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How Blockchain Can Bridge the Gap Between Digitalization and ESG Regulations

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Environmental, Social and Governance (ESG) regulations have continuously evolved over the decades. They are set in place in order to ensure that businesses flourish while safeguarding the environment, the people and the organization itself. ESG regulations both instill and enforce an adequate level of corporate responsibility in businesses.

The development and adoption of emerging technologies, such as artificial intelligence (AI), the metaverse, Internet Protocol version 6 (IPv6) and the Internet of Things (IoT), have most recently warranted the tightening of ESG regulations. Likewise, companies around the world are rapidly embarking on the process of digitalization in order to keep up with the burgeoning digital economy.

This has created a wave of concern for businesses worldwide as the tightening of ESG regulations coupled with their goal of digitalization may negatively impact their operations and profit. However, this should not be the case as the solution lies in another emerging technology—blockchain. 

The powerful capabilities of blockchain can not only be used in digitalization, but it can actually bridge the gap between this arduous process and being able to efficiently meet ESG regulations. Because blockchain allows for the immutable recording and storage of data, it is able to provide a tamper-proof history of transactions that is easily verifiable and auditable. 

This enables businesses, not only to keep track of and analyze their data for further improvement, but also so it can ensure that ESG regulations are met at all times. And a huge part of these regulations is concerned with energy consumption and the carbon footprint it leaves behind.

While many may argue that blockchain itself consumes a massive amount of electricity, when scalability is enabled and factored in, it then becomes more sustainable and energy-efficient as it is used. Transaction fees on a scalable blockchain also become lowered as it scales. So, scaling ensures the efficiency, sustainability, and cost-effectiveness of digital systems. This makes it the ideal technology to be used both for digitalization and to ensure that ESG goals are achieved. 

Because fees are reduced to the lowest possible price, both big and small businesses will be able to afford to build digital systems and platforms on a scalable blockchain, which will ultimately reduce energy consumption. A very good example of this is GreenCoding, a software development tool created by digital transformation firm GFT.

According to its website, GreenCoding is “scaled up to servers and consumer devices worldwide, every line of code has the potential to reduce energy consumption and emissions.” This enables the reduction of electricity consumption in three major ways. First is that energy is saved because the software is programmed in such a way that it will automatically shut down devices when idle for a certain period of time. 

Second, it avoids impulsive consumption by analyzing whether real-time processing or dynamic content is necessary at all times. And third is that it allows for a more efficient allocation of energy by determining where to focus the most time and energy. These three architectural principles of GreenCoding effectively increase a business’ energy efficiency.

This is but one way that blockchain can bridge the gap between digitalization and ESG regulations. The potential is endless, especially because a scalable blockchain can offer more powerful capabilities that can be utilized to address ESG issues across many different industries.





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