Improving Carbon Accounting Efficacy with Blockchains

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Written by
Shivani Tripathi
Published on
September 12, 2022

Climate change and risk reporting are more important now than ever.



The Securities and Exchange Commission has recently mandated public companies to submit their climate change and risk disclosures along with their filings.
As a consequence, if you are a public company, you would need to timely and accurately account for your carbon emissions while reporting so that the auditing process can take a precise account of the carbon offset and credit.

What is carbon accounting?

The various techniques organizations employ to estimate the amount of greenhouse gases released during business processes is called carbon accounting. The existing carbon accounting mechanisms take into consideration all the internal business processes and the emissions they create.
With that said, the existing carbon accounting ecosystem has inherent drawbacks. According to a report by The Rocky Mountain Institute, the supply chain emissions of an average company are as much as 5.5 times higher than the emissions from its processes and operations; the carbon accounts thus aren't necessarily accurate.
Even with the market of carbon accounting software touching a CAGR of 25% (2021-2025), the performance in accurate accounting is lackluster. Additionally, more concerns regarding data storage, trust, and APIs plague today's carbon accounting software technology.
A potential solution to these problems with carbon accounting systems rests in blockchain technology. Let’s discuss the role of blockchains in carbon accounting in detail.

Benefits of Carbon Accounting

We are living in an era of climate change. As responsible citizens and part of a larger cause, organizations today are getting serious about accounting for their processes' carbon emissions.
To put things into better perspective, let’s look at a few key benefits that come with carbon accounting:

Energy Economy
Carbon accounting necessitates streamlining energy consumption across business processes to reduce carbon emissions. As a result, firms enjoy a better energy economy and optimized consumption that isn’t wasteful.

Environment Conservation
Carbon accounting is a noble initiative that helps companies reduce their carbon emissions by actively accounting for resource and energy use, pollution generated, emission quality, and many other factors.
When the picture is clear about the number of emissions a company generates, steps can be taken towards reduction.

Social Impact
Consistently accounting for your carbon emissions creates a tangible social impact in terms of cleaner air and responsibility towards society.
As an organization, it is important to give back to society, and a step towards that can be initiated through carbon accounting.

Carbon Accounting Architecture and Blockchains

Carbon Accounting

Accountability is now necessary in every business if the world is to deliver on its commitment to reach net-zero emissions.

At the center of it lies accounting for carbon emissions using methodologies and technologies that are reflective of these goals.

Blockchain technology, on this front, displays great promise in helping create carbon accounting software that isn’t just trustworthy but proactive as well.

Blockchains in Carbon Auditing

Blockchain is an immutable technology, allowing for data storage that is decentralized but highly traceable. This trackability can be effectively leveraged as a source of verification for the carbon credit transactions during auditing.

Blockchain ledgers are publicly available, which audit authorities can directly access on their own systems for verification. This eliminates one step for contacting third parties or banks for statements of these transactions.

Device Integrations, IoT, and Carbon Accounting

Device Integrations

In their recent study, Ericsson discovered that implementing solutions of Information and Communications technologies, like IoT, can potentially reduce global emissions by as much as 15% by 2030. This is a lot of tonnages, considering the ambitious target that the Paris Agreement has seen countries committing to.

IoT technology in carbon accounting is deployed for activities like smart metering and forecasting for the energy consumption aspect of emissions.

Blockchain can transform IoT devices engaged in carbon accounting by effectively managing data across all device integrations and connections and maintaining security while reducing complexity.

Digital Trust in Carbon Accounting Software with Blockchains

Blockchains have been designed to be decentralized and immutable by nature. The data stored in blockchains has high traceability and cannot be changed without leaving recorded evidence behind. This makes them a subject of digital trust.

Blockchains are being effectively leveraged by carbon accounting software to maintain distributed ledgers, device data integrity, security of digital assets, and keep immutable records safe from fraud.

These benefits translate into better audibility of emission reports and insights that remain true and honest towards achieving net-zero goals.

Blockchain APIs for Data Fidelity

Blockchain APIs

APIs have increasingly become a preference because they allow users to access microservices without having to undergo the full haul. However, such a mechanism leaves the integrity of user data (interacting through the API) at risk. The owner of the API has full usage rights to this data – this is problematic.

Blockchain-based APIs distribute user data across decentralized nodes, making it impossible for the API owner to harness user data in the background. This added layer of security makes blockchains an ideal solution for carbon accounting software.

Cognitive Computing and Blockchains

Carbon accounting software is in the works for automation powered by artificial intelligence and machine learning. With that said, there are inherent problems across this process chain.

Multiple connected devices translate into multiple connection interfaces, which can potentially be compromised. Furthermore, the security concerns regarding centralized storage of sensitive process data are also an important consideration.

Blockchains can revolutionize device interconnectivity and centralized storage for cognition-enabled carbon accounting software by decentralizing the data at the root.

Blockchains for Reporting

The tangible positive impact on climate change depends significantly on accurate reporting of carbon accounting by organizations.

Improved tracking, better security, and accurate accounting using blockchains in carbon accounting software will create an enhanced, efficient ecosystem for authentication and verification of real-time data and records.

Wrapping Up

The world is nearing the point of no return in environmental damage. Commitment to controlling and offsetting carbon emissions is the only way to make a sizeable impact on the climate status today.

Creating effective carbon accounting ecosystems can be made possible with the use of blockchains, aiding the world in saving the environment with conscious practices and active carbon accounting.

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