Blockchain’s potential role in sustainable development

Adam Fishman Lynn Wagner explains on the International Institute for Environment and Development SDG Knowledge Hub website about blockchain’s potential for contributing to SDG implementation. 

This week Energycities also announced a new report on blockchain and the energy transition. It is available here.

 

Policy Brief: SDG Knowledge Weekly: Blockchain in Practice

This week’s brief explores distributed ledger technology (DLT), or blockchain, and its potential for contributing to SDG implementation. As touched upon in February through the lens of financial inclusion, the international community is rapidly exploring the technology’s applications to sustainable development challenges.

Distributed ledger technology stores information on a decentralized system, where sealed “blocks” of data are copied and distributed across a network of peers, thus forming a “chain.” Although blockchain has risen in profile in the past several months as the underlying technology to Bitcoin, a cryptocurrency that uses the platform to enable the transfer of funds on a peer-to-peer basis, this is just one of its potential applications to development.

A white paper from the Blockchain Commission for Sustainable Development explains the underpinnings of the technology and outlines how it can be used to achieve sustainable development outcomes. The paper titled, ‘The Future is Decentralized: Block chains, distributed ledgers, and the future of sustainable development,’ is the first volume in a series that aims to show how blockchain can be used to build multi-stakeholder, cross-sector partnerships as well as mitigate potential risk. The Commission looks at six areas of application—development aid effectiveness, digital identity, remittances, supply chain management, energy and property rights—and indicates the SDGs to which they apply using the Goals’ icons at the start of each section.

The report’s foreword acknowledges recent political controversies and perceived risks in the technology’s nascent stages, but notes that blockchain should not be seen as a threat to existing governance systems. Some countries have banned cryptocurrencies like Bitcoin, or expressed caution due to perceived risk of its being used for money laundering or financing of illicit activities. The report suggests means of mitigating some of the broad risks, calling for risk management rather than risk avoidance. A press release linked to the white paper describes how the UN Development Programme (UNDP), the UN Refugee Agency (UNHCR) and the World Economic Forum (WEF) are leveraging the platform.

Delving into additional thematic applications and specific solutions, BlockX Labs’s Laura Marissa Cullell links blockchain case examples to the SDGs in an article on Medium. The post summarizes recent initiatives on SDGs 2, 5, 13, and 16 (on zero hunger, gender equality, climate action and peace, justice and strong institutions, respectively). Programmes implemented by UN-led funds and programs such as the World Food Programme (WFP) yield immediate savings by reducing transaction costs and international bank transfer fees. The DLT-based programmes also enable more transparent finance delivery to specific sites, where, for example, the International Union for Conservation of Nature (IUCN) administers its Green List of Conservation Areas. However, the article also notes challenges for blockchain, reminding readers that it is not a silver bullet: there must be buy-in and support from policymakers, as legislation needs to provide “guidance on what can and can’t be accomplished with Blockchain.” Additionally, the lack of adequate infrastructure for high-speed internet access presents a hurdle in some contexts where blockchain applications could provide a solution to development challenges.

Applying blockchain to SDG-advancing projects does not necessarily mean working within (or even with) the UN system. The Plastic Bank, a for-profit social enterprise, seeks to address marine plastic waste in developing countries. The endeavor uses blockchain technology to track recyclable materials and the virtual currency tokens offered to collectors. A Sustainable Brands article featuring co-founder Shaun Frankson outlines his and co-founder David Katz’s business model, which can be scaled to contribute to SDGs 12 and 14 (responsible consumption and production, and life below water, respectively) on a global scale.

Virtual tokens and payments are not only becoming a viable option at the base of economic pyramid. Devex’s Sara Jerving sat down with a USAID consulting firm Konektid International, which is currently experimenting with using cryptocurrency both to receive payments from clients and to pay employees. In the article, Konektid CEO Mike Shanley notes that one reason for the switch is the avoidance of wire fees and the delays often associated with transfers, saying it’s “just a better payment system.”

GreenBiz Editorial Director Heather Clancy explains in a post from February 2018 how the technology can disrupt energy markets, including by advancing streamlined distributed grids. Linking blockchain to SDG 7 (affordable and clean energy), she writes that units of energy and smart metering appear to be a natural fit with the ledger system, which in turn can help generate verified renewable energy credits (RECs). Clancy also offers an example of how blockchain can increase transparency across products’ supply chains, which serves to accelerate progress on other Goals. She spotlights a Walmart-IBM collaboration kicked off in 2016 to demonstrate how better supply chain information can increase food safety (SDG target 2.1) and reduce food loss and waste (SDG target 12.3). The information gathered on the blockchain enables more strategic removals of tainted or questionable products, avoiding wasteful mass recalls.

In addition to these writings and projects, a number of recent events also examined blockchain’s applications for sustainable development. The Blockchain for Sustainable Solutions Conference took place at Yale University in New Haven, Connecticut, US, on 2 March 2018. The agenda covered a range of sustainability and development issues that directly map to the SDGs, including climate change (SDG 13), deforestation (SDG 15), energy (SDG 7), water (SDG 6), food (SDG 2), transparency (SDG 16) and finance (SDG 17). A recording of the conference livestream is available on YouTube.

At the Global Festival of Action on Sustainable Development held from 21-23 March, in Bonn, Germany, Tauni Lanier posited that cryptocurrencies and their current popularity could be used to fund SDG projects, particularly in cities. She cited the inherent value of the environment and the transparency gains noted above as selling points for such a currency. An article on Development & Cooperation by Drake Jamali shares remarks from Lanier on new sustainable development financing methods such as diaspora bonds and social impact bonds, in addition to her comments on cryptocurrencies.

Discussions of blockchain’s potential for solving problems facing the international community have appeared in several other news items on the SDG Knowledge Hub in recent months. For further reading, see:

  • In January 2018, the UNFCCC Secretariat created the Climate Chain Coalition, which uses DLT to strengthen monitoring, reporting and verification (MRV) of climate actions, as covered by Leila Mead;
  • In March, a competition was held by the UN Office for Project Services (UNOPS) and the UN Department of Management’s Office of Information and Communications Technology (UN-OICT) to use blockchain to combat child trafficking in Moldova, as covered by Catherine Benson Wahlén; and
  • Also in March, UN Secretary-General Antonio Guterres highlighted the use of blockchain in nuclear safeguards or machine learning in multilateral disarmament verification, as examples of ways for new technologies to support disarmament and non-proliferation, at a roundtable event in New York, also covered by Leila Mead.

Looking ahead, a workshop on ‘Blockchain for Sustainable and Inclusive Finance’ will take place on 25 April, in Zurich, Switzerland, convened by the Responsible Finance and Investment Foundation (RFI), the Swiss-Arab Network (SAN), the UN Environment Programme (UNEP), the Bank of the Argentine Nation and European Partners for the Environment.

 

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