Sitting down in front of some of the leading projects in the ReFi space was interesting this week. The wider consequences of our actions in relation to the environment are now being felt across industries as we prepare for vast changes in how goods and services are monitored for their carbon footprint.
I listened in to a group of panelists, including Plastiks CEO, Impact Investment firm Trrue, Kumo Earth and Arivu Labs as they discussed the upcoming regulations and the impact of these regulations on the wider economy. The conversation was both fascinating and frankly a little terrifying. With the sheer number of regulations coming on stream in 2024 it is difficult to imagine how the supply chains that we all so heavily rely on are going to cope.
On January 1, 2024 there will be a significant shift in sustainability practices and reporting across the EU. The directive will be broad and start with large organisations in 2024, extending to smaller enterprises by 2028.
There is recognition across all member states that greenwashing must be tackled and this will certainly play a role in how companies illustrate their committment to sustainable practices and manufacturing. The directive demands active engagement from companies to safeguard human rights not just within their operations but throughout their supply chains, with non-compliance attracting monetary penalties and potential civil suits. Its reach surpasses existing national regulations, necessitating companies to establish due diligence procedures, report on 10 key ESG topics, and create public grievance procedures.
Enforcement, varying across EU member states, emphasizes substantial penalties as a deterrent, marking the end of greenwashing and underscoring the need for meticulous preparation.
Simultaneously, the CSRD will impact thousands of international companies. Financial data firm Refinitiv estimates that over 10,000 non-EU companies, with approximately one-third based in the U.S., will need to independently verify sustainability disclosures. The directive’s purview includes businesses outside the EU with listed securities on EU-regulated markets, an annual EU revenue exceeding €150 million, or an EU subsidiary meeting specific criteria.
With expected stringent standards, including 82 annual disclosure requirements covering diverse aspects like greenhouse-gas emissions, Paris Agreement-aligned plans, pollution control, and gender pay disparities, the CSRD stands out by demanding reporting on sustainability aspects, even if financially immaterial.
Enforcement at the country level brings penalties ranging from fines to a percentage of annual revenue for non-compliant listed companies.
As multinational businesses grapple with this regulatory overhaul, the evolving landscape underscores the pressing need for standardized climate reporting standards across jurisdictions.
Blockchain Technology may provide a pivotal role
Amidst these changes, blockchain technology emerges as a potential solution for tracking sustainability. The transparent and decentralized nature of blockchain can enhance the accuracy and integrity of sustainability data throughout supply chains, ensuring compliance with the CSRD’s rigorous reporting requirements.
A blockchain’s ability to create an immutable and traceable record of transactions aligns with the need for robust reporting mechanisms, offering a promising avenue for companies navigating the complex terrain of sustainable business practices.
Blockchain projects such as Plastiks, Regen Network and Energy Web are staying ahead of the curve by providing unique solutions that allow corporates and individuals to demonstrate their true green commitments.
Fashion Brand New Look Embraces Blockchain
As an example of tackling the traceability of a brands carbon footprint, UK fashion retailer New Look is embracing blockchain through a partnership with TrusTrace. This collaboration aligns with New Look’s commitment to responsible sourcing in response to the environmental impact of the fashion industry.
The fast fashion trend over the last 15-20 years has led to increased environmental damage, with the garment industry contributing up to 20% of industrial water pollution. In a bid to combat this, New Look aims to reduce its carbon emissions by 46% by 2031 and achieve Net Zero by 2040. The move toward responsible sourcing is a growing trend among brands, driven by the industry’s significant contributions to water pollution and greenhouse gas emissions.
This development underscores the increasing role of blockchain in providing a robust solution for companies navigating reporting requirements, such as those outlined in the EU’s Corporate Sustainability Reporting Directive. Blockchain’s ability to create an immutable and traceable record of transactions aligns with the need for robust reporting mechanisms, offering a promising avenue for companies navigating the complex environment of sustainable practices.
