Web3 and Blockchain technology help solve global ESG issues
Environmental, Social, and Governance matters, often referred to as ‘ESG’ or sustainability, have become central issues for businesses today. Whether a business is small or large, national or international, a start-up or well-established, external and internal expectations of ESG influence executive and board decision-making in some shape or form. More than ever, societies and customers expect companies to be part of the solution to matters like climate change and also wider ESG issues such as diversity, inclusion, retail protection, and education.
The Crypto industry is no exception to this trend and is responding to it. Our role is two-fold. We can’t just tackle our own ESG challenges, like reducing carbon in our practices. We must also incentivize carbon reduction through the use of blockchain technology which is presenting a growing solution to many governments and other industries as they aim to hit sustainability targets. Moving forward, the world must adopt the view that blockchain technology and Web3 have the potential to deliver a wide range of innovative, positive, social, and environmental solutions to complement or provide alternatives to traditional solutions that are on offer today.
For example, Distributed Ledger Technology (DLT), which is the platform from which crypto tokens are built, is already being applied right now to solve environmental challenges. Traditional carbon offsets can be tokenized on blockchain, offering the potential to bring greater transparency and assurance to purchasers that carbon offsets are reaching the intended projects.
The UAE is one region that has recognized that expanding its blockchain ecosystem and advancing ESG goals can go hand in hand. Not only has the UAE developed an environment that is favorable for crypto firms that wish to expand in the region, but policy innovations and investment by the region in low-emissions technologies are impressive and demonstrate global leadership in efforts to reduce carbon. In March this year, Abu Dhabi Global Market partnered with Air Carbon Exchange to announce the world’s first “fully-regulated” carbon trading exchange. The exchange uses distributed ledger technology within a traditional trading construct to create tokenized carbon credits for spot trading.
Crypto.com welcomes innovative efforts like this and considers the UAE to be a critical partner and a critical region for our growth. We have sustained dialogue with policymakers in the region, including on sustainability, and we have clear shared interests and aims in managing carbon in a thoughtful and impactful way. Partnering with platforms like Investopia is another way we can help make a difference and play our role in pushing forward innovation in the ESG space.
Of course, as an industry, we can discuss the benefits of using blockchain technology to help solve ESG issues, but we must not ignore our own responsibilities when it comes to the same concerns – one of the biggest for our industry being carbon. Policymakers and regulators are consistently assessing what the right regulatory parameters are for crypto as a new asset class and this includes assessing energy use and possible ways to mitigate the level of carbon produced by the sector.
Crypto.com, for example, has made a public commitment to proactively manage its carbon footprint and we are speaking with policymakers globally, as well as with our customers and several other partners, about how best to address the global challenge of carbon reduction. This dialogue is fruitful and necessary, both to get clarity of the issues at hand, such as obtaining robust data on the actual carbon footprint of the sector, and helps us to understand best practices in carbon offsetting.
Through these conversations, it has become clear that leading, impactful practice in carbon offsetting is about actual carbon removal of residual carbon, a technology known as Direct Air Capture (DAC). This kind of removal is a relatively new option to offset carbon. It is more costly than traditional forms of carbon offsetting, given the technology required for DAC, and currently, there is only a relatively small supply of offsets available. But the market for services that offer DAC-related carbon offsetting is growing and will continue to develop with the right policy settings and political and financial backing.
We understand that there’s an appetite among policymakers for low emissions technology to support the sustainable transition to a low-carbon economy. But with the cost still relatively high, and the volume of supply of carbon capture low, this will require further public and private sector collaboration.
It is only through these collaborations described that we will develop the best innovation, ultimately bringing down costs and increasing supply of low emissions technology. Similarly, developing and sharing innovations in crypto and blockchain technology to help reach ESG goals will only come about through strategic government and industry partnerships, and while the UAE is certainly on the right road, – there’s still work to be done on this exciting prospect globally.