Why Blockchain is Perfect for Documenting Open, Traceable Proof of Enterprise Sustainability Efforts
While at the World Economic Forum in Davos, Switzerland, Blockchain Journal editor-in-chief David Berlind interviewed HBAR Foundation Sustainable Impact Fund Director Hania Othman to find out why public blockchain is so well-suited to traceably and openly documenting, at a very granular level, an enterprise's track record when it comes to all of its environmentally related activities. These include all the activities that contribute to an enterprise's carbon footprint as well as everything an enterprise does to offset that carbon footprint. Why is it in the best interests of an organization to make all of its environmentally-related behaviors a matter of public record? According to Othman, it's not only the best way to maintain compliance with currently emerging global sustainability regulations, but it is also key to winning over a new and growing breed of environmentally sensitive investors (aka "access to capital") and customers (full transcript appears below).
By David BerlindPublished:January 17, 2023
How do ESG recordingkeeping efforts benefit from blockchain?
David Berlind: I'm David Berlind with Blockchain Journal. I'm here in Davos, Switzerland for World Economic Forum 2023.
The main promenade that goes to the Congress Center is right outside our studio, and it's very busy right now. It's the evening hours on the night before one of the busiest days of the economic forum. Lots of people moving up and down, going to the after hours events. With me right now, though, is Hania Othman.
Hania, what is it you do?
Hania Othman: Hi David. First of all, thanks for having me here.
Othman: I am the director for Sustainable Impact for the HBAR Foundation, mostly overseeing Europe and Africa within the HBAR Foundation. So, what we do within the HBAR Foundation, we invest and provide grants, actually, build the ecosystem for sustainability and in order to make sure that sustainability markets have an infrastructure to build on and help that scale.
Berlind: Okay. So when you say that a sustainability market, you're saying it needs an infrastructure, what does that infrastructure look like? What kind of infrastructure does a sustainability market need?
Othman: So the sustainability market needs an infrastructure that needs to be built from A to Z. So anything you can think about, anything from sustainable debt, starting from even before we have an asset class. So sustainable debt moving forward into how do we measure sustainability.
And then we go into the digital measurement reporting verification process. And that's what we call the Guardian, the guardrails of sustainability. These guardrails are the policy workflow engine for any type of policy that is revolving around sustainability, but also, for example, carbon credit, a rec credit, which are the energy credits that are involved in that.
And eventually we move into data discoverability because we need to understand what makes up these credits and what provides value in these credits in order for us to trade them, create these markets.
Berlind: Before we go further into the whole ecosystem of carbon credits and so on, we're talking about sustainability. You're talking about an infrastructure for sustainability, but the bigger picture, who would this be important to? What kind of organization would be interested in having access to an infrastructure for sustainability and why?
Othman: Yeah. So I think that's a very important question to ask. And I think that the playing field at this moment, there's a lot of movement happening and there's a lot of growth in the sustainability field.
So from my perspective, any type of organization, any kind of corporate needs to have thought about, how are we positioning ourselves within the sustainability ecosystem and how can we ensure that we're leading or at least providing some value within sustainability.
Because right now, 2023, all we talk about, the next form of digitization is going to be sustainability. We're looking at transformation, creating more longevity in the corporate business models.
Berlind: So are we talking about big Fortune 500 companies that this would... Yeah.
Othman: Yes, any organization that has a supply chain or a value chain, any organization that needs to report. I mean, when we look at the European Union, it came out the legislation regarding the SFDR, which is the Sustainable Finance Reporting Directive and the corporate responsibility reporting directive, which makes any kind of organization that has more than 500 employees liable in terms of reporting their impact on the environment and have their social impact, so ESG.
Berlind: So for these big enterprises and even beyond a Fortune 500, at the very bare minimum, if they don't have a compliance issue that they're facing right now because they're operating in Europe, they probably will no matter where they are at some point, because usually some of these regulations that you see being pioneered in Europe, end up happening all over the world.
So at some point, all organizations are going to encounter some sort of legal framework that they're going to have to comply with from a sustainability perspective. So compliance is an important driver of corporate interest and sustainability.
What else? When I was booking my flight to come here on Swiss Air, it came up and it told me how much carbon I was going to be personally responsible for burning and if I wanted to purchase offsets to compensate for that dumping of carbon into the atmosphere.
And I thought, from a customer perspective, that's really interesting. I can literally pay to offset my own personal carbon footprint for coming to Switzerland. Is this a customer issue as well for many of these companies?
Othman: So there are different issues and movements happening. And from one side, the customers are definitely pushing sustainability forward.
At the end of the day, we want to make sure that we have a planet for our children in order to live on. So everybody cares about the environment, everybody cares about having a socially responsible system. And right now we're seeing the impacts of climate change. So the customers are definitely pushing to keep these corporates responsible.
Berlind: Are they moving their purchasing dollars to enterprises that are showing more corporate responsibility when it comes to...
Othman: Yes, that is very clear, especially with the new generations coming up, even with the new generation of investors. And that's why also there's a cost of capital risk for these organizations who are not looking at sustainability in the right way.
Because we're looking at sustainability not from a way that we're saying that we are sustainable. We are looking at sustainability from a way we want to prove that we are sustainable. So we want to have fully traceable systems that are open for our customers, for them to understand, hey, what am I actually buying here? Where does this carbon credit come from? Is this actually a credit that I can support and does this have any co-benefits or any other kind of values?
And I think that's exactly what we invest in with the HBAR foundation, Hedera in general, making sure that this framework and this field is traceable, fully auditable for any kind of stakeholder who is interested in sustainability.
Berlind: I'm going to connect all the dots here and you tell me if I've got it right or wrong. You've got organizations that are sensitive to at least three issues. One is customers. Customers are moving their dollars to businesses that are demonstrating sustainability. Access to capital is really important for any business and that capital comes from investors. And investors are now looking and saying, look, I'm not going to invest my money in a company that is not itself investing in sustainability in some way. And that could be a risk to me as an investor. And the third item is just the compliance issue in terms of the growing regulatory framework that just keeps spreading when it comes to organizational reporting on this.
And now you're saying that there is an infrastructure and a framework that these companies can connect with in order to essentially provide the information that's needed to show that they're compliant, to show the customers that they are doing the right thing from sustainability point of view, and to prove to investors and that will support their objectives in terms of all of those three different constituencies.
Othman: Exactly. So I think that's exactly what we're doing. And the infrastructure we're building, we're investing into an entire infrastructure from start to finish. Because we don't want to have solutions that are separate islands that are not connected with each other. So we want to make sure that we're investing into the right solutions that provide value for these corporates and these are from the ground up. And then we also have partners who are the corporates, Hedera governing council, who have these use cases that they can enable on this and help us to scale that.
Berlind: Okay. So the infrastructure's in place, and you're here at the World Economic Forum looking for these partners to tap into this infrastructure and basically cause the infrastructure itself to flourish.
Othman: Exactly. So what we're looking at is finding partners in any shape, form or way, looking at increasing auditability, increasing liquidity, increasing accountability also within the sustainability markets. We have the right infrastructure and we are building more investing into this infrastructure. We're looking at use cases and we're looking how we can scale this and making sure we have the guardrails for nature for the environment set in the right place.
Berlind: So you've been here for what, a couple days now?
Berlind: And how's it going? Have you found some new potential partners to help to drive your objectives here?
Othman: So we have some amazing partners. Today, we had this amazing ReFi forum at the Hedera house, and we have great potentials for scaling sustainability efforts in this parts.
Berlind: And so for those organizations that are interested in this, either from using the infrastructure and benefiting in the ways we just described, or partners that might be interested in helping the infrastructure to kind of grow and scale, how do they find out more about this?
Othman: So they can connect with the HBAR foundation, hbarfoundation.com, or they can connect with me on LinkedIn, which is Hania Othman on LinkedIn or Wes Geisenberger, who's the VP of Sustainable Impact Fund. We have a great team with great experience who are ready to help them at any moments.
Berlind: Terrific. All right, well we'll make sure that on the video we put all that information up, so people know how to connect with you. Thank you very much, Hania.
Othman: Thank you so much, David.
Editorial Disclosure: This article mentions the Hedera public distributed ledger. At the time this article was published, Swirlds Labs, Inc. sponsored the operation of Blockchain Journal and is also part of a multi-party coalition that contributes to the success of the Hedera ecosystem. For more information about Blockchain Journal's policies regarding editorial independence and neutrality, please read our welcome to Blockchain Journal.