How blockchain will ease Integrated Reporting to drive Societal Impact
“Money talks, everything else walks.”
Short-term financial performance was commonly regarded as the most significant driver and indicator of business value. However, companies are increasingly exploring non-financial performance metrics in order to gain a more holistic insight of the (both positive and negative) impact they have on their context(eg. jobs created, wealth generated, waste recycled but also waste generation and water consumption).
The ability to define, measure and report on multiple types of impact that a company has on its commercial, social and environmental contexts is often referred to as Integrated Reporting and enables businesses to elevate their purpose beyond profit in several ways:
- Improved value chain oversight and potentially improved relations by incorporating the perspectives of various stakeholders in calculations of business value & quantification of impact.
- Enabling companies to outperform their peers in terms of profitability and market capitalization by maintaining and providing a long-term and holistic view on the value created & impact made.
- Empowering companies and ecosystems to navigate and measure the progress towards their sustainability goals (e.g. with UN SDG’s as dots on the horizon), aligning business value creation with societal value generation.
- Helping investors and shareholders exercise their investment thesis by enabling assessments of risks, sustainability performance, overall industry dynamics and long-term potential of value creation.
Overall, integrated reporting enables companies to fully capture the value of business value and help them leverage holistic insights for optimizing their impact on their commercial, social and environmental context.
However, unlocking the full potential of this integrated approach requires several challenges in the field to be addressed.
CURRENT CHALLENGES IN INTEGRATED REPORTING
Despite growing corporate consensus regarding the performance-enhancing and impact-driving benefits of integrated reporting, most companies are still struggling with quantifying, measuring and understanding non-financial performance.
How can companies incentivize stakeholders across the value chain to share confidential data?
Regardless of which methodology companies are using, a reliable measurement of societal impact requires companies and all stakeholders in their value chain to share data of their practices.
However, company data related to business practices and externalities emerging from these practices are very often deemed confidential. In this light, companies need to find a way to break down data silos while preserving data confidentiality.
How can companies address the lack of transparency in societal impact measurement methods and metrics?
Most societal impact measurement methods currently show a lack
of transparency regarding e.g. data collection methods, impact categories, metrics used in societal impact calculations and metrics exclusion.
Ultimately, transparency aids in limiting bias and preventing fraudulent reporting while helping companies to optimally measure, create and capture different types of value for different stakeholders in their value chain.
How can companies apply an open and inclusive approach for societal impact measurement?
The intangibility of societal impact impedes the emergence of a standardized methodology for measuring non-financial performance. Different metrics are currently available for trying to explain and calculate the same impact categories. These are selected based on human preferences and bounded by available knowledge. This necessitates an open and inclusive approach for method improvements, metric development and defining societal impact.
HOW BLOCKCHAIN CAN HELP
In its essence, blockchain technology enables multiple parties to collaborate over shared data, shared processes and shared business logic without the need for a trusted intermediary. One very interesting use-case of the technology is enabling confidentiality-preserving transparency on an industrial scale.
As an example, individual businesses in a consortium could provide confidential data points to a blockchain solution, which would then leverage the confidential data for calculations and analytics that would benefit all the parties involved, without compromising on the confidentiality of input data.
Besides the example mentioned above, let’s consider some practices that blockchain could enable for enterprise struggling with Integrated Reporting:
Adaptable metrics lead to inclusive development
Any external party is able to suggest metric improvements, provide feedback on metric validity and how they are used in impact calculations. This leads to a more democratic approach to determining the weight of certain impacts based on society’s dynamic values.
Incentivizing value chain stakeholders to share data
By facilitating the conversion of fungible and non-fungible real-world assets into unique digital tokens, blockchain allows for secure value transfers among value chain stakeholders. Tokenization allows for stakeholders to be incentivized for increasing their sustainability practices, sharing data related to their performance and auditing other participants in such a network.
Transparent method execution
If done right, blockchain applications are hosted in a robust and decentralized manner. This allows for transparent, sound and trustworthy execution of societal impact calculations based on trusted calculation models. This ensures the validity and societal relevance of the calculation results.
Confidentiality-preserving processing of data
Secure computations allow confidential processing of datasets without revealing the underlying sensitive information, enabling companies to generate a much more holistic insight based on both shared and siloed datasets of multiple parties across the value chain.
Through use-cases like confidentiality-preserving transparency, blockchain emerges as a powerful infrastructure for companies to address the challenges of social impact measurement and integrated reporting.
What Kryha can do for you // From concepts to digital ecosystems
Kryha offers end-to-end services that guide you through the adoption cycle of blockchain technology. We help you develop initial concepts to powerful digital ecosystems.
Through working with our clients such as BASF, Shell, KLM, FedEx, and Bosch, we have gained extensive experience in:
- Concept development and service design.
- Business model design.
- Ecosystem development and coalition building.
- Iterative software development.
Some examples of Kryha’s experience in the domain of sustainability and supply chain management:
- We are working on an impact measurement platform that preserves data confidentiality for all stakeholders in a value chain and includes an incentivization mechanism.
- We are co-developing a decentralized B2B platform that seeks to bridge siloed ERP systems.
- We are developing a pilot solution focussed on waste recycling certification.
Kryha helps those that are responsible for changing their business. Are you changing yours? Let’s talk!
Get in touch via alexander@kryha.io
