In response to increasing awareness about climate change, more and more companies are now pledging to become Carbon Neutral. A great example is Microsoft's initiative to become carbon neutral and eventually carbon negative. These initiatives often involve several steps, including:
- Audit of greenhouse gas (GHG) emissions following the established Greenhouse Gas Protocol
- A plan for reducing the company's own emissions over time
- Purchasing carbon offsets to offset current emissions to achieve carbon neutrality. The offsets are should be certified by standards bodies such as the Gold Standard or Verified Carbon Standard.
While these initiatives represent a significant step forward on climate change, there are many challenges for companies which embark on such paths. Most of these challenges center around the issues of data and trust. Fortunately, distributed ledger technology or blockchain, especially an open source platform like Hyperledger, are naturally designed to solve the problems of data and trust.
The Data Challenge
A company looking to become Carbon Neutral must first perform an audit to determine its emissions. The Greenhouse Gas Protocol specifies Scope 1, 2, and 3 emissions from direct energy use (fuel burned on site), indirect energy use (energy purchased from utilities), and all other significant activities of the business, including raw materials purchased, transportation of goods, travel and commuting of employees, and leased assets such as office space.
Such an audit would require getting data from every part of the business, from purchasing to manufacturing to facilities management to human resources. This often involves manually gathering data and entering them into spreadsheets. In reality, much of this data may either be difficult to get or simply not available. Sometimes data is simply not available, and generic model values have to be used. At other times, the high cost or complexity of obtaining the data would require a judgement call about whether the activity is "significant" to the company's overall emissions or not.
The Questions of Trust
Can we trust the data that the company has provided?
Can we trust judgement calls, made by either the company or a certifying entity, about which activities are relevant and which activities do not require data and auditing?
How do we know if the company is in fact working on its emissions reduction plan?
Can consumers and investors trust that the certifying entity is objective?
On the flipside, how much data can the company share before it's giving away proprietary competitive information?
Trust in the Blockchain
A permissioned blockchain such as Hyperledger Fabric is designed to address issues like this:
- A private channel could be set up for a company, its trusted data sources, and certifying entities.
- The data sources could include utilities, suppliers, shippers, and other sources that could supply data automatically about a company's activities. When the data is pulled from their data sources, they would be digitally signed to certify their sources. A hash of the data could also be stored for later verifying that the data has not been altered.
- One more certifying entities could have access to the data and use smart contracts to calculate the company's emissions based on the data on the private channel.
- The result could then be signed and published to a more public place.
If there are questions of the audit process, then additional parties' smart contracts could be added to the channel so that they too could audit the emissions, while limiting who has access to a company's proprietary operating data. For example, if an environmentalist group has questions about a company's reported emissions, it could develop its own smart contract for auditing emissions. It could then ask that they be deployed, possibly by a neutral third party service provider, to the company's private channel. The smart contract could audit the data and report its results without sharing the company's data with the environmentalist group.
Why Open Source
There are a lot of different environmental certifications today, and the general public often doesn't know which one they could trust. Some consumers feel that any business which makes a pro-environment claim is "greenwashing," while many businesses feel that no matter what they do, it's not good enough for the radicals out there.
Part of the problem is that the different certifications are either opaque, proprietary, or at least highly complex. By putting the certifications down in code and making them open source, we can address this problem. Anybody can study a certification and objectively analyze its merits. Furthermore, if the code for the certifications are open source, then anybody could take an existing certification and make their own version. So if you feel that a business is using a certification that is too lax, you can make your own certification, write it as smart code, and share it with the world.
By creating an open source system to audit emissions, we would not only create a system that would help reduce the cost of carbon neutral certifications, but also make it possible for the certifications and standards to become open and transparent, so that investors, consumers, and the general public could finally trust in the climate actions that businesse are taking.
How to Get Started
While carbon audits and certifications are complex, a lot of data could be obtained automatically now. For example, utility bills, corporate travel, server usage, and shipping data could all be obtained by API calls. This means that if you work for a professional services such as software or IT consulting, an automated system using the blockchain could audit your company's emissions and certify your company as carbon neutral.