability reporting, as the CSRD requires assurance on the reported sustainability information.
Transparency and Accountability: Focus on the accuracy and transparency of your reporting to build trust with stakeholders and comply with the directive.
Stay Informed and Adapt
Regulatory Updates: Stay updated on any changes or updates to the CSRD and related regulations.
Continuous Improvement: Regularly review and update your sustainability practices and reporting to ensure ongoing compliance and improvement.
Communicate and Disclose
Effective Communication: Develop a communication plan to effectively disclose sustainability information both internally and externally.
Report Preparation: Prepare your sustainability reports in line with CSRD guidelines and ensure they are accessible to stakeholders.
Conclusion
Compliance with the CSRD is not just a regulatory requirement; it’s an opportunity to embed sustainability into the core of your business operations. By taking these steps, businesses can not only comply with the directive but also demonstrate their commitment to sustainable development and corporate responsibility.
Corporate Sustainability Due Diligence Directive (CSDDD) requires a comprehensive approach from businesses. The CSDDD aims to ensure that companies operating in the EU market address and mitigate adverse impacts on human rights and the environment within their operations and supply chains. Here’s a guide on what your business needs to do:
Understand the Directive and Its Scope
Determine Applicability: The CSDDD applies to large companies operating in the EU market. This includes EU companies with significant turnover and a certain number of employees, as well as non-EU companies with substantial business in the EU.
Scope of Operations: Understand that the directive covers your operations, your subsidiaries, and your supply chain, including indirect business relationships.
Conduct Thorough Due Diligence
Risk Assessment: Carry out a thorough risk assessment to identify actual and potential adverse impacts on human rights and the environment in your operations and supply chains.
Action Plan: Develop and implement an action plan to address, prevent, and mitigate identified risks.
Engage with Affected Stakeholders
Stakeholder Engagement: Actively engage with potentially affected groups, including workers, local communities, and other relevant stakeholders, to understand their concerns and perspectives.
Feedback Mechanisms: Establish and maintain a system for receiving and addressing feedback or complaints from affected stakeholders.
Implement Effective Governance Structures
Responsibility and Oversight: Assign responsibility for due diligence at a high governance level within your organization.
Training and Awareness: Ensure employees and management are trained and aware of the due diligence requirements.
Ensure Transparency and Reporting
Public Reporting: Prepare and publicly disclose an annual report on your due diligence policies, processes, findings, and actions taken.
Transparent Communication: Be transparent about the challenges and limitations faced in addressing adverse impacts.
Monitor, Evaluate, and Update Due Diligence Practices
Continuous Monitoring: Regularly monitor the effectiveness of your due diligence measures.
Regular Updates: Update your due diligence processes as needed based on monitoring results and evolving risks.
Prepare for Legal Compliance and Liability
Legal Compliance: Understand and comply with the legal obligations under the CSDDD, including civil liability provisions.
Documenting Compliance: Keep thorough records of your due diligence efforts to demonstrate compliance.
Establish End-to-End Supply Chain Management
Supply Chain Collaboration: Work collaboratively with suppliers and business partners to ensure they understand and comply with the CSDDD requirements.
Contractual Clauses: Include appropriate clauses in contracts with suppliers and business partners to ensure compliance with due diligence obligations.
Develop a Responsive Strategy for Identified Risks
Mitigation and Remediation: Develop strategies to mitigate any adverse impacts and provide for remediation where harm has occurred.
Ending Relationships: Be prepared to end business relationships if mitigation of adverse impacts is not possible.
Conclusion
Compliance with the CSDDD is a crucial step towards responsible and sustainable business practices. By integrating due diligence into your business operations and addressing potential adverse impacts on human rights and the environment, your company not only adheres to regulatory requirements but also contributes positively to societal and environmental well-being.
Corporate sustainability has gained unprecedented importance in the face of global challenges like climate change and human rights issues. Businesses are increasingly held accountable for their environmental degradation and social impacts. Legislative and regulatory changes are redefining corporate responsibilities towards sustainability, moving beyond voluntary initiatives to mandatory compliance.
From EU regulations such as the Corporate Sustainability Reporting Directive (CSRD) to the global standards of the International Sustainability Standards Board (ISSB) and the Task Force on Climate-related Financial Disclosures (TCFD), the reporting landscape is transitioning at lightning speed.
The Council and the European Parliament reached a provisional deal on the Corporate Sustainability Due Diligence Directive (CSDDD), which aims to enhance the protection of the environment and human rights in the EU and globally. The due diligence directive will set obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners.
Which regulations apply to you?
Key Frameworks: The CSDDD, CSRD, ISSB, and TCFD represent significant legislative and regulatory shifts, mandating comprehensive sustainability practices and reporting.
Implications for Organizations: These frameworks signal a shift from voluntary to mandatory sustainability practices, emphasizing transparency, accountability, and long-term planning.
Read more over the next few days as we provide insight into CSRD, ISSB, TCFD, and the CSDDD.
Recently, I was on a panel at Wake Forest University, School of Law, NC on this subject, and it triggered my interest in digging deeper into this space. Chainyard has been involved in ESG via its SaaS platform, Trust Your Supplier, since 2020. I occasionally participate in the Hyperledger SIG on Climate Change where many different topics are discussed. The goal of this article is to share my thoughts as I continue to expand upon that knowledge in the coming months.
What is ESG?
ESG expands to Environment, Social, and Governance. There have been many subsets of it in the past, but the current incarnation is a result of concerns about the climate, environment, and social justice. ESG is complemented by DEI which looks at diversity, equity, and inclusion in society and at the workplace.
Businesses have an impact on our Earth. It includes human and machine activity, and the use of natural resources including water, fossil fuels, raw materials, and minerals. These can result in greenhouse gas emissions like CO2, pollution of the air we breathe or water we drink, deplete natural resources, generating vast amounts of waste, etc. The ESG framework measures the degree to which a corporation adheres to sustainable and environmentally responsible practices.
Organizations have relationships with customers, partners, people, and communities. ESG measures the social impact on people both internal to the company and customers and supply chain partners. Many questions arise such as how workers are treated, do they get living wages and good healthcare, are the labor practices acceptable, are the communities they serve benefitting, etc.
Governance refers to a corporation’s management practices related to ethics, regulatory and legal compliance, and transparency in reporting. Companies have to establish policies, procedures, guidelines, and measurement frameworks to achieve these goals. “DEI” or diversity at the workplace, equity in opportunities and wages, and inclusion are all part of governance activities.
According to Moody’s, a 2022 survey of their customers found among other insights,
“Customers also indicated that rising customer expectations, environmental, social, and governance (ESG), and future of work, are the trends expected to affect their business the most”
Saving the Planet
Fixing the damages caused to the environment by human activity requires a multi-pronged approach. Though it is generally accepted that the main contributor to the climate crisis is CO2 emissions, the environment has been seriously injured by many factors; key among them being the disposal of plastics, which is now the major cause of ocean pollution and the extinction of many species.
To address the crisis, there are several projects put in motion by NGOs, governments, and global institutions. Some of them are voluntary and others are imposed by regulation. These projects fall under several categories such as:
Emission Reduction
Carbon Farming and Sequestering
Migration to electrical energy
Transition from Fossil Fuels to Renewable sources
Carbon Offsets and Credits to compensate for emissions
Carbon Insetting through corporate self-improvement initiatives
Plastics Management
Plastic Waste collection, sorting, recycling, and disposal
Discontinue single-use plastic items.
Measuring the impact of micro-plastic pollution
Land and Water Management
Forest management (re-forestation, conservation, and afforestation)
Restoration and protection of coastal wetlands and marine life
Carbon-Friendly Agriculture
Waste Management
Efficient and effective collection, sorting, and recycling of industrial and household waste.
Reprocessing electronic waste to extract valuable metals and reduce the discharge of toxic chemicals into the environment.
Excess inventory sharing by enterprises with others.
Manufacturing products using sustainable processes and raw materials.
We are all familiar with how our government is pushing for a rapid transition to Electric Vehicles (EVs) and renewable energy from wind and solar power.
Carbon Offsetting, Credits, and Insetting
We need to understand what strategies corporations are using to achieve net-zero goals. Corporations make commitments to the industry or the government about becoming carbon neutral or reducing their emissions. In order to meet those targets, they invest in projects that address in part or full those commitments. These projects can be internally triggered, or the corporation can fund third-party projects.
A generic approach followed in the industry
It is generally agreed that 1 offset or credit is equal to 1 metric ton of carbon dioxide emission (CO2e). A typical tree planted in a reforestation program takes about 40 years to sequester 1 metric ton of carbon. The same amount is roughly emitted by an automobile in about 3 to 12 weeks.
Carbon Offsetting
Carbon offsetting is a mechanism by which a company that has been emitting CO2 and is not yet ready to fix its process, technology, and operations, funds offsetting projects in the voluntary carbon market (VCM). For example, ACME Corp. which has been emitting 100 metric tons of CO2 could invest in the MOSS Project which supports the preservation of the Amazon rain forests to offset its emissions. For a novice, offsetting works as shown.
Carbon Offsetting – High-Level Flow
Some typical projects include:
Forest conservation
Wind farms, hydropower projects, solar power plants
Other renewable energy projects such as fusion
Landfill gas capture and management
Providing energy-efficient appliances to local communities such as the recent push in NY To ban gas stoves.
Farm power, methane capture, and biogas production, something very common in Asia and Africa
Waste management
Carbon Credits
These are regulated credits also referred to as Cap-n-Trade. The Government or the Regulatory Body sets caps on carbon emissions which translate into “Emission Allowances”. These allowances are available for purchase as “Carbon Credits. Business entitiespurchase “Carbon Credits based on assigned emission allowances. These allowances are gradually reduced over time to realize tangible emission reductions.
Carbon Credits Model
Carbon Insetting
Insetting refers to a Business Entity reducing its own emissions through the adoption of new technology, optimizing supply-chain processes and practices, and improving efficiency. Insetting is more important as it enables a company to take ownership and responsibility for its emissions.
Insetting
Actions a company may take include deriving more of its energy from renewable sources, management of resources such as water and raw materials, and enforcing ESG across their upstream and downstream partners.
Key issues in the Measurement and Reporting of ESG initiatives
Currently, there are many projects by various organizations in the voluntary carbon market. There is no consistent way to verify if these projects are genuine and truly deliver the benefits they promise. Some of the issues are:
Consistency in the application of policies and regulations
No single or integrated verifiable and trusted project registry
Too much focus on CO2 emissions though the environment is harmed by various other activities.
Potential Double Spend problem (accounting of credits and offsets)
Traceability of Offsets & Credits throughout their lifecycle from issuance to retirement
Transparency of project status and benefits
Consistent and verifiable (regulatory) reporting
Why Blockchain?
Blockchains have a bad reputation for being energy-intensive, and thus not climate or carbon friendly. Well, that comes from Bitcoin mining and other public blockchains that supported the proof-of-work (PoW) consensus protocol. PoW is very CPU intensive and consumes a lot of energy to solve a mathematical challenge essential for block verification and earning crypto. However, most other blockchains support better protocols such as proof-of-stake, BFT, or proof-of-authority which are much more energy friendly.
A blockchain is a valuable tool that can help address many issues. It extends enterprise solutions and can work cohesively with IOT and AI/ML technologies.
An immutable record of data enables “track and trace” of projects, the provenance of lifecycle events, and transparency. All this depends on stakeholders including applications and things recording data into the ledgers.
Smart Contracts can help with governance, enforcing policies and business rules, and managing tokens issued as offsets, credits, and incentives.
Decentralized Identity is a relatively new concept and can be applied to projects, people, organizations, and things. Every project can be assigned a DID and tagged with verifiable credentials by bodies such as Carbon Action Reserve, Verra, and the like. DIDs are cryptographically verifiable, universally resolvable, and enable Proof-of-Existence and Proof-of-Verification
Consensus protocols such as Proof-of-Stake allow validators to verify transactions and maintain consistency and integrity of the ledger
Privacy and Anonymity are very important for organizations. Using encryption and secrets, organizations can be transparent about their commitments and actions, yet implement privacy and confidentiality to avoid exposing their business secrets and intellectual property.
Three use case patterns where blockchain can augment ESG initiatives are:
Provenance, and Track & Trace of ESG Projects
Facilitating the trading and trustable record-keeping of Carbon offsets and credits (tokens)
Supporting risk, audit, and compliance reporting
These patterns cut across many domains such as supply chain, health care, real estate, and energy,
Organizations and Bodies involved with Sustainability Initiatives
It was enlightening to see the number of organizations and companies involved with climate initiatives and ESG.
Some of the notable ones are:
Verra is one of the most recognized and trusted providers of standards and guidelines for sustainable development. The Verra registry is a repository of certified and verified projects.
Climate Action Reserve is approved to serve as an Offset Project Registry (OPR) for the Compliance Offset Program under California’s Cap-and-Trade Program. They also maintain project registries and support various carbon offset programs.
GHG Protocol According to their website they provide standards, guidance, tools, and training for businesses and governments to measure and manage climate-warming emissions. One can download worksheets and tools to measure and record carbon emissions footprint.
The Gold Standard is another reputed and recognized organization that provides standards, verifies and certifies carbon projects, and maintains project registries.
Other organizations include
American Carbon Registry
CSA Group Registries
Climate, Community & Biodiversity (CCB) Standards: Certification to the Climate, Community & Biodiversity (CCB) Standards demonstrates that a project simultaneously addresses climate change, supports local communities and smallholders, and conserves biodiversity
Task Force on Climate-related Financial Disclosures (TCFD) – Increased reporting of climate-related financial information.
Verra – SD-VISta The Sustainable Development Verified Impact Standard (SD VISta) – Premier standard for certifying the real-world benefits of social and environmental projects, from gender equity and economic development to affordable clean energy and restoration of wildlife.
The United Nations’ Sustainable Development Goal 7 (SDG 7) focuses on reliable and clean energy modern energy services, as defined in its Target 7.1
Paris Accord on Scope 1/2/3 reporting
United States – Environmental Protection Agency
European Commission (2020) Circular Economy Action Plan
Open Earth Foundation
Hyperledger Foundation – Climate SIG
Many projects support ESG such as the MOSS Project, Toucan, Plastic Bank, Save The Planet, Klim DAO, and Greenly. The notable ones that need mentioning are:
Trust Your Supplier – Chainyard is a SaaS blockchain network focused on supplier risk and qualification. Workflows help customers capture supplier ESG initiatives and actions and get them verified through third-party verifiers who provide ESG rating scores.
TYS Captured ESG Information
TYS has standardized the information capture to gather ESG information that can be used by organizations to support Scope 1 & 2 reporting today, and a goal of Scope 3 in the future.
Title Chain – Borsetta is an evolving network that enables asset track and tracing of energy micro-grids, helps secure their title, and tokenizes the grid and energy production among other functions. Though it is not directly related to ESG, it mainly targets microgrids that support renewable energy ecosystems, including the energy they produce and the excess quantity sold to the national grid. Microgrids serve campuses and are seen as the future of community-driven energy production.
Digital Credentials for Carbon Accounting is an initiative by the British Columbia government in Canada. The initiative known as “Traction” set up under the Energy & Mines Digital Trust supports the BC Government’s requirement for certified annual sustainability reporting. The solution is built on a blockchain platform based on Hyperledger Aries and Indy and leverages the Decentralized Identity (DID) standards protocol. The mining companies collect data for sustainability reporting, which is verified by organizations such as PWC resulting in the issuance of a Verifiable Credential that can be shared with the government.
ESG and Blockchain (A conceptual architecture)
Earlier in this article, we discussed how a blockchain complements ESG solutions. Can blockchain add value beyond Carbon Offsets and Credits? Yes, there are many reasons.
The Blockchain can serve as an ESG BUS providing access to various services such as project verification and tokenization
Many institutions maintain verifiable registries of carbon projects, some enabled by blockchains, and others provide APIs. A decentralized identifier can be assigned to every project. Decentralized identifiers are a W3C-enabled standard and specification to define the structure, attributes, and architecture of DID and its constituents. DIDs are universally resolvable to “DID DOCS” which are JSON documents present authentication schemes, digital signatures, and service endpoints to access various aspects and details about the project.
The blockchain can record hashes (aka digital fingerprints) of data received from IoT sensors that track emissions or watch human activity, thus providing immutable tamper-evident proofs for later audit.
Carbon offsets and credits are offered by various organizations. A unified solution can act as an interface for enterprise blockchain to have access to those marketplaces and exchanges.
Enterprises having insetting programs can record the lifecycle of their projects against commitments, thus offering transparency into their programs. Solutions such as TYS capture and/or process such information in their risk assessment workflows. Blockchain “Oracles” assist in making those connections and ensuring the reliability of the source and the received data.
AI ML algorithms and third-party rating providers can calculate ESG scores. which can be recorded with proofs and signatures. Today many companies such as Bloomberg, Ecovadis, CDP, Moody’s, D&B, S&P Global, and other analytics firms provide the service and can secure their ratings on a trusted decentralized ledger.
Lastly, both enterprise and public blockchains have a role to play.
Summary
Governments across the world and global conferences such as the World Economic Forum-Davos, United Nations Climate Conferences held in Kyoto and Paris, and UN Climate Action i.e. COP27 are focused on actions to address climate change. The “E” in ESG is not just limited to carbon emissions but includes plastic waste and other human and industrial waste, non-carbon pollutants. and management of our forests, coastal and marine life. While Carbon offsets have been used as a tool by individuals and industries, it does not make them responsible for their actions. The impact of offset projects has been difficult to measure and report. Insetting as a goal puts more responsibility and accountability on corporations to improve their process and technology. Blockchains can help bring more trust, transparency, accountability, and compliance to ESG management. Also, it is unclear, how much of the geo-political events and industrial disasters are taken into account such as the war in Ukraine, the Norfolk Southern toxic spill in Ohio, or the dairy explosion that occurred in Texas.
About Chainyard
Chainyard is a boutique blockchain consulting and advisory firm based in Morrisville, NC. As the first Hyperledger Certified Service Provider, it has executed over 50+ projects. Chainyard’s Trust Your Supplier enables supplier risk assessment and qualification including ESG-related risks. To learn more, please send me an email or visit our website.
Our Chief Technology Officer, Mohan Venkataraman, provides thought leadership to the tech community at large. His latest article, Ethical Considerations of Digital Transformation, is a sensible case for companies doing the right thing for society and the planet. Mohan lays out three ways to ensure your business is practicing ethical principles.
By design, Trust Your Supplier incorporates these steps into our features and workflows. From audit & compliance management, supplier diversity, ESG or other compliance initiatives, TYS provides business process transparency, data privacy, and key partnerships to maintain ethical standards.
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