Written by Elena Bassoli
Reading time 3 minutes
Blockchain technology: implications for social responsibility
Blockchain technology, described as “a revolutionary new protocol for sharing and updating information by linking ledgers or databases in a decentralised, peer-to-peer, open-access network” (Upadhyay et al., 2021), is transforming how information is stored, shared, and secured.
In simpler terms, blockchain is a system where information is stored in a decentralized manner, across multiple computers or “nodes”, rather than relying on a single central database. Each piece of data is organized in “blocks,” which are linked together in a chain. Once a block of data is added, it cannot be easily altered or deleted, ensuring transparency, security, and trust.
Initially developed as the foundation for cryptocurrencies such as Bitcoin, blockchain technology has since evolved into a versatile tool with applications in diverse fields, including finance, healthcare, and supply chain management. One emerging and impactful application is its use in Corporate Social Responsibility (CSR).
Beyond its foundational use, blockchain has the potential to significantly and positively affect the performance and marketing of corporate social responsibility in enterprises by providing the needed transparency, traceability, accountability and decentralization that CSR communication currently lacks (Rinne, 2022),
Blockchain’s role in Enhancing CSR
Corporate Social Responsibility has become a critical aspect of modern business operations. However, there is a lot of skepticism and mistrust among stakeholders about how companies can use CSR campaigns instrumentally (Rinne, 2022). As a result, such challenges in the moral legitimacy of companies lead to so-called “credibility gaps” due to inconsistency between the level of Corporate Social Responsibility efforts that are communicated to the public and the sustainable actions practically taken (Lock & Steele, 2017).
The utilization of Blockchain technology in this context could lower the information asymmetry and improving the trust between the parties involved (Ezzi et al., 2022) especially for those commodities easily susceptible to fraud (Ezzi et al., 2022) such as non-profits, or those dealing with conflict minerals or fair trade products.
How Blockchain Enhances CSR
Transparency and traceability
Records in the nodes on a blockchain are always time stamped and stored which results in absolute visibility and traceability to everyone in the blockchain network. That is important not only from the customers’ side, but also for the company itself to reassure investors about the flow and final use of funds or resources (Ezzi et al., 2022). For instance, a company that pledges to allocate funds to community development projects can use blockchain to provide real-time proof of where and how those funds are being spent.
Verifiability and trust
Thanks to cryptographic mechanisms, the authenticity of a record in a blockchain can be ensured (Rinne, 2022), allowing stakeholders to verify CSR claims, enterprises to prove their sustainability efforts are legitimate, and customers and partners to independently validate the organization’s initiatives. Indeed, organizations can no longer replay exclusively on marketing to showcase their efforts. Instead, it is nowadays more and more necessary for companies to support their claims with verifiable data (Rinne, 2002).
Data integrity and security and anonymity
Blockchain makes sure that data cannot be deleted or altered (Ezzi, 2022) once recorded. This feature allows to preserve the integrity of corporate reports and prevent collusion and external manipulation. Moreover, blockchain anonymity further safeguards individuals from undue influence or retaliation, ensuring ethical practices and encouraging honest contributions from all parties involved.
Decentralized nature through disintermediation
Blockchain process allows information systems to be free from intermediaries and therefore it allows for direct collaboration and communication between stakeholders. Thanks to such decentralisation, companies can maintain control over their data, reduce costs and streamline their CSR initiatives more efficiently (Rinne,2002). For instance, rather than relying on auditors or consultants to verify sustainability metrics, companies can implement blockchain systems that automate these processes. This not only enhances operational efficiency but also ensures the credibility of the data being reported.
Interoperability
Blockchain networks can be integrated with other technologies, such as IoT sensors feeding real time data and AI, to enhance CSR efforts (Ezzi, 2022). IoT devices, for instance allow organizations to continuously monitor their societal and environmental impact by tracking their energy consumption, emissions and carbon footprint.
Efficiency leading to cost savings
Finally, blockchain streamline processes can reduce inefficiencies from an operational and administrative point of view. Indeed, traditional CSR reporting would require a more time consuming and expensive process of data collection, analysis and auditing. The time and resources saved by the company thanks to the automation of these processes, can instead be redirected toward more significant social and environmental initiatives.
Cryptocurrency
One of the most widely known applications of blockchain technology is cryptocurrency, with Bitcoin being the pioneer and most recognized example. Thanks to the decentralized and digital nature of Bitcoin, people send and receive money digitally with no need for financial intermediaries. Moreover, every transaction is recorded on a public blockchain, which ensures transparency and security.
Conclusion
Blockchain technology has the potential to overcome difficult challenges within CSR initiatives by ensuring more transparency, accountability and stakeholders’ engagement. However,its adoption comes with high development costs, technical and managerial challenges, and ethical concerns. Key sustainability issues include the significant energy consumption of blockchain algorithms and the complexity of implementing large-scale systems (Parmentola et al., 2021). Despite these obstacles, blockchain’s potential to enhance CSR initiatives makes it a valuable tool for organizations striving for sustainable and socially responsible operations.
My name is Elena Bassoli, and I am a 20-year-old Italian student pursuing a Bachelor’s degree in Business Administration at KU Leuven University in Brussels. Moving to the heart of Europe was a life-changing decision that has allowed me to immerse myself in an international environment and get closer to the European Institutions. Being a part of this dynamic and stimulating community has laid the foundation of my knowledge in the field of Business and Corporate Social Responsibility.
I am passionate about driving positive change, which is why, as a creator within the Circle of Sustainable Europe, I aim to raise awareness and promote sustainable practices in the corporate world through my content. It is my firm belief that the future of our planet depends on our ability to make responsible decisions today, and I am committed to doing my part in making it a reality.
References
Ezzil F., Jarboui, A., & Mouakhar, K. (2022). Exploring the Relationship Between
Blockchain Technology and Corporate Social Responsibility Performance: Empirical
Evidence from European Firms. Journal of the Knowledge Economy.
https://doi.org/10.1007/s13132-022-00946-7
Lock, I., & Seele, P. (2017). Measuring Credibility Perceptions in CSR Communication: A Scale Development to Test Readers Perceived Credibility of CSR Reports.
Management Communication Quarterly, 31(4), 584 613.
https://doi.org/10.1177/0893318917707592
Parmentola, A., Petrillo, A., Tutore, I., & De Felice, F. (2021b). Is blockchain able to enhance environmental sustainability? A systematic review and research agenda from the perspective of Sustainable Development Goals (SDGs). Business Strategy and the Environment, 31(1), 194–217. https://doi.org/10.1002/bse.2882
Rinne, E. (2022). Communicating Corporate Social Responsibility (CSR): How Can Blockchain Help CSR Communication (Bachelor’s thesis)
Upadhyay, A., Mukhuty, S., Kumar, V., & Kazancoglu, Y. (2021). Blockchain technology and the circular economy: Implications for sustainability and social responsibility. Journal of cleaner production, 293, 126130.
