Greenwashing: Blockchain as a Solution
Greenwashing occurs when a company misleads consumers about its environmental practices or performance, creating an inaccurate portrayal of its positive environmental impact. It is a recurrent problem that encompasses a spectrum of negative ramifications impacting consumers, the market, and the environment. Primarily, it adversely affects consumers by potentially compromising their health and contributing to the dissemination of misinformation. Additionally, it erodes trust in the market and fosters demand for greenwashed products. Lastly, such products pose a threat to the climate and undermine sustainability goals.
Traditional methods of verification are usually carried out by third-party entities or public authorities, which follow international standards. The certification of a product may involve various degrees of complexity: for a strawberry, for instance, the assessment process may be simpler in comparison to other products, such as a strawberry yoghurt, a shampoo, or a computer. This further complicates things, especially for products involving multilateral processes, whose supply chain crosses several borders or even continents.
Blockchain can provide modern solutions for these ramifications, helping combat greenwashing. It possesses the characteristic of data integrity, which is upheld through a network of nodes, ensuring the immutability of information. By using this distributed digital ledger technology, all of a product’s components and processes would be traceable to its source of origin and be available to the consumer, ensuring transparency by showing (through a QR code or any other form) all the steps that the product undergoes during its life cycle. This presents a different way of how the supply chain of a product can be managed and shown to the consumer for consultation. Blockchain provides consumers with the capacity to monitor products’ chain of supply in a more efficient, transparent and reliable way. These characteristics guarantee that the products are indeed truthful to what they claim to be, with the consumer being able to verify the product’s data details through the blockchain. This way, consumers will be better protected against false claims, misinformation and unfair commercial practices. This protection could even promote changes in consumer behaviour, ultimately stimulating greater demand and driving competition around green products, potentially shifting more sectors towards sustainability.
For instance, the European Union (EU) regulations addressing illegal, unreported, and unregulated (IUU) fishing impose a strict monitoring process that ensures the implementation of sustainable fishing practices. In this monitoring process, blockchain could help to ascertain regulatory compliance because it improves the efficiency of information collection from the different authorities along the international fish products supply chains. Furthermore, supply chain auditors, third-party entities and public authorities can benefit from this technology since it provides more detailed information for the certification process (particularly in complex supply chains).
The information on supply chain goods and processes available in the blockchain and obtainable by consumers needs to be sufficiently in compliance with consumer protection standards (see Article 38 of the Charter of Fundamental Rights of the European Union). Consumer protection against greenwashing is established in the Commission’s proposal for a Directive on empowering consumers for the green transition. This piece of legislation sets the ground for the enhancement of consumer rights and tackles unfair business-to-consumer commercial practices, and amending Directive 2005/29/EC and Directive 2011/83/EU.
The implementation of blockchain technology could also help improve the environmental performance of companies and make products more reliable, verifiable, and comparable not only across the European Union, but also across continents. Some problems and difficulties may naturally arise along the way, notably related to the application of different jurisdictions’ laws, which may restrict the cross-border data transfers that are a consequence of the distributed nature of blockchain. In addition, organisations implementing blockchain need to carefully consider scenarios like consent withdrawal when determining what data they store and how they record this data.
Conclusion
Based on the analysis set forth above, it can be concluded that there is a gap in the green products market, namely, the difficulty in verifying the environmental claims of these products. It was also suggested that the problem of greenwashing can potentially be solved using blockchain technology.
The challenge faced is that this digital technology is not widely available or very economically feasible. Nonetheless, the transparency and traceability offered by the blockchain is becoming a central demand of consumers, which will continue to increase as environmental awareness and sustainability gain prominence, making blockchain a key technology for the future.
On the other hand, in the legal domain, the EU is trying to tackle the problem of greenwashing by regulating the supply chain of certain products and thus improving consumer protection. However, there is no existing or proposed regulation on blockchain technology, as exists for other technologies, such as the Artificial Intelligence Act. Knowing that blockchain is a possible solution for fighting greenwashing and enforcing compliance with the rules and regulations established by the EU, it can be expected that the EU will make greater efforts to legislate and regulate blockchain.
