How on track – or off track – are we in meeting our sustainability targets? While 2050 targets may feel far away, the first deadline of 2030 is approaching fast.
Real estate produces around 40% of global carbon emissions, so this sector is constantly in the spotlight to improve its sustainability performance. An increasing number of regulations and mandatory ESG reporting frameworks are prompting companies to act, but we need to accelerate change, move quicker – and at scale – to hit the deadline on time.
And buildings are no longer stand-alone; with the integration of renewables such as photovoltaics, they become “Prosumer” of energy with electricity grid connection, providing e-vehicle charging infrastructure for the electrification in the mobility sector.
Not to forget that about a third of all emissions worldwide are caused by industry. It is the task of the producing companies to make their contribution and to significantly reduce the carbon footprints of their products.
Digital technologies are the most scalable means of accelerating the decarbonisation and the quickest and most cost-effective way to start optimizing existing systems.
So, with just 6 years to go until the 2030 target, now is the time to switch to Blockchain solutions.
Tracking Product Carbon Footprint with SiGREEN
Many industries are already pressured to start disclosing their Product Carbon Footprint (PCF) or to implement it in the next decade; therefore adopting tools that help with the exchange of real data early on is key for carbon disclosure.
SiGREEN is a Siemens platform that simplifies the management of product-level emissions, also called Product Carbon Footprint (PCF).
The PCF measures the total greenhouse gas emissions associated with the entire life cycle of a specific product (cradle-to-gate). This life cycle includes all stages from raw material extraction, manufacturing, transportation, use, and end-of-life disposal or recycling. It helps consumers, businesses, and policymakers make informed choices about products based on their environmental performance.
SiGREEN provides actionable and trustworthy information, based on the principles of data sovereignty, decentralised trust and business confidentiality.
Companies can go beyond static reporting of CO2 emissions and instead of pure reporting, start to monitor the impact of improvement measures on their journey towards product decarbonisation.
Based on CO2 values measured where the emissions occur and aggregated along the value chain, dynamic PCF quantify the results of improvement measures and turn emission data into a management tool for decarbonisation at scale.
SiGREEN is a Web3-based application for fast adoption and easy supplier onboarding and data aggregation of the supply chain, including verifiable credentials for third-party verification of exchanged emission data. All partners keep full sovereignty over their data; Compliance with multiple established standards enables exchange of verifiable PCF with partners across industries.
SiGREEN uses Blockchain technology to facilitate the verification of shared PCF credentials that have been issued by trusted certifiers. The Blockchain network based on Hyperledger stores credential schemas, public keys of certifiers and revocation information, which allow a customer to Cryptographically verify PCF information presented by a manufacturer.
The Blockchain network does not store PCF information or information about suppliers and manufacturers. Instead, PCF information is exchanged along existing supplier/manufacturer and manufacturer/customer relationships.
How to ensure independency from Siemens?
A governing body called ESTAINIUM association is for those companies that want to actively shape the way product carbon reporting is done in the future, founded in April 2022.
ESTAINIUM association is an open and decentralised network that brings together manufacturers, suppliers, customers and partners and facilitates their cooperation.
How sustainable is the Blockchain technology used by SiGREEN?
The consensus in Hyperledger Indy is based on energy-efficient Redundant Byzantine Fault Tolerance (RBFT).
Peer-to Peer energy trading at the Grid Edge with Pebbles
The Pebbles project is a peer-to-peer energy trading based on Blockchain, supported by the Federal Ministry for Economic Affairs and Energy in Germany. The project is to design, develop and field test a digital platform concept for peer-to-peer trading (P2P trading) and the exchange of grid services. Pebbles analyses and tests the effects of Blockchain on the energy market. Local peer-to-peer energy trading not only assumes a practical function in controlling the supply and demand of the decentralised energy system. It is also a further indication of the business and monetisation opportunities the «energy flexibility market» is already opening up today.
With Pebbles we aim to decentralise energy systems by bringing to market non-centralised energy conversion plants, e.g. using a virtual power plant. At the same time we want to democratise the energy supply by actively involving end users and small-scale producers.
The Blockchain-based platform with trading agents also provides a smart contract library for energy applications. The smart contract-based billing automatically generates invoices based on the traded data and measurements.
The authentication of on- and off-chain streams ensures integrity & verifiability of trading process in decentralised environment, ensuring confidentiality.
As a result, energy cost was reduced up to 21% while earnings from energy supply increased up to 165% – enabled by 6.700 P2P contracts per day.
We are bringing the energy transition online!
Investing for impact ñ Financing the Energy Transition through DeFi
Sustainable assets and projects need finance and the impact investing market is growing fast. There is a genuine appetite for investment in projects that have a positive social and environmental impact. In fact, the Global Impact Investing Network (GIIN) reports that the market size is $1 trillion while the green bond market has experienced an annual growth rate of 50%.
Siemens was the first DAX-Corporate (non-financial) to issue a digital bond on a public Blockchain in accordance with Germany’s Electronic Securities Act (eWpG), being a pioneer in the ongoing digital transformation of capital and securities markets.
It has been possible to issue Blockchain-based digital bonds in Germany since the Electronic Securities Act came into effect in June 2021. Siemens has used the new possibilities of the Electronic Securities Act and sold the securities directly to investors without engaging established central securities depositories.
The bond has a volume of €60 million, maturity of one year and was sold directly to investors. And in this Blockchain application, there was no Crypto currency used, the settlement of the bond has been proceeded via bank account in EUR.
The bond is underpinned by Polygon’s public Blockchain. Issuing the bond on a Blockchain offers several benefits compared to previous processes. For instance, it makes paper based global certificates and central clearing unnecessary. What’s more, the bond can be sold cost-efficiently and directly to investors without needing a bank to function as an intermediary.
By moving away from paper and toward public Blockchains for issuing securities, transactions are executed significantly faster and more efficiently than when issuing bonds in the past. The transaction was able to be completed within two days instead of eight days.
How sustainable is the Blockchain technology used for the digital bond?
By using Polygon’s Proof-of-Stake Blockchain, CO2 emissions were reduced to a minimum.
Digital MRV: 4 ways digital Measurement, Reporting and Verification will revolutionise ESG reporting
The new wave of mandatory (and also voluntary) ESG reportings sweeping across the globe, and the commitment by a growing number of companies to participate in voluntary reporting schemes has suddenly elevated the role of the independent auditor. The role is becoming a rapidly expanding function and one that is gaining importance within the realm of ESG reporting. With auditors now aiming to analyse ESG reports with the same level of scrutiny as financial statements, companies must be prepared to defend the way they measure and verify their data.
Essentially, the auditor investigates the processes by which ESG performance data is collected, evaluated, and how its consistency and accuracy is verified. In effect, inspecting the methods of measurement and verification.
Audits are often based on projects which have been executed months or years before, so mistakes might not be discovered at the time and it’s difficult to clarify ex-post. By running validation and verification constantly, incidents will surface earlier, and errors avoided entirely.
Even in this age of digitalisation, Measurement, Reporting and Verification (MRV) is often a manual process, opening up the collection and calculation of data to human error. To maintain the highest accuracy, MRV requires reliable data but when the process requires manual participation, to what extent can we trust the numbers?
Accurate MRV is something we’ve been doing at Siemens for more almost 2 decades and we use it to provide evidence to our customers of the energy and carbon savings they achieve from our energy performance contracting services. In 2023 we were also able to automate and digitize the collection of energy data for 85% of used space within the Siemens Real Estate portfolio. The audit-proof data from 230 office buildings and manufacturing sites are reported into our global EHS environmental management system then.
But what about the future? How do we improve our current processes and systems?
To trust the data we need to know the source.
Digital MRV, or dMRV, is based on Blockchain and about to set new reporting standards by using Distributed Ledger Technology (DLT) – a database that’s shared and duplicated across a network of computers in different locations.
A fully digitized MRV architecture collects data via IoT devices, remote sensors and API’s, then processes data using machine learning and stores it decentralised.
For example, when an IoT device is connected to Web3 and performing first-time configuration, it will register itself as part of the Blockchain by sharing an address that is fully traceable. It marks day one of the device on the chain and receives a verifiable credential that certifies that the data is correct, providing a reference point of approval.
Digital MRV systems link sustainable investments to measurable results.
Overall, dMRV improves:
1. Transparency dMRV improves transparency and accountability that underpins the trust stakeholders have in a company and its climate change commitments. An automated system based on Blockchain allows you to safely, securely hash data – transparency creates trust.
2. Automated Monitoring Transforming a manual process to a digital one removes the possibility of human error and eliminates the potential for inaccurate or incomplete recording of data. When reports and records are on hardcopies, the possibility of loss or damage is relatively high compared to the safety of a distributed ledger on Blockchain. Digital MRV is a digital safety net for monitoring, recording and storing data.
3. Verifiable Credentials for Validation After measuring, cross-checking is essential to find proof or plausibility of the correctness of the monitored performance. Verification and validation through dMRV reduces time and resources needed while improving the accuracy of data. Verifiable credentials can be validated efficiently by an external auditor.
4. Tokenized Reporting ESG data has a tokenized representation which is created on Blockchain to ensure traceability. Further metadata can be linked to the item, for example, GHG emissions. Standardised formats for reporting accurately present results to provide a level of assurance not available using traditional systems.
Tokenisation of sustainable, real-world assets
Decentralised Finance (DeFi) is an emerging financial technology based on secure distributed ledgers. The use of Crypto tokens can prove ownership of a fixed asset recorded on a Blockchain and secure custody. But more important, a physical, fixed asset can be transformed in a tradeable, digital security. Tokenisation has the potential to open up private markets to institutional investors by reducing issuance costs and providing the same benefits as traditional models. The result being increased access to investment cases for private equity investors or private debt investors and more access to capital for project developers.
There is a group of Blockchain-powered projects that place a huge emphasis on creating systems that distribute value back to the environment and to communities, called Regenerative Finance (ReFi).
However, the market is still evolving and while some regulation has been implemented, there needs to be more global standardization to ensure transparency for the entire issuer and investor market. With the ‘cons’ being ironed out and the market developed, the ‘pros’ and possibilities that tokenisation can offer are far more compelling.
Whatís next? Tokenising the energy transition
There’s another disruptive financial innovation that’s being hailed as an enabling solution for impact investing: the creation of Crypto tokens through digitization of fixed physical sustainable assets with guaranteed ESG-impact.
The tokenisation of fixed assets eliminates the time-consuming acquisition process and the constraints of geographical boundaries. Crypto tokens facilitate liquidity, guarantee audit proof measurement & verification, and allow higher trading volumes paired with a better risk-return-impact ratio. Tokenisation improves speed and operational efficiency for stakeholders, investors and leaders who are driving the energy transition to achieve maximum impact.
However, there is no regulatory compliant marketplace for digitized sustainable assets established, but the demand is huge. Industry partners and finance, guided by banks and exchange authorities, need to collaborate to leverage demand.
The countdown to 2030
We do still have time to meet the 2030 decarbonisation target, but it means acting fast, thinking big, operating at scale and leveraging digital solutions, with Blockchain as enabling technology.
