Blockchain for supply chain management is one of the most practical business applications for large, multi-party sectors seeking trust and transparency across daily operations. As such, the mining and metals sector has now started to leverage blockchain technology to effectively track carbon emissions across complex, global supply chains. 

This month, the World Economic Forum launched a proof-of-concept to trace carbon emissions across the supply chains of seven mining and metals firms. Known as the Mining and Metals Blockchain Initiative, or MMBI, this is a collaboration between the WEF and industry companies including Anglo American, Antofagasta Minerals, Eurasian Resources Group, Glencore, Klöckner & Co., Minsur, and Tata Steel.

Jörgen Sandström, head of the WEF’s Mining and Metals Industry, told Cointelegraph that the distributed nature of blockchain technology makes it the perfect solution for companies within the sector looking to trace carbon emissions:

“Forward-thinking organizations in the mining and metals space are starting to understand the disruptive potential of blockchain to solve pain points, while also recognizing that the industry-wide collaboration around blockchain is necessary.”

According to Sandström, many blockchain projects intended to support responsible sourcing have been bilateral, resulting in a fractured system. However, this new initiative from the WEF is driven entirely by the mining and metals industry and aims to demonstrate blockchain’s full potential to track carbon emissions across the entire value chain.

While vast, the current proof-of-concept is focused on tracing carbon emissions in the copper value chain, Sandström shared. He also explained that a private blockchain network powered by Dutch blockchain development company Kryha is being leveraged to track greenhouse gas emissions from the mine to the smelter and all the way to the original equipment manufacturer. Sandström mentioned that the platform’s vision is to create a carbon emissions blueprint for all essential metals, demonstrating mine-to-market-and-back via recycling.

To put things in perspective, according to a recent report from McKinsey & Company, mining is currently responsible for 4% to 7% of greenhouse gas emissions globally. The document states that Scope 1 and Scope 2 CO2 emissions from the sector (those incurred through mining operations and power consumption) amount to 1%, while fugitive-methane emissions from coal mining are estimated at 3% to 6%. Additionally, 28% of global emissions is considered Scope 3, or indirect emissions, including the combustion of coal.

Unfortunately, the mining industry has been slow to meet emission-reduction goals. The document notes that current targets published by mining companies range from 0% to 30% by 2030 — well below the goals laid out in the Paris Agreement. Moreover, the COVID-19 crisis has exacerbated the sector’s unwillingness to change. A blog post from Big Four firm Ernest & Young shows that decarbonization and a green agenda will be one of the biggest business opportunities for mining and metals companies in 2021, as these have become prominent issues in the wake of the pandemic. Sandström added:

“The industry needs to respond to the increasing demands of minerals and materials while responding to increasing demands by consumers, shareholders and regulators for a higher degree of sustainability and traceability of the products.”

Why blockchain?

While it’s clear that the mining and metals industry needs to reduce carbon emissions to meet sustainability standards and other goals, blockchain is arguably a solution that can deliver just that in comparison to other technologies.

This concept was outlined in detail in an NS Energy op-ed written by Joan Collell, a business strategy leader and the chief commercial officer at FlexiDAO, an energy technology software provider. He explained that Scope 1, 2 and 3 emission supply chains must all be measured accurately, requiring a high level of integration and coordination between multiple supply chain networks. He added:

“Different entities have to share the necessary data for the sustainability certification of products and to guarantee their traceability. This is an essential step, since everything that can be quantified is no longer a risk, but it becomes a management problem.”

According to Collel, data sharing has two main purposes: to provide transparency and traceability. Meanwhile, the main feature of a blockchain network is to provide transparency and traceability across multiple participants. On this, Collel noted: “The distributed ledger of blockchain can register in real time the consumption data of different entities across different locations and calculate the carbon intensity of that consumption.”

Collel also noted that a digital certificate outlining the amount of energy transferred can then be produced, showing exactly where and when emissions were produced. Ultimately, blockchain can provide trust, traceability and auditability across mining and metals supply chains, thus helping reduce carbon emissions.

Data challenges may hamper productivity

While blockchain may appear as the ideal solution for tracing carbon emissions across mining and metals supply chains, data challenges must be taken into consideration.

Sal Ternullo, co-lead for U.S. Cryptoasset Services at KPMG, told Cointelegraph that capturing data cryptographically across the entire value chain will indeed transform the ability to accurately measure the carbon intensity of different metals. “It’s all about the accuracy of source, the resulting data and the intrinsic value that can be verified end to end,” he said. However, Ternullo pointed out that data capture and validation are the hardest parts of this equation:

“Where, when, how (source-cadence-process) are issues that organizations are still grappling with. There are a number of blockchain protocols and solutions that can be configured to meet this use case but the challenge of data capture and validation is often not considered to the extent that it should be.”

According to Ternullo, the sector’s lack of clear standards on how emissions should be tracked further compounds these challenges. He mentioned that while some organizations have doubled down on the Sustainability Accounting Standards Board’s capture and reporting standard, there are several other standards that must be evaluated before an organization can proceed with automation, technology and analytical components that would make these processes transparent to both shareholders and consumers.

To his point, Sandström mentioned that the current proof-of-concept focused on tracing carbon emissions in the copper value chain demonstrates that participants can collaborate and test practical solutions to sustainability issues that cannot be resolved by individual companies. At the same time, Sandström stated that the WEF is sensitive to how data is treated and shared: “Having an industry approach enables us to focus on practical and finding viable ways to deliver on our vision.”

An industry approach is also helpful, with Ternullo explaining that an organization’s operating models for culture and technology must be aligned to ensure success. This is the case with all enterprise blockchain projects that require data sharing and new ways of collaboration, which may very well be easier to overcome when performed from an industry perspective.

As one of the first countries to industrialize in the 1760s, Britain’s manufacturing revolution instigated one of the greatest practical and ubiquitous changes in human history. But even more extraordinary than the cultural shift itself, is the fact that Britain’s industrialization remained way ahead of potential competition for decades. Only in the early 1900s did historians come to grips with the issues of causation. Max Weber’s pithy answer, “the Protestant work ethic,” pointed to Puritan seriousness, diligence, fiscal prudence and hard work. Others point to the establishment of the Bank of England in 1694 as a foundation for financial stability.

In contrast, continental Europe lurched from one national debt crisis to another, then threw itself headlong into the Napoleonic wars. Unsurprisingly, it was not until after 1815 that industrialization took place on the European mainland, where it was spearheaded by the new country of Belgium.

250 years later, another revolution has begun with the launch of Bitcoin (BTC), but this one is more commercial in nature than industrial. Though the full impact has yet to play out, the parallels between these two historical events are already striking.

Bitcoin may not match the obviousness of industrialization, but the underlying pragmatics touch on the very foundations of the non-barter economy. Like the establishment of the Bank of England, the creation of the cryptocurrency infrastructure has been prompted by ongoing and worsening threats to financial stability: systemic fault-lines created by macroeconomic challenges stemming from the 2008 financial crisis.

If you can’t beat ‘em, join ‘em…right?

Where a central bank once anchored financial enlightenment, it now plays the role of antagonist. For those who could “connect the dots” in 2008, there was the realization that central banks no longer existed as guardians and protectors of national currencies, but rather as tools for creating politicized market distortions, abandoning their duty to preserve wealth in favor of creating the conditions for limitless, cheap government debt. While many of the underlying intentions were benign, the process inherently worked to punish savers and reward reckless debt.

Meanwhile, it has steadily taken time for the potential of digital assets to reach their potential and approach something like critical mass, though thankfully full acceptance shouldn’t take as long as Britain’s industrial revolution. Over the past 12 years, cryptocurrencies have moved from unknown to novel to significant, growing interest. As a result, profound changes are underway, affecting the mechanics by which investors, the investment industry, wealth managers and even the commercial banking sector are engaging with cryptocurrencies.

This interest has accelerated as we enter into a period of deep economic uncertainty and growing awareness that structural soundness is shifting away from traditional investment options. Not only that, this growing financial innovation and public interest has largely occurred outside of the central banks’ control, if not outright antagonism led by the banks’ regulatory arms in government.

Now, many central banks are trying to join a game they’ve tried almost every way of beating, with digital currencies that adopt the glowing sheen of crypto innovation, but which also eschew the underlying innovations and philosophy that made those innovations so popular to begin with.

Follow or get out of the way

The popularity of cryptocurrency has largely been due to its protean fungibility — it has been whatever the independent financial community has needed it to be, from digital currency to speculative financial instruments to smart contracts that can power smart financial technology.

However hard central banks might try to co-opt the hype of cryptocurrency, cryptocurrency succeeding will mark the fundamental end of critical aspects of the central banking monopoly by offering a more competitive vehicle for facilitating commercial transactions and providing a more stable medium to store monetized assets. Cryptocurrencies actually offer real returns on “cash” deposits, something that the fiat banking system has long since abandoned. Most of all, cryptocurrencies reveal the fictitious nature of fiat currencies as a principle.

Cryptocurrencies as an ecosystem will increasingly constrain, redirect and set the parameters for government macroeconomic policies. Certainly, sound alternatives to fiat currencies will drive the latter to the periphery of commercial life, concomitantly reducing the number of tools the nation-state has at its disposal to regulate or respond to changing economic conditions. Above all, this means that government financial engagement can no longer be a rule unto itself. It will have to engage by the same principles as everyone else. A level playing field here has dramatic implications.

Against the backdrop of the essential limits of fiat currencies, current geo- and macroeconomic policies and a new emerging world order, cryptocurrencies offer vast potential as an efficiency facilitating frictionless commerce and investment, a medium of stability against uncertainty and inflation, increased security in value transfer and wealth management, optimum autonomy in an increasingly intrusive climate, and “cash” asset preservation/growth in a world of negative interest rates.

The edifice that supports the concept of a “global reserve currency” is also weakening. This will reduce political influence over global finance, as well as nations’ abilities to run a long-term balance of payments deficits, current account deficits and borrow at little or no interest. Indeed, given current trends, changes in trading mechanics may speedily evolve to the point that such “reserve currencies” no longer have a function at all. And cryptocurrency success will hasten the end of the U.S. dollar monopoly in global commerce.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.