The New KYC — Know Your Carbon

As the world moves towards target zero for carbon emissions in 2050 knowing your business’ carbon footprint will be mandated; and we’re developing solutions to help business’ tackle this problem.

The measurement and verification of carbon emissions across supply chains will impact multi-billion dollar industries. Many business owners and managers are left scratching their heads wondering where to start with this measurement problem. What part of the supply chain are they responsible for and how exactly do we quantify and report these measurements?

Knowing your business’ carbon footprint will become mandatory imminently. This is due to the following four main drivers:

1. Regulatory requirements with stiff government backing. In some countries carbon footprint data will be mandated through regulation.
2. Another dimension of this is market access. Imposition of financial penalties e.g. so-called carbon tariffs on goods that either don’t comply with carbon targets or don’t have data on carbon footprints will reshape how businesses think about the issue. No data, no competitiveness.
3. Social license. Consumers will increasingly demand and expect visibility to a business’ footprint.
4. Finance requirements and opportunities. Green finance is here, and access to lower cost finance on the back of data on carbon performance will incentivise many as well.

“Carbon footprint” by allispossible.org.uk is licensed under CC BY 2.0

Challenges for Carbon Reporting

But there will be some “gotchas”.

First, carbons value is a global phenomenon. There are still no standards across jurisdictions and industry sectors as to appropriate measures and methodologies.

Second, associated with the question of methodology is that of data capture approaches and technologies. Not only are there barriers when it comes to the cost of technologies and costs of deployment (e.g. soil carbon measurement is very expensive), there are open questions about how people can be confident in the veracity of data from any set of devices.

Third, credibility. Publishing data to a database raises issues of credibility:

1. First, many may wonder as to the credibility of the author of the data. Who is signing off on the data? What gives them the credibility to do so?
2. Second, what gives data consumers confidence in the quality, accuracy or precision of the data itself?
3. Third, how can actors be confident that the data has genuine integrity — namely that it hasn’t been censored or altered by actors in a non-transparent, capricious way.

“Carbon Pricing Coalition Leadership Meeting” by World Bank Photo Collection is licensed under CC BY-NC-ND 2.0

Responding to Challenges the Smart Trade Networks Way

There are no simple “silver bullet” answers to these challenges.

The Smart Trade Networks team has been researching these and related issues for a number of years, and have carefully designed information systems that can enable diverse methods for communities of agents to reach consensus on what credence claims are acceptable and which aren’t, which allows us to create mechanisms that increase the probability that information claims (the data) is credible and accurate on a consistent basis.

To deal with risks of capricious tampering or censorship, we use blockchain infrastructure. To lend strength to the technical properties of a blockchain, we have ensured that transaction records (tx hashes) for data updates can be independently searched and verified on a blockchain explorer. This is standard practice on public chains, but rarely exists in enterprise level applications. We believe that the ability for anyone, anywhere, anytime to independently check the tx hashes is critical to database credibility.

We also take active steps to confront the challenge of “garbage in / garbage out”. That is, a blockchain database is only so good as the quality of the data that is published to it. To address GIGO, we focus for the time being on introducing what we call “social consensus” on top of the “technical consensus” layer. This takes place via the application of multisig technologies to bring levels of collective accountability to the processes by which data is “approved for publishing” in the first place.

While multisigs cannot guarantee the data isn’t rubbish, they reduce the probability that it is. First, we have more than one set of eyes signing the data in. It’s like enforcing proof reading. Second, as signers are transparent on the blockchain, it is possible to trace the signers as well.

Patterns of bad data (picked up downstream) associated with particular signers will become evident as time goes on, and other actors in the ecosystem will become increasingly mindful of the reputation of certain signatories compared to others.

Social consensus thus enables the progressive emergence of an “economy of reputations”. Transparent reputation statuses can act, therefore, as a key behavioural guardrail mitigating risks of data malfeasance.

On a side note, we’ve also designed a Schelling-inspired community attestation game that can be applied over the top of multisigs. We’re still doing some work on the code base to fine tune and stabilise it and hopefully will have it out some time this year (2021), depending on resourcing and priorities. The attestation mechanism sees the network as a whole invited to vote on whether they see any data state update as credible (affirm / disaffirm). While the attestation isn’t designed to censor data being published, it does introduce additional social lenses to the credibility of the update.

More eyes looking at data patterns assist to verify its integrity

Actor identification is an area that we will be focusing on increasingly in 2021, as part of our collaborations with Queensland University of Technology and Future Food Systems. The R&D will address the relationship between identity transparency and reputation metrics.

Lastly, the issues of data collection devices must be addressed. Sure, there’s been an explosion in IOT in recent years but in many of the supply chains we are working in, digitalisation of data collection is still “on the drawing board” rather than anything that resembles cost effective reality.

Global Carbon Projects

In the carbon space, we’re pleased to be working across a number of continents on various projects that enable us to explore the issues and implement the solutions we’ve designed and developed.

1. Livestock carbon mitigation is one of our areas of serious work. We are working with innovators in carbon abatement certifications driven by livestock feed inputs, to deliver to the marketplace traceable abatement certificates down to a single animal. We are working with global technology giants in this space who bring capacity and reach in IOT systems. More will be announced in the not too distant future.
2. We are also engaged in a range of projects across the global energy space. Projects in the hydrogen and renewable energy arenas in Australia and Africa are being developed by local entrepreneurs, with similar opportunities in the pipeline in South America.

As a designer and developer and provider of foundational infrastructure STN can enable projects to fast track to market and de-risk their technology development cycles.

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About Smart Trade Networks

Smart Trade Networks is a general purpose blockchain technology-enabled supply chain asset registration, tracking and trading ecosystem.

Smart Trade Networks undertakes R&D in cross-border supply chain and trade systems in collaboration with researchers at Queensland University of Technology and the Future Food Systems Cooperative Research Centre, in Australia.

More information about Smart Trade Networks can be found at:

Medium Article: What is Smart Trade Networks?

Telegram: https://t.me/SmartTradeNetworks

YouTube: https://www.youtube.com/channel/UCarnV-OEusVcPRil2gDF3Ig

Website: https://www.smarttradenetworks.com/

LinkedIn: https://www.linkedin.com/company/smart-trade-networks

Twitter: @networks_trade