Why Blockchain is the Key to a More ESG-Compliant Supply Chain.

The Role Of ESG

People want businesses to behave & be good

Environmental:?

Carbon Emission & Pollutants

Energy Efficiency

Waste Management

Resource Utilization

Social: People & Issues Within The Supply Chain

Customer Service

Product Quality

Data Security

Diversity, Equity, Inclusion & Human Rights?

Governance: Organization Leadership Issues

Executive Compensation

Diversity In Leadership

Organizational Corruption & Bribery

Political & Legal Misconduct

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Target ?Audiences ?

• Customers & Consumers
• Government Bodies
• Supply Chain Partners
• Employees
• Investors

Why ?Now?

• Changes in culture & climate
• Local & Global Politics?????????
• Speed of communication via social media

Why ?Does ESG Matter?

• Consider the opportunities - Young People: these are the future customers, employees & investors for businesses.
• Young people have developed a significant interest in ESG making businesses with no ESG strategy have their future market shares at risk.
• Businesses with ESG strategies could experience savings from the fluctuation of energy, water & materials
• People & All this together are forcing businesses to? ? accept accountability for their actions
• The world is also demanding businesses to provide data as proof of their good behavior

ESG laws are already being implemented by Governing bodies Globally. Making businesses with the inability to meet legal standards and provide accurate ESG data might result in fines, penalties, or inability to do business in the region.

Challenges Facing ESG & Supply Chain

• Supply Chain Complexity: Tracking, Auditing, Persuading & Training Supply Chain Participants?
• Inconsistencies: No common language or set of rules that could be contradictory
• Profitability: Ensured, Contract New Business Partners, Implement New Tech, Train People, Gather, Analyze & Store Data

Negative Supply Chain Practices In Kenya & Africa In General

• ?Dangerous working conditions
• ?Terrible Wages
• ?Child Labor
• ?Pollution From Manufacturing & Transportation
• ?Natural Resource Waste
• ?Toxic Product Manufacturing or Byproducts
• ?Non Biodegradable Products?????????

How Stakeholders Can Clean Up Their ESG?

• Report their present ESG state
• Improve specific supply chain parts
• Motivate supply chain partners to fall inline
• Identifying new suppliers
• Linking analytics data to ESG goals as proof to customers, internal managers,? supply chain partners, Govt, Advocacy groups

Supply Chain Opportunities

• Minimize bad PR, government fines & lawsuits.
• Less scrutiny from tradition & social media
• Lower long-term costs (efficiency, energy costs, fewer fines, decrease in quality costs of production)
• Decrease exposure to supply chain risks (happier customers, fewer PR disasters, fewer supply chain disruptions, better & happier employees)
• Better supply chain data & analytics
• Being seen as an industry pioneer. (Increase & entice new & existing customers with loyalty, and government collaboration, and ensure implementation of an industry standard.

• How traceability programs mature While firms are investing to improve traceability, 58% have just begun the journey and only 15% are capturing value at scale

• 68% of executives view traceability as “ very or extremely important.” But many leadership teams have found implementation painfully complex.

Why Blockchain Technology Solves This Problem

Blockchain ensures the reliability and openness of data by being resistant to tampering. It functions as a decentralized database, consisting of interconnected blocks that require validation from all other blocks before any updates can occur. This mechanism guarantees the accuracy of the stored information.

It's important to note that blockchain addresses the authentication challenges associated with raw data. Acting as a light node, it enables the transfer of data from smart devices or infrastructure to the blockchain network while maintaining privacy and transparency. Additionally, a smart contract system is implemented to verify the consistency between the initial raw data and the final ESG (Environmental, Social, and Governance) report.

With the increasing prevalence of mandatory corporate and sustainability reporting, having reliable and verified documentation to ensure transparency is crucial. Blockchain can contribute to ESG compliance in two significant areas: data reporting and supply chain transparency.

Role of Large Multinational Corporations In Creating Swift & Lasting Regional Impacts In ESG

In a world of too many to too little ESG choices & competing ESG agendas - the biggest & most global companies set the standards. This also all ties back to the supply chain.

Example:

Global Manufacture in Kenya pledges the following:

• Reduced Emissions
• Sustainable Water Use
• Ethical Business Practices

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Supportive stakeholders (Government & Consumers) Demand? Standards Met

?Upstream & Downstream Supply Chain Partners Similar Standards

This massive manufacturer probably represents a high percentage of business for many of their supply chain partners, hence massive leverage. They can demand supply chain partners to reduce carbon emissions, utilize sustainable materials, implement new processes that conserve natural resources, and improve how they treat employees. etc

Huge Multinational Corporations? With Massive & Complex Supply Chains May Be The Problem Now But Also The Key To Change.

How?

• By Driving Innovation.
• Establishing Global Standards.
• Ensuring ESG isn’t a choice but a standard in every business in every industry.

Developing ESG Objectives

• Develop a list of stakeholders (people who care about your company performance) Investors, Employees, Business Partners, Customers, State & Local Govt.
• Create stakeholder specific objectives

• Compare Business Objectives To ESG Objectives & Look For Relationships.

ESG KPIs

Who gets to decide on KPI’s? Control or No Control

Steps To Setting KPIs

• Develop a list of metrics to use to track ESG Objectives
• Make KPIs meaningful & Actionable (easily understandable & points toward good decision)
• Ensure ESG KPIs are measurable, at a reasonable cost & cheater proof.

Well Rounded KPIs (Effectiveness (Carbon Emissions Per Day, Efficiency (Number of Cars Manufactured on this day), Adaptability (Carbon Emissions on cold days vs Warm days

Supply Chain Mapping

Initiate ESG strategy by knowing who is in the network? & how they are interconnected.

To measure the overall ESG impact of the supply chain, you look at the KPI’s

Example:

• Which partners need to provide carbon footprint data?
• Which partners will utilize fresh water in operations related to our company?
• What is the employee gender breakdown of each partner?
• What are the hourly wages of the employees?
• How much landfill waste is produced by each supply chain partner?

This supply chain map helps identify:

• Who will need to share data with us.
• What type of data we might need from them.
• Their location & which rules that may be important in their region.
• The map may also identify places to provide support & education to our partners

Life Cycle Analysis

It helps organizations measure ESG not just within the supply chain but beyond it.?

Five Stages: Sourcing > Operation Logistics > Consumer use > Product disposal

• Material Extraction
• Manufacturing
• Packaging & Transportation
• Product Use
• End of Life

Example:

Product X: Gas Powered Car

Carbon Emission Issues Throughout Lifecycle

Primary issues encountered during Product Use

Product Y: Battery Powered Electric Car

Problems during Material Extraction phase & End of Life phase.

Product Z: Hybrid Electric Vehicle

Has Issues during Material Extraction & Logistics

How Lifecycle Acts as A Guide

• Life Cycle analysis helps us see where we need to invest to make biggest impact
• It also helps determine where to consider new materials or energy sources
• Where to invest in research to develop new ESG technologies
• Identify opportunities to collaborate with suppliers, tech firms & researchers

Conclusion

In conclusion, blockchain technology holds great potential for promoting a more ESG-compliant supply chain. It offers data reliability and transparency, addressing authentication challenges and ensuring the accuracy of stored information.?

Blockchain can contribute to ESG compliance in areas such as data reporting and supply chain transparency. Large multinational corporations play a crucial role in driving swift and lasting regional impacts by setting standards and driving innovation.?

Developing ESG objectives, defining meaningful KPIs, and mapping the supply chain can further enhance ESG strategies.?

Additionally, life cycle analysis provides valuable insights into identifying areas for investment and collaboration, ultimately leading to a more sustainable and responsible supply chain.