1. Introduction to ESG 

What is the purpose of ESG and why is it important? 

Environmental, Social, and Governance (ESG) considerations have become increasingly vital in the business and investment landscape, driven by the urgent need to address global challenges and create a more sustainable future. ESG refers to a framework that assesses organizations' environmental impact, social responsibilities, and corporate governance practices. Its purpose is to evaluate how businesses integrate sustainability into their operations and decision-making processes.

Since the signing of the Paris Agreement in 2015, which marked a significant milestone in global efforts to combat climate change, the importance of ESG has continued to evolve. Emissions in Europe fell 23% below 1990 levels in 2018, and are on track to reduce further to 55% by 2030. A consumer survey conducted by IBM showed that despite the increasing cost of living, 6 in 10 stated that at least half of their purchases were branded environmentally sustainable or socially responsible, indicating that consumers’ commitment to sustainable development remains strong.

In recent years, institutional investors have demonstrated a longstanding interest in ESG considerations. However, the industry now appears to be on the brink of a significant shift, characterized by a growing demand for more detailed and advanced ESG mandates. This shift is driven by an array of pressing factors, including escalating climate risks like the Super El Niño Phenomenon, societal upheaval stemming from the COVID-19 pandemic, and geopolitical tensions such as the war in Ukraine. In response to these challenges, institutions are moving away from passive exclusionary approaches and harnessing new data sources to actively engage with management teams, establish concrete objectives and gauge the measurable impact of their ESG strategies. 

Understanding ESG and the standards 

To effectively evaluate and compare ESG performance, reporting standards and frameworks have evolved and become more robust. Organizations have embraced frameworks such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). These standards provide guidance on disclosing and measuring ESG metrics, facilitating transparency, comparability, and accountability.

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2. Current Problems in ESG Reporting

Despite the progress made, challenges still persist in the collection, auditing, and reporting of ESG data for the stakeholders. To understand the pain points in the industry firsthand, we asked the attendees of Dedoco’s  Blockchain On The Rocks event, “What are the key problems you are currently facing or foresee to face in ESG reporting?”. The responses are summarized as a word cloud in Figure 1.

Based on the response from the attendees, the most common issues of ESG reporting are attributed to high costs, lack of standardization of reporting, and intensive labor requirements. 

Challenges for the reporting companies

One of the primary difficulties lies in the multitude of global reporting standards available, with over 600 reporting provisions globally. This lack of standardization creates complexity and confusion for reporting companies, as each standard has its own requirements, metrics, and reporting guidelines, making it challenging for companies to determine which standards are most relevant and applicable to their specific industry and operations. 

Additionally, gathering ESG data can be a highly manual and resource-intensive process. A survey conducted on 2,200 executives showed that 73% of them agreed that the high demand for manual data-gathering processes is holding back their organization’s ESG efforts. Companies often struggle to collect the necessary data from disparate sources within their organization, such as financial systems, operational records, and employee surveys. This data-gathering process can be time-consuming and prone to errors, making it difficult to ensure the accuracy and completeness of the reported information. Furthermore, companies may face challenges in aligning their data collection processes with the specific metrics and reporting requirements of the chosen ESG standards. 

Carbon credits emerge as a vital mechanism in the quest for achieving net-zero emissions. They represent measurable reductions in emissions that can be acquired to offset equivalent emissions elsewhere. The concept of net zero aims to balance total emissions by achieving equal reductions or removals, resulting in a climate-neutral impact. It is important to differentiate between offset and avoidance credits. Offset credits originate from projects actively reducing or removing emissions, such as renewable energy installations or reforestation initiatives. They counterbalance emissions by creating carbon sinks or preventing emissions that would have occurred. In contrast, avoidance credits focus on preventing emissions through sustainable practices and cleaner technologies. Both types of credits contribute to the journey towards net zero, driving emissions reductions and promoting sustainable development. Therefore, carbon credits are a crucial tool in transitioning to a carbon-neutral future.

Challenges for investors

Investors face their own set of challenges when it comes to ESG reporting. One significant concern is the issue of greenwashing, where companies present a misleading or exaggerated picture of their ESG performance. This can make it difficult for investors to accurately assess a company’s true sustainability practices and the impact of their investments. Without robust and standardized reporting data, investors struggle to differentiate between companies genuinely prioritizing sustainability and those merely making superficial or unsubstantiated claims. 

Another challenge for investors is the lack of transparency and consistency in ESG reporting data points. Due to the non-standardized reporting standards, companies often report different ESG metrics. The lack of consistent data standards hampers meaningful analysis and benchmarking, limiting investors’ ability to make informed decisions based on reliable and comparable information. Furthermore, the non-transparent and vague nature of reported data hinders the ability of funds to allocate capital towards companies that align with their ESG goals and may result in missed opportunities to support sustainable businesses. 

Addressing these challenges requires concerted efforts from reporting companies, investors, and regulatory bodies. Standardization of reporting standards, increased transparency, and the development of robust data collection and verification processes are key steps toward overcoming these obstacles. By establishing clear guidelines, enhancing data quality, and fostering accountability, the ESG reporting landscape can become more reliable, accessible, and conducive to sustainable decision-making.

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3. Blockchain 

Blockchain is a revolutionary amalgamation of cryptographic techniques designed to establish a decentralized ledger that is resistant to unauthorized alterations. Its functionalities extend beyond the realm of cryptocurrencies, enabling the peer-to-peer exchange of digital assets and data. While blockchain gained prominence through cryptocurrencies, it has evolved to offer numerous other use cases. Over the past decade, enterprises have undertaken experiments utilizing blockchain for their operational workflows. As the focus on Environmental, Social, and Governance (ESG) practices intensifies, it is now crucial to leverage insights garnered from these experiments to enhance ESG tracking and reporting processes.

Cryptography plays a pivotal role within the blockchain ecosystem, employing various mechanisms to ensure security. At its core, cryptography facilitates the digital signing of transactions, enabling verification of the sender's authenticity. Furthermore, it is instrumental in establishing an unbreakable "chain" of data. Each block within the blockchain is cryptographically hashed, creating a unique digital fingerprint that serves as the header for the subsequent block. Retroactively altering any transaction would modify the hash of the affected block, thereby impacting the hashes of all subsequent blocks. This disruption in the chain ensures that tampering becomes easily detectable. In order to avoid detection, an attacker would need to replace the hashes of all blocks. Given the distributed nature of blockchain, the attacker will have to take over a majority of the network in order to make such changes. Thus, blockchain data is generally seen as tamperproof.

Blockchain and ESG

By harnessing the potential of blockchain technology, management can seize the opportunity to fortify their organizations' ESG initiatives. Blockchain facilitates the establishment of an auditable and transparent system for tracking ESG milestones and reporting progress. It enhances the reliability and accuracy of ESG reporting by providing a trustworthy and immutable record of sustainability efforts. Additionally, blockchain offers benefits such as improved transparency, enhanced data security, and the ability to track provenance within supply chains

As organizations face mounting pressure to elevate their standards and accountability in the realm of ESG, blockchain emerges as a powerful tool to drive positive change. By leveraging blockchain's inherent features of immutability, transparency, and trust, management can propel their organizations toward a more sustainable and responsible future. Current ESG systems face shortcomings in data accuracy, transparency, and trust. Blockchain holds immense potential to address these challenges and revolutionize ESG reporting, some examples include:

• Enhanced Data Accuracy and Transparency By utilizing blockchain technology, ESG-related information can be securely recorded, verified, and shared across multiple stakeholders in a transparent manner. This ensures that data is tamper-proof and eliminates the need for intermediaries, reducing the risk of data manipulation and increasing trust in the reported metrics. Moreover, blockchain-based smart contracts enable automated validation and enforcement of predefined ESG criteria, further enhancing accuracy and reducing human error.‍
• Supply Chain Traceability and Provenance ESG reporting often involves complex supply chains with numerous stakeholders. Blockchain can enable end-to-end traceability and provenance verification by recording every transaction and event within the supply chain. This allows organizations to track the environmental and social impacts of their products or services, ensuring compliance with sustainable practices. By providing a transparent and auditable record, blockchain enables consumers and investors to make informed decisions based on verifiable ESG information.‍
• Improved Stakeholder Engagement Blockchain technology fosters increased stakeholder engagement by creating a shared ecosystem for ESG data. Through decentralized networks, stakeholders such as investors, regulators, NGOs, and consumers can access reliable and up-to-date ESG information. This transparency empowers stakeholders to actively participate in monitoring and influencing corporate sustainability practices. Additionally, blockchain-based platforms can incentivize stakeholders to contribute their own ESG data, creating a more comprehensive and accurate picture of an organization's impact.‍
• Enhanced ESG Assurance and Auditing The auditing process plays a crucial role in ensuring the reliability of ESG reports. Blockchain technology can streamline and automate the auditing process, making it more efficient and cost-effective. With the integration of smart contracts and cryptographic algorithms, auditors can securely access and verify ESG data directly from the blockchain, eliminating the need for manual data collection and reconciliation. This automated process enhances auditability, reduces the risk of fraud, and improves the overall assurance of ESG reporting.‍
• Tokenization and Impact Investing Blockchain's ability to tokenize assets opens up new possibilities for impact investing and incentivizing sustainable behaviors. Tokenization allows the representation of assets such as carbon credits, renewable energy certificates, or social impact projects on a blockchain. This enables fractional ownership, liquidity, and seamless transferability of ESG-related assets, facilitating innovative financing models and promoting investments in sustainable initiatives.

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4. Blockchain use cases for ESG

Although the possible applications of blockchain on ESG are broad, most attempts in the real world are limited to two main use cases.

Data tracking and supply chain provenance

One of the significant benefits of utilizing blockchain technology in supply chain provenance is the ability to map out the entire value chain. Blockchain provides a decentralized and immutable ledger that records transactions and data at every stage of the supply chain. This mapping capability offers full visibility into the movement and transformation of goods, enabling stakeholders to track and verify the origin, authenticity, and quality of products. By ensuring transparency and traceability, blockchain enhances trust among trading partners and consumers.

Furthermore, blockchain enables complete data transparency within the supply chain. All relevant information, including certifications, test results, and environmental impact data, can be securely stored and accessed by authorized participants. This transparency empowers companies to gather granular data on the carbon footprint of their products and attributes it to the product level accurately. By capturing detailed information at each stage, blockchain facilitates the calculation of carbon emissions, facilitating effective environmental management and sustainability reporting.

However, integrating blockchain into the entire supply chain system poses challenges. One major hurdle is the requirement for integration with various enterprise resource planning (ERP) software systems and trading partners. Achieving seamless connectivity and interoperability across diverse platforms and stakeholders can be a complex and time-consuming process. It demands significant coordination and collaboration to ensure all participants are onboarded and their systems can interact with the blockchain network effectively.

Additionally, the creation of a blockchain-based supply chain provenance system incurs substantial costs. Developing and implementing a robust blockchain infrastructure requires substantial investments in technology, resources, and expertise. The costs associated with designing, deploying, and maintaining the system can be high, particularly considering the need to ensure scalability, security, and continuous operation. Moreover, ongoing maintenance and updates to address emerging challenges and evolving technology can further contribute to the overall cost burden. Below are some real-world examples of the use of blockchain for supply chain and data tracking:

• World Economic Forum (WEF): The WEF has been actively exploring the application of blockchain principles to improve ESG systems. Their efforts aim to leverage blockchain's capabilities to enhance the accuracy, traceability, and accessibility of ESG data, ultimately fostering greater trust among stakeholders.‍
• Kaleido: Kaleido, a blockchain platform provider, is working on maximizing ESG impact by enabling companies to record, share, and track sustainable efforts throughout their supply chains. Their blockchain solution offers a secure and efficient way to measure impact and attract value-based investments.‍
• IBM: IBM has collaborated with organizations like Nestlé, Unilever, and Walmart to develop blockchain-based supply chain platforms that enhance traceability and sustainability. These platforms enable real-time monitoring and verification of ESG-related data, ensuring compliance with responsible sourcing practices
• ‍Everledger: Everledger, a global leader in blockchain-based supply chain solutions, focuses on the traceability of high-value assets, including diamonds and fine wines. By leveraging blockchain, Everledger ensures transparency and ethical sourcing, contributing to the overall ESG goals of the industries it serves.‍
• Data Gumbo and Topl: These two Houston-based blockchain technology companies have partnered to help corporations report timely and accurate ESG data. Their integrated platform enables companies to track and report ESG metrics, providing evidence-based progress reports to external stakeholders.

Tokenization of carbon credits or similar

Tokenization can help to enhance efficiency and disintermediation in the Voluntary Carbon Market. Utilizing blockchain technology enables direct peer-to-peer transactions for carbon credits, eliminating the need for intermediaries. This streamlined approach reduces transaction costs and enhances operational efficiency. Additionally, the absence of intermediaries decreases the risk of fraud as trust is established through the transparent and immutable nature of the blockchain.

Another key benefit is the ability to eliminate double counting: The public ledger feature of blockchain simplifies the identification and prevention of double counting in carbon credit claims. Double counting occurs when multiple sustainability claims are made on the same carbon credit, leading to inaccuracies and potentially fraudulent activities. With blockchain, each transaction is recorded on a publicly accessible ledger, ensuring clear traceability of ownership and retirement of carbon credits. This enhances transparency in the verification process and minimizes the risk of double counting.

Lastly, fractionalization unlocks key potentials in the carbon market: Blockchain tokenization enables fractional ownership of carbon credits, making them more accessible to smaller retailers and individuals. This division of carbon credits into smaller units facilitates flexible purchasing, selling, and retirement options. Industries such as retail and transportation, which require sub-tonne carbon credits to offset specific carbon footprints, can benefit from the granularity provided by tokenization. For example, a retailer can offset the precise carbon emissions associated with the production of a single pair of shoes, while a traveler can offset the carbon footprint of a specific flight. Tokenization enables precise and targeted carbon offsetting efforts.

However, there are limitations associated with blockchain tokenization of carbon credits. One critique of tokenization is that it provides renewed attention to "non-additional" credits that would typically be disregarded in the market. Non-additional credits refer to those generated from projects that did not require financial incentives to implement emission reduction measures. Such credits are generally perceived as having minimal to no environmental impact. Below are examples of how tokenization is used in ESG:

• International Finance Corp (IFC): The IFC, a World Bank affiliate, has partnered with Aspiration, Chia Network, and Cultivo to launch the Carbon Opportunities Fund. This blockchain-enabled platform aims to attract institutional investors to support climate-friendly projects in emerging markets by tokenizing and tracking carbon credits using blockchain technology. The platform seeks to address concerns about the origin and environmental benefits of traded credits and encourage more institutional capital to participate.‍
• Securitize: Securitize is a leading blockchain-based platform that tokenizes real-world assets, including renewable energy projects and sustainable real estate. By enabling fractional ownership and simplifying the investment process, Securitize promotes ESG-focused investing.‍
• ClimateTrade: ClimateTrade is leveraging blockchain to create a transparent marketplace for carbon offsetting. Their platform allows companies and individuals to trade certified carbon credits, facilitating investment in environmental projects and promoting sustainable practices.‍
• Toucan and Topl: These startups are leveraging blockchain technology to enhance the transparency and reliability of carbon credits. By incorporating blockchain into climate initiatives, they aim to address the lack of transparency in carbon markets and ensure that funded projects effectively reduce carbon emissions.‍
• Flowcarbon: Flowcarbon is a blockchain-enabled carbon credits trading firm that aims to tokenize carbon credits and leverage Web3 technology to protect natural carbon sinks. It seeks to address the fragmented and opaque nature of the voluntary carbon market by increasing transparency and democratizing access to offsets. The company focuses on nature-based projects such as reforestation and conservation.
• ‍Moss: Moss is a Brazilian startup known for its blockchain carbon credit token called MCO2. Each MCO2 token represents one carbon credit, equivalent to one metric ton of CO2 prevented from being emitted into the atmosphere. Moss has facilitated transactions and contributed to the conservation of trees in the Amazon through verified programs. It has partnered with GOL, Brazil's largest airline, to enable customers to offset their emissions by purchasing MCO2 tokens.

Other than carbon credits, renewable Energy Certifications or RECs are another area being tokenized with blockchain technology. Here are some examples:

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• RED: RED (Renewable Energy Database) is a blockchain-based platform that aims to provide transparency and trust in the renewable energy market. It allows users to tokenize and trade RECs, ensuring the provenance and impact of renewable energy sources.‍
• Power Ledger: Power Ledger is another company utilizing blockchain for RECs. Their platform enables peer-to-peer energy trading and tracking of renewable energy generation and consumption. By leveraging blockchain, Power Ledger ensures transparency and efficiency in REC transactions.‍
• WePower: WePower is focused on democratizing access to renewable energy through blockchain technology. Their platform allows renewable energy producers to tokenize and sell future energy production as RECs. Buyers can then purchase these tokens and offset their energy consumption with renewable energy.‍
• enerT: enerT is a Hyperledger Fabric-based solution that tokenizes energy certificates. It creates a consumer-focused marketplace for trading and exchanging RECs.

Projects in Singapore

• Project Greenprint: Project Greenprint is a MAS-initiated collection of initiatives that aims to utilize technology and data to create a more transparent, trusted, and efficient ESG ecosystem to enable green and sustainable finance. There are four pillars to the project, a disclosure platform (see ESGenome below), a data registry (see ESGpedia below), a data orchestrator, and a data marketplace.‍
• SGX ESGenome: A disclosure platform for ESG. It enables companies to report metrics aligned with global standards and frameworks, ensuring regulatory compliance that meets investor needs for consistent and comparable ESG data. Ran by the Singapore Stock Exchange for listed companies.‍
• STACS ESGpedia: A one-stop registry of ESG data and certifications. ESGpedia aggregates, records, and maintains the provenance of holistic and forward-looking  environmental, social, and governance (ESG) certifications and data of companies across various sectors and globally verified sources on a single registry, utilizing blockchain technology to ensure security and ease of access by different users.

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5. The Dedoco Trust Engine

Blockchain technology alone cannot provide the complete solution to ESG. It needs to work in synergy with existing systems. A good solution, in this case, would impose minimal disruptions to existing processes and allow easy integrations.  However, most existing solutions for enterprise blockchain do not provide that. Utilizing blockchain technology has remained a daunting task for most enterprises. We discuss the challenges below:

The Challenge for Enterprises to adopt blockchain 

Traditional and legacy enterprises have faced challenges when it comes to integrating with blockchain technology. Despite the availability of privacy features offered by permissioned blockchain technologies like Hyperledger and Corda, these enterprises are often hesitant to send their data into a shared and replicated database. This is especially true for companies that deal with highly sensitive and heavily regulated data, such as healthcare providers. 

Additionally, designing a blockchain solution is a highly intensive process that requires significant resources to build out a full-scale solution. Enterprises need to gain buy-in from multiple stakeholders in the ecosystem and hire experienced blockchain developers to deploy and manage the system. 

The current blockchain ecosystem is highly fragmented. 

Despite blockchain's value proposition of creating an interoperable ecosystem, the current landscape is highly fragmented and isolated from each other with multiple private consortiums built by large multinational corporations and smaller players deployed on their own networks.

Introducing Dedoco Trust Engine

The Dedoco Trust Engine is a blockchain-based solution that enables businesses to securely store, manage, and verify documents across multiple networks.

It provides a simple yet powerful API integration that allows businesses across various industries to seamlessly write and read blockchain data, and manage information exchange. With this singular solution, enterprises can reap the benefits of enhanced security, transparency, and trust without blockchain expertise. We address the current challenges of Web2 and Enterprise blockchain systems as shown in Figure 2.

Enhanced data/document privacy

DTE separates the document or data from the blockchain provenance. This means that sensitive documents that need to be trusted and shared within the ecosystem are not directly stored on the blockchain. Instead, we only store the document hashes and all business processes that are applied to the document.

This alternative approach ensures that only the document holders can get access to the information contained within the document and also verify its audit trail. Figure 3 demonstrates this process.

Deploy without blockchain expertise

The Dedoco Trust Engine is designed with the intention of creating an easy-to-use set of APIs for any business to be able to tap into blockchain features via smart contracts.

The APIs are made available as a Web2-friendly environment that is able to be integrated into any existing infrastructures and enterprise software without having to deal with the blockchain components.

Modular & Incremental Adoption 

As opposed to private consortiums when ecosystem members are required to undergo intensive integration and data migration, the Dedoco Trust Engine allows users to take a modular approach when integrating with Dedoco Trust Engine. This means that a company can start with the most basic functionalities with a simple API request, and incrementally add on more smart contract features on the go based on the business requirements.

Dedoco Trust Engine API: Multi-Chain Interoperability

The Dedoco Trust Engine enables business applications to call the API service with different requests to write and read the blockchain data. The blockchain data is indexed and consolidated, making it easy for users to query. Acting as a moderator to the API requests, it uses indexed data to post and retrieve the information to the various connected blockchain networks. This unique feature allows for the verification of documents on Dedoco across different networks using one single API. These interactions are shown in Figure 4. 

Business Optimised Smart Contracts

DTE allows users to read and write smart contracts that are catered toward business processes. These include document hashing, transaction signing, business attestations, certificate issuance, ownership transfers, revocations, and verification.

Multiple Blockchain Connections

To cater to differing customization needs by different user demographics, our smart contracts are deployed on various blockchain networks such as Polygon Matic network and Hedera Hashgraph. DTE acts as an orchestrator for the information flows between and within each network.

With the cross-chain query feature, stakeholders are not restricted to deploying on a specific chain. In the case of supply chain management, any company can now sync data with each other on the blockchain without having to join a private consortium network. Users of the trust engine will not need to interface with each specific blockchain and will tap into their functions via the DTE APIs. See Figure 5.

Benefits of using DTE 

1. Enhanced security & traceability: the immutable record cannot be tampered with, and the end-to-end encryption helps to prevent fraud and unauthorized activities. An audit trail documents the provenance of an asset and all actions taken to it at every step of its journey. This audit trail can be used as proof for industries that requires a provenance system due to regulations, or when the consumers want to see the audit trail for ESG purposes.
2. Digitalisation: Traditional paper-based processes are highly time-consuming, prone to human error, and often require third-party mediation. The shared and replicated ledger on the blockchain acts as one source of truth, eliminating the need for paper exchange, and streamlining the settlement process.
3. Automation: Smart contracts can automate transactions and settlements. It acts as a parametric solution that automatically triggers a process once pre-specified conditions are met. This reduces the reliance of a middleman to oversee the process that requires significant lead time.

Supply Chain Management 

One example of a DTE application is in supply chain management. Visibility remains a challenge in large supply chains in large supply chains involving complex transactions. Current ERP systems are not able to reliably connect information flows, inventory flows, and financial flows between stakeholders of the supply chain which makes it difficult to eliminate execution errors and resolve supply chain conflicts.

Often, large organizations may have more than 100 legacy ERP systems with multiple ledgers in each ERP system that does not easily communicate with one another.

With DTE, companies are able to break the data silos by integrating with all these ERP systems and query data with a single call. 

Additionally, unique identifiers can be assigned to assets such as inventory, orders, loans, and bills of lading and participants are able to create digital signatures to sign the blocks they add to the blockchain. The end-to-end process of the transaction is stored on the blockchain which creates a traceable and verifiable audit trail.

Proposed ESG Solutions with DTE

In this section we explore some possible solutions for ESG with DTE. 

Solution 1: Data Exchange 

One concern regarding ESG reporting requirements is the associated costs. For instance, the Singapore Stock Exchange mandates 27 reporting metrics for listed companies, encompassing areas such as carbon emissions, human resource statistics, and corporate governance. Large enterprises often need to gather this data from multiple disparate systems, leading to a substantial allocation of resources for data validation and auditing. Notably, it has been found that companies spend an average of around half a million USD solely on climate-related disclosures.

To streamline the disclosure and audit process, we propose the use of DTE as a platform for verified data exchange. With this approach, ESG data can be collected at the source and authenticated by machines or pre-endorsed by key stakeholders involved in the process. This method reduces the effort required to validate the data and facilitates the connection of certification reports to the source data, simplifying the overall process. By adopting DTE, organizations can enhance the efficiency and reliability of their ESG reporting while mitigating the associated costs.

Figure 6 provides an example of how the DTE can act as a data orchestrator between the reporting organization systems, auditors/certification bodies, and the reporting platform:

Challenges with this approach:

1. Trust in the data source - as data would come from multiple sources, there may be a lack of trust in the data. This can be addressed in two way, with data collected from machines and sensors, one can integrate this directly to DTE APIs this would capture the data as it is generated and ensure tamper-proofing. The second way is to have the data certified by a human being involved in the process, this would be equivalent to a sign-off and makes the person liable for the information provided.
2. Data privacy - Data collected in its raw from may be sensitive from a both a personal or organizational data privacy perspective. One approach to mitigate this would be to separate the data source from the data evidence as described above with DTE. Another possible solution would be to use privacy-enhancing approaches such as zero-knowledge.

Solution 2: Retail Carbon Avoidance Tracking

ESG applications primarily focus on disclosures and reporting to comply with regulatory requirements imposed on listed companies and other corporations. However, this is just the beginning, as the world is progressing toward achieving net-zero emissions and the demand for carbon credits is increasing. To address this, we need to explore additional avenues beyond green farms.

Opportunities exist for pro-environment retailers and corporations to support customers' environmental contributions and generate avoidance credits through innovative initiatives. Examples of such initiatives include promoting the use of second-hand and reusable goods. Corporations can leverage this opportunity by engaging in activities that generate avoidance credits, such as through sponsorships or internal corporate social responsibility (CSR) initiatives.

Use case: Reusable cups

Everytime a reusable cup is used instead of a disposable one, about 40g of CO2 emissions are reduced. Each year the average office worker can use about 500 disposable coffee cups. The amount of environmental impact can add up and can create valuable carbon avoidance credits. One ton of CO2 emissions can be offset with 50 workers switching to reusable cups. An enterprise can provide reusable cups in their office for its staff to use to generate these credits. However, the main challenge is the recognition of these credits. For any carbon credit issuance body to recognise this, it data needs to be trusted and verifiable. 

To demonstrate how we can do this, we propose a simple process integrated with DTE where participating cafes can scan a QR code at the point of sales whenever a reusable cup is used. See figure 7 for a proposed workflow.

Cafes will be given access to a Cafe App which requires authentication. Use of a reusable cup can only be captured via the Cafe App and not the cup holder directly. By using the reusable cups provided by their company, employees can contribute to the accumulation of carbon credits. The use of DTE and blockchain creates a transparent and verifiable process which ESG auditors can rely on. 

Challenges:

1. Standardization/ecosystem - a substantial group of cafes needs to be involved or use a common standard for this to generate substantial network externalities
2. Collusion with Cafes is possible - if the app is used by the cup-user to generate carbon avoidance credits, collusion with cafes may be possible to fake the use of cups. There will need to be a strict and monitored process to ensure that this does not happen.
3. Integration with a carbon credits issuer - there would be a need to integrate with a standard body that recognizes the generation of these avoidance credits as well as being able to issue these credits in a form that would be usable by corporates.

Solution 3: Dynamic ESG Certifications

Certification reports are mostly static and do not provide the provenance of disclosure data and how they are collected. We propose a blockchain-based certificate and the tracking of pre-cert and post-cert processes using DTE.  Figure 8 demonstrates how an ESG cert can be tied to data sources, disclosures, and reports. This can provide assurance and reduce validation time for entities that need to ascertain the organization’s ESG metrics such as banks or stock exchanges. 

Challenges:

Access management and authentication - as various stakeholders are involved in the process, there would be a need to ensure that special rights, to write different types of data onto blockchain, are only given to the right people. There would be a need to ensure proper authentication to prevent misrepresentation and ensure that the data can be trusted. Integrations with different forms of DIDs (decentralized identity) or centralized identity providers (such as LDAPs orational identity systems) could be possible solutions. 

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6. Conclusion

As the world increasingly focuses on Environmental, Social, and Governance (ESG) reporting, organizations are seeking cost-effective and efficient solutions to meet reporting requirements and achieve zero-emission targets. The complexity of ESG reporting and the necessity for trustworthy data in green financing make technologies like blockchain particularly promising. Blockchain has the potential to streamline ESG reporting processes for enterprises, making them more accessible and palatable.

Currently, many organizations are burdened by their existing systems and processes, and a complete overhaul to meet ESG requirements might be challenging. Instead, the way forward lies in integrations. Integrating blockchain technology through low-disruption API interfaces can enable enterprises to achieve their ESG targets more effectively. By providing low-disruption API integrations with blockchain, DTE aims to help enterprises achieve their ESG targets.

This paper suggests different approaches where blockchain can help to enhance the process. As technology evolves, the intersection of blockchain with AI and IoT can offer even more synergies, further enhancing ESG reporting capabilities/ It is evident that blockchain can significantly contribute to the advancement of ESG reporting, improving data integrity and transparency while aiding organizations in meeting their sustainability goals. As technology continues to evolve, blockchain's potential synergies with other emerging technologies hold promise for further enhancing the ESG reporting landscape.

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7. Acknowledgments

We would like to express our heartfelt appreciation to all the participants of Dedoco's Blockchain on the Rocks event, held on May 31, 2023. Their valuable contributions and engaging discussions on Environmental, Social, and Governance (ESG) matters have served as a great source of inspiration for the development of this paper. In addition, we extend our gratitude to the clients and partners with whom we had insightful conversations regarding ESG and its various use cases. Their valuable input and collaboration have significantly enhanced the overall depth and quality of this paper. Lastly, we commend the entire team at Dedoco for their dedicated efforts and unwavering support throughout the process. Each member has played a vital role in making this endeavor a reality, and we acknowledge their hard work and commitment.

We are truly grateful for the valuable contributions, collaborative efforts, and support from all those involved. Their involvement has greatly enriched our understanding and approach towards the subject of ESG, empowering us to make meaningful progress in this field.

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8. About Us

데도코 (주)

Built on the Dedoco Trust Engine, our Dedoco platform is secure, tamper-proof, and convenient. The Dedoco platform offers flexibility for documents to reside securely with clients while protecting the integrity of your document records on-chain. Know at the click of a button, how your document and workflow changed hands, along with the chain of custody.

Our mission is to help you embed trust in your documents and processes, which will enable you to pass this trust assurance over to your brand and people. With Dedoco, you and your customers can be confident that your documents are secure, reliable, and trustworthy.

In the last 2 years, Dedoco has grown from a start-up with HQ in Singapore to having offices in Malaysia, Australia, and the US. It raised S$3.3 mil in seed funding led by Vertex Ventures SEA. Dedoco was one of the first digital signing application providers to offer “Sign with Singpass” which allows users to digitally sign documents, an initiative rolled out by the Government Technology Agency of Singapore. Dedoco has earned ISO27001 certification and is IMDA accredited. Today, Dedoco serves over 150 customers in Asia-Pacific across multiple sectors such as Banking and Finance, Real-Estate, Government; Public sector, and Professional Services.

디랩

deLab is the innovation hub of Dedoco, which offers Web3-enabled, ready-to-use, and custom solutions to organizations of all sizes. Established in 2020, Dedoco harnesses the power of Web3 technology for Enterprise Trust, providing customers with true ownership of their documents and digital assets. Dedoco's team of blockchain consultants has proven experience in finding use cases to transform your business.

The Challenge for Enterprises to adopt blockchain

Traditional and legacy enterprises have faced challenges when it comes to integrating with blockchain technology. Despite the availability of privacy features offered by permissioned blockchain technologies like Hyperledger and Corda, these enterprises are often hesitant to send their data into a shared and replicated database. This is especially true for companies that deal with highly sensitive and heavily regulated data, such as healthcare providers. 

Additionally, designing a blockchain solution is a highly intensive process that requires significant resources to build out a full-scale solution. Enterprises need to gain buy-in from multiple stakeholders in the ecosystem and hire experienced blockchain developers to deploy and manage the system. 

The current blockchain ecosystem is highly fragmented. 

Despite blockchain's value proposition of creating an interoperable ecosystem, the current landscape is highly fragmented and isolated from each other with multiple private consortiums built by large multinational corporations and smaller players deployed on their own networks.

Introducing Dedoco Trust Engine

To help enterprises overcome this barrier to blockchain adoption, Dedoco has taken an alternative approach to help companies overcome this challenge - by separating the document or data from the blockchain provenance.

This means that sensitive documents that need to be trusted and shared within the ecosystem are not directly stored on the blockchain. Instead, we only store the document hashes and all business processes that are applied to the document.

This alternative approach ensures that only the document holders can get access to the information contained within the document and also verify its audit trail.

What is Dedoco Trust Engine?

The Dedoco Trust Engine is a blockchain-based solution that enables businesses to securely store, manage, and verify documents across multiple networks.

It provides a simple yet powerful API integration that allows businesses across various industries to seamlessly write and read blockchain data, and manage information exchange. With this singular solution, enterprises can reap the benefits of enhanced security, transparency, and trust without blockchain expertise.

Deploy without blockchain expertise

The Dedoco Trust Engine is designed with the intention of creating an easy-to-use set of APIs for any business to be able to tap into blockchain features via smart contracts.

The APIs are made available as a Web2 friendly environment that is able to be integrated into any existing infrastructures and enterprise softwares without having to deal with the blockchain components.

Modular & Incremental Adoption 

As opposed to private consortiums when ecosystem members are required to undergo intensive integration and data migration, the Dedoco Trust Engine allows users to take a modular approach when integrating with Dedoco Trust Engine. This means that a company can start with the most basic functionalities with a simple API request, and incrementally add on more smart contract features on-the-go based on the business requirements.

Dedoco Trust Engine API: Multi-Chain Interoperability

The Dedoco Trust Engine enables business applications to call the API service with different requests to write and read the blockchain data. It utilises GraphQL to index and consolidate the blockchain data, making it easy for users to query. Acting as a moderator to the API requests, it uses indexed data to post and retrieve information to the various connected blockchain networks. This unique feature allows for the verification of documents on Dedoco across different networks using one single API. 

Business Optimised Smart Contracts

DTE allows users to read and write smart contracts that are catered towards business processes. These include document hashing, transaction signing, business attestations, certificate issuance, ownership transfers, revocations, and verification.

To cater for differing customisation needs by different user demographics, our smart contracts are deployed on various blockchain networks such as Polygon Matic network and Hedera Hashgraph.

Users of the trust engine will not need to interface with this layer and will use these functions via the APIs.

Benefits of blockchain for Enterprises

1. Enhanced security & traceability: the immutable record cannot be tampered with, and the end-to-end encryption helps to prevent fraud and unauthorised activities. Audit trail documents the provenance of an asset and all actions taken to it at every step of its journey. This audit trail can be used as a proof for industries that requires provenance system due to regulations, or when the consumers want to verify audit trails for ESG disclosures.
2. Digitalisation: Traditional paper-based processes are highly time consuming, prone to human error, and often requires third party mediation. The shared and replicated ledger on the blockchain acts as a one source of truth, eliminating the need for paper exchange, and streamlining the settlement process.
3. Automation: Smart contracts can automate transactions and settlements. It acts as a parametric solution that automatically triggers a process once a pre-specified conditions are met This reduces the reliance of a middle man to oversee the process that requires significant lead time.

Explore the endless possibility with Dedoco Trust Engine Today

Dedoco Trust Engine is an easy to use on-ramp service for web2 companies to deploy web3 features within a short timeframe. With this singular solution, enterprises can reap the benefits of enhanced security, transparency, and trust without requiring their own in-house blockchain expertise.

The beta release of Dedoco Trust Engine is currently available on Dedoco’s permissioned chain and polygon Matic public network. For companies that are keen to explore the potential of DTE, our sandbox environment on polygon Mumbai Testnet is available for free access. 

If you wish to access the beta version of DTE, contact us. For further information about DTE, check out our white paper and documentation.

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Blockchain technology has gained significant traction in recent years, demonstrating its potential to revolutionise the retail sector. Beyond the speculation surrounding cryptocurrencies, blockchain is transforming the way retailers operate in various ways, from improved management of consumer data to enhancing loyalty programs, tracking inventory, and ensuring food safety.

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1. Enhancing Consumer Data Management with Blockchain

One of the primary concerns for consumers today is the security of their personal data. Blockchain technology enables individuals to store their data outside organisational databases using decentralised identity (DID). This approach gives individuals control over their personal data, allowing them to decide who has access and when.

Blockchain also empowers individuals with autonomy over their DID, enabling them to securely and easily store their personal data and share it across various platforms. This streamlined process allows retailers to efficiently collect and manage consumer data while also ensuring that consumers' privacy remains protected.

Despite its potential, there is a lack of successful implementations of DID in the retail sector. While the concept seems promising on paper, it may prove to be challenging to implement in reality due to the complexities involved in integrating blockchain technology with existing systems. 

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2. Supply Chain/Inventory Tracking with Blockchain

In today's retail environment, effective supply chain management is crucial. Blockchain technology can enhance transparency and oversight for retailers, ensuring that they can monitor inventory levels and avoid stockouts. This, in turn, leads to increased efficiency and cost savings. Blockchain helps retailers track assets throughout the supply chain using unique identifiers, improving order fulfilment, supply chain management, and reducing the risk of counterfeit goods in circular economies.

Dedoco’s Trust Engine (DTE) addresses these challenges head-on. For example, DTE can be used to trace the lifespan of a luxury watch: 

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Without DTE integration, the entire process is manual and often lacks records, relying on trust-based transactions. Authenticity and maintenance records are not guaranteed. However, with DTE integration into existing platforms, interested parties can query the audit trail on the blockchain, ensuring full traceability and automatic data generation.

However, with DTE integration to existing platforms, the audit trail can be queried on the blockchain by interested parties. Buyers can transact in peace with full traceability and automatic data generation on the blockchain.

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3. Ensuring Food Safety with IoT and Blockchain

Food safety is paramount, and retailers bear the responsibility of ensuring that the products they sell are safe for consumption. While the FDA’s Hazard and Critical Control Point (HACCP) system is designed to address food safety concerns, manual processes can be laborious and susceptible to fraud. Blockchain technology, combined with IoT (Internet of Things), enables retailers to track food products from farm to table, ensuring their safety and freedom from contaminants.

Blockchain technology can help retailers improve food safety by increasing transparency and traceability. This, in turn, builds consumer trust in their brand, enhances customer satisfaction, and ultimately drives sales. So how can IoT and blockchain come together to assist? Let us take a butcher’s shop for example.

1. An IoT temperature sensor detects that the required temperature for poultry storage has exceeded the HACCP defined limit
2. A notification is sent to an employee on their smartphone
3. The employee lowers the temperature to a temperature within HACCP’s guidelines
4. As the temperature is lowered, the platform verifies that relevant measures were taken into place and such information is recorded on the blockchain

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Such use cases of blockchain have already been adopted by retailers. In 2019, Carrefour implemented blockchain-based tracking for 20 different product types, including milk, cheese, chicken, eggs, and other essential products. This enables customers to scan a QR code and access detailed information about the product's origin, such as the producer's name, cultivation location, harvest date, and package date. Carrefour also reported that products tracked through blockchain reportedly experienced a significant increase in sales. 

In 2021, Carrefour expanded the use of blockchain to include tracking its exclusive textile products, and in 2022, it became the first retailer to apply blockchain to its own branded organic products. As a result, the entire range of Carrefour Bio products is now traced through blockchain, giving customers greater confidence in their purchases.

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In conclusion, blockchain technology is transforming the retail industry in various ways. From better management of consumer data to improved supply chain management and food safety, blockchain technology offers retailers new opportunities to enhance their operations and customer experiences. Dedoco’s Trust Engine (DTE) has the potential to address the challenges identified in these areas by providing a robust and secure solution for data management, supply chain tracking, and food safety monitoring.

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While integrating blockchain technology into retail operations may present challenges, the potential benefits are undoubtedly appealing. By leveraging the Dedoco Trust Engine, retailers can explore innovative use cases to solve critical problems and unlock new opportunities for growth.

Discover how Dedoco’s Trust Engine can help your retail business overcome its biggest challenges and thrive in today's competitive landscape. Learn More and embrace the potential of blockchain technology with Dedoco's Trust Engine to take your retail business to new heights. Transform your efficiency by implementing secure and transparent solutions that not only enhance the customer experience but also streamline operations and ensure regulatory compliance.