Is Blockchain the Answer to ESG Challenges?

Abstract

Sustainability is a major talking point in the world, with climate change, unsustainable business practices and uncertainty about the future of our planet. With no obvious answer to the troubles facing the world, more and more actions have been taken to combat climate change and make the world more sustainable. The European Union has put a larger focus on companies operating within the union and has introduced the Corporate Sustainability Reporting Directive (CSRD), which in turn has resulted in new reporting standards for sustainability in the European Sustainability Reporting Standards (ESRS). The new reporting standards have increased the reporting responsibility and along with a tight deadline for implementation, it puts subjected entities under additional pressure. This thesis seeks to give insight into which challenges the subjected entities and auditors face in connection with the ESRS standards, additionally to explore a potential solution through blockchain technology. Through interviews with experts and relevant professionals, have we initially in the analysis aimed to outline the main challenges the ESRS standards present and what the respondents believe to be a solution. The main issues derived from the interviews can be summarized as 1) too tight of a deadline for implementation, 2) the sheer scope of the standards, and 3) obtaining and validating necessary data. Additionally, the respondents have voiced concerns in regards to whether the standards will actually ensure a more sustainable economy or the reporting only will be seen as a compliance exercise and not add any value. Second part of the thesis’ analysis focuses on the presented challenge of obtaining and validating data from the supply chain and if blockchain technology could be part of a possible solution. The thesis bases the research on an interview with Bestseller who have successfully implemented and used blockchain technology in pilot projects. Overall, based on conducted research in the thesis, the conclusion reached, amounts to three main challenges with the new ESRS-standards where blockchain technology could be a feasible solution to the issue of obtaining and validating data.