Two key use-cases for blockchain – supply chain optimisation and new financing models – should be of interest to finance professionals, as explained in a study by PwC for the World Economic Forum, which was released at the Global Climate Action Summit held in San Francisco last week. The study identifies more than 65 ways blockchain can be applied to the world’s most-pressing environmental challenges - and some of the applications solve financial as well as environmental problems.
As the PwC report says, blockchain has potential “not just for finance or industry, but for people and the planet”. The report considers several blockchain use-cases but of particular interest to corporate treasurers and CFOs are two examples that create financial value and efficiency through blockchain platforms while also achieving a positive environmental impact:
- supply-chain transparency and management; and
- new financing models for environmental outcomes.
Supply chain optimisation
On transparent supply chains the report notes that recording transactional supply chain data on a blockchain platform, thereby establishing a trustworthy and public record of provenance offers the potential for full traceability of products from source to store. It says that providing such transparency “creates an opportunity to optimise supply-and-demand management, build resilience and ultimately enable more sustainable production, logistics and consumer choice”.
And it notes that, for the first time, blockchain-based solutions are providing full transparency and traceability within the supply chain. This is of great importance to corporates, who are facing increasing regulatory and investor pressure to measure risks in their operations and supply chain, such as corruption, human rights violations, modern slavery, gender-based violence, water security and environmental degradation.
The report also notes some of the current barriers for blockchain applications for supply-chain traceability and management, including:
- the reliability of source data – while a product can be tracked accurately as it's transported across the globe, data about its origin has to be trustworthy;
- the interoperability of blockchain solutions with existing systems for supply-chain management;
- the lack of supply-chain standards in place for blockchain solutions or providers;
- the transactional capacity of blockchains versus the capacity that big data from supply chains will require; and
- the regulatory implications regarding data security and privacy among participants.
New financing models
On the potential for blockchain-enabled finance platforms to provide new sources of sustainable finance, the report states that this could “revolutionise access to capital and unlock potential for new investors in projects that address environmental challenges – from retail-level investment in green infrastructure projects through to enabling blended finance or charitable donations for developing countries”. According to the report, there is a funding gap of $5 to $7 trillion per year to meet the UN's Sustainable Development Goals (SDGs), with an investment gap in developing countries of about $2.5 trillion.
It adds that, more broadly, a blockchain-based financing platform could also potentially facilitate a system shift from shareholder to stakeholder value, and to “expand traditional financial capital accounting to also capture social and environmental capital”. Such a platform could help to unlock the huge amounts of cash needed to finance the shift to a low-carbon and environmentally sustainable economy.
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