The ESG Blockchain | Topl
Commercial Story | 2022 | 29 pages
The ESG Blockchain: You change the world. We prove it.
Introduction Video
Agenda Current state of ESG: Promise yet compromise Future of verifiable ESG claims: Blockchain to the rescue The Topl solution: Available today and built for the future Next steps: Working with Topl
ESG a “must have” today & is proving to be good business Stakeholders demanding more Businesses reaping reward for ESG focus Consumers demand prioritization of ESG initiatives Studies show strong link ESG & company performance • ~90% want companies to go even further • Margin premiums ~3-8% for ESG initiatives across • 75% Gen Z research to ensure brand “walks the talk” consumer goods, pharma, O&G, financial services, etc. • ESG Funds beat market at 1, 3, 5-year horizons (2019) Increasing willingness to pay ESG “premium” • 75% will pay ~5% sustainability premium Companies large and small reap rewarded for ESG focus • Revenue growth and cost savings drive bottom-line Investors increasingly use company ESG records to • E.g. Unilever, patagonia, LuDeim, Walmart, Heineken make decisions • 80% use ESG ratings/certifications when investing Meta-studies confirm link ESG - financial performance • 1/3 of AuM in US ($17T) & >40% globally ($41T) in 2020 • Analysis of >2000 studies: ESG focus 8x more likely to have positive (vs. negative) impact on equity returns • Fidelity: high ESG rated companies outperform in both bull and bear markets Strong ESG credentials foster brand recognition, trust, and customer loyalty Cone Communications CSR Survey, 2017 Navex ESG Survey, 2020
Despite ESG focus, transparency & verifiable proof remain elusive Certification bodies and processes highly flawed Inability to confidently verify claims leads to high level of subjectivity and abuse “Fair trade” chocolate? • E.g., Nestle to consolidate all certifications with Rainforest Alliance, leaving Chocolate made with many Fairtrade for a less stringent (and cheaper) process (Oct ’20) ingredients: cocoa, sugar, lecithin, vanilla, milk etc… Significant expenses hinder adoption of certification body …But fair-trade certification • E.g., cost to verifiably trace $12M in coffee (4kT) ~$140K and is 90% variable possible if one ingredient is by volume (UTZ) certified (e.g., cocoa) Overall lack of clarity on what and how to measure Thus, a company might use child • E.g., Two different certification bodies ranked Walmart top and third labor to produce one ingredient quartile for its ESG record, proving a lack of uniform standards and still be “fair trade” if another is ethically sourced Scarlet Letters: Remarks before the American Enterprise Institute, Commissioner Pierce (2019); The Challenge of Rating ESG Performance, MacMahon (2020)
Lack of verifiable proof diminishes true impact of ESG claims Accusations of ‘greenwashing’ or getting ‘blindsided’ all too common Greenwashing Blindsiding 2001: pledge to eliminate child labor by 2005 Founded with mission for “all chocolate 100% slave free” 2010: first CSR report, touting its child labor efforts; Recently removed from Slave Free Chocolate list due to advocacy groups critical, citing poor relative supply chain association with Barry Callebaut(1) performance 2010: announces sustainability core to mission Beauty products claiming 100% certified organic / vegan 2018: Greenpeace found key palm oil suppliers causing Facing ~$2M FTC fine for reliance on fake certifications mass deforestation; company under investigation for its role Named top 10 carbon emitter by EU report (2020) Cookies using palm oil labeled “certified sustainable” Ad response: “lowest carbon emission for major airline” Despite certification, recipe uses mix of sustainable and Forced to retract for basing claim on business model vs. unsustainable oils, with as a little as 1% being sustainable actions sustainable Insufficient certification costly; 24 ESG controversies erased >$500B S&P 500 (’14-’19) (1) Logistics partner the subject of International Rights Advocates lawsuit; Industry reports, web research; Financial Times, “ESG controversies wipe $500B off value of US companies”
Agenda Current state of ESG: Promise yet compromise Future of verifiable ESG claims: Blockchain to the rescue The Topl solution: Available today and built for the future Next steps: Working with Topl
Blockchain uniquely positioned to provide trust & transparency for ESG claims Basic Principles of Blockchain Transparent • Detailed list of every transaction ever recorded • Anyone can verify (public) or only a chosen group (private) network Blockchain: a digital ledger Immutable with transactions recorded • Each transaction builds on entire history of previous transactions chronologically and verifiably in tamper proof • Cannot “amend” without changing entire blockchain history manner Secure • No single point of failure, as ledger replicated (decentralized) across all computers (nodes) in network • Decentralized nature makes it tamper proof as corruption would require gaining control of >50% of network Ideal use case allows many disparate actors to transact in transparent, trustless manner
Key architectural design choices define best use for any blockchain Distributed & Decentralized Uncommon Everyone is equal s •Any party can write to but only •Any party can write to / access ain les select parties can access blockchain data ch ion blockchain data •Required to forge trust & transparency across large ock iss network of parties unknown to bl erm each other to P “write” Internal blockchain or “Intranet” Some more equal than others •Only select parties can write to •Only select parties can write to to ed / access data but all can access data ion •Good for internal use wanting •Good for transparency of data iss ability shared, immutable ledger where a consortium controls a erm posted messages ak P … Distributed & Private Public Centralized …aka ability to “read” from blockchain
Caution: a “public” blockchain doesn’t lack for data confidentiality But public is idea where disparate actors want to transact in transparent, trustless manner …& can be publicly verified w/o Record added to blockchain… …exists confidentially… sacrificing confidentiality • When a record is added to blockchain, the • On a public blockchain, anyone can see • Info verified by comparing shape (where impression or shape is added…not the data the entry exists, but cannot access the data is known) to one on the blockchain • The resulting shape is public…not the data details • An exact match verifies info is identical Based on a cryptographic proof protocol, which offers a way for a “prover” to convince a “verifier” that a statement about a secret is true without revealing the secret publicly
Six key characteristics define ideal blockchain for ESG claims s Description Relevance for ESG ain • How robust is it against attacks? ch • What would be required to manipulate or corrupt it Secure • Do smart contracts have any major vulnerabilities? Security a “must have” part of value proposition ock bl all Flexible • Can it run complex business logic, such as smart Must meet expectations for use cases (similar to assets, chain programs and conditional transfers? across all blockchain applications) Key • How accessible is it? Access for all contributors to verify claims; ability of • Can new parties join and participate fully or is it Transparent parties to join and prove claims or view others’ ain centrally controlled? claims ch ock Affordable & • Can it verifiably track digital assets in detail at a price Ability to track individual asset vs. balance bl Traceable commensurate to the value created by doing so? • E.g., 3 quarters, 2 dimes and 1 nickel vs. $1 SG balance E • Can the blockchain be run only by powerful computer for Lightweight nodes or can it be run on a smartphone? Ability to use on lightweight device critical to proving & Scalable • How many transactions per second (tps) can it claims at provenance (e.g., in field, at plant, at mine) process? Specific Energy Ensure it does not counter positive ESG efforts (e.g. Efficient • What is energy requirement of blockchain? energy intensive proof of work consensus mechanisms)
Well-known commercial blockchains suboptimal for ESG claims Description Why not ideal for ESG claims? General-purpose platform High transaction fees impractical for tracing lower value • permissionless, public, PoW consensus, account-based asset classes &/or high transaction volumes, excluding ledger, smart contract programing language some sectors & limiting end-to-end transparency Designed for close consortiums or internal company Private, permissioned nature limits parties who can applications; allows select parties to share private write to or read from BC, allowing only a select few to information and applications write the history or read from it, limiting participation & • permissioned, private, BFT consensus transparency of claims Enables cryptocurrency transactions using mobile phone Lacks capability to represent diverse range of asset • permissionless, pBFT consensus, Ethereum smart classes, limiting ability to support traceability solutions contract capabilities, account-based ledger in different supply chains Facilitates exchange of digital representation of all money Permissioned nature limits parties who can write & forms, ideal for currency trade applications approve transactions, excluding smaller parties (i.e., • permissioned, public, account-based ledger, limited farmers) while allowing only a select few to write the smart contract blockchain’s history Traces movement & goods across supply chain using IoT PoA consensus protocol selects “authority” to approve & devices commit data to blockchain, which favors network • permissioned, public, hybrid system (centralized- centralization & expose the system to biases & conflict decentralized), proof of authority (PoA) consensus of interest Lack of purpose built blockchain for ESG claims hindering market adoption Appendix: Consensus mechanisms or protocols explained in more detail
Agenda Current state of ESG: Promise yet compromise Future of verifiable ESG claims: Blockchain to the rescue The Topl solution: Available today and built for the future Next steps: Working with Topl
Topl blockchain designed to perform exceedingly well across all major requirements of a sustainability focused blockchain s ain • Rigorously tested PoS consensus and enterprise-grade virtual machine offers leading security ch Secure to its users by ensuring network protected against single source of failure and misuse by a ock bad actor bl all Flexible • Topl blockchain can run complex business logic, such as smart assets, chain programs and to conditional transfers Key • Permissionless nature provides independent public ledger, not merely an internal database ain Transparent • Widely visible proof increases transparency and trust to claims ch ock Affordable & • Higher granularity possibly by connecting real-world asset with digital twin in simplest way bl Traceable possible by tracking assets (e.g. specific product) directly instead of simply recording account SG balances (e.g. SKU level) as an affordable transaction fee E • UTXO model results in blockchains lightweight enough to run on mobile phones by allowing for Lightweight users to verify and store only the data that is relevant to them & Scalable • Currently ~100 tps with upgrade path to 1000, Topl delivers transaction confirmation in seconds vs minutes Specific Energy • Consumes 1000x less energy by using PoS consensus mechanism rather than earlier protocols Efficient such as PoW that rely on energy intensive mining
Building our own blockchain frees us from constraints faced by others ESG Constraint Architecture choice Consequence in ESG Technology Only certain parties can view committed For claim to be widely trusted, it needs to be data, rendering transactions unverifiable by widely verified, which private blockchains do anyone outside of the consortium (e.g. not allow private) 1 Transparent Only authorized parties can write and • Consortium owners can act as gatekeepers confirm data to blockchain (i.e., to what claims can me put on the permissioned) blockchain • Limiting “free speech” lessens ability of those whose ESG claims are strongest (e.g. at source) to make them Affordable & Native coin used to both price transactions • Transaction fees can exceed the value of 2 and reward network. Publicly traded nature the asset being transacted (i.e., coffee, Traceable of native coin means transaction price cocoa) increases with appreciation of its token • Limits ability to track all the way to end user Energy Consensus mechanism is a ‘race’ by network • Requires high energy input to maintain, 3 efficient & nodes to solve mathematical puzzle (e.g. diminishing or offsetting ESG efforts Lightweight PoW)
Additional architectural choices allows Topl community (users & partners) to shape the future above & beyond our initial offering Impact Credits Topl’s Impact Credit will change the way sustainability is supported / monetized by converting i verified sustainable practices into additional revenue streams for those creating the impact Impact Credits: tokens to align created impact to any of 17 UN SDGs or ESG claims, traced by Topl • Once earned, can be sold to governments, private sector or individuals pursuing verifiable results in focus area • Exchange and use can create more visibility and transparency into broader ESG reporting Access to credit Digital production history can be leveraged to build credit worthiness, unlocking barriers to access financing and insurance for underserved and rural communities worldwide Alternative Sources • E.g. by recording their production, farmers can leverage their digital production history to build of Credit credit worthiness via the ability to prove verifiable history of sustained income generation
Topl’s Blockchain-as-a-Service allows companies enhanced ESG claim verification capabilities across our full-stack offering Two product offerings BaaS Self-built Seamless connection to Topl Blockchain App Topl App Topl App Topl App through suite of hosted tools and Baa services S+ • Perfect for those with existing digital Baa traceability platforms or tracking off devices Topl Services & Tooling S er off in BaaS+ er g in Custom built, all-inclusive, user-friendly Topl Blockchain g integration provides complete solution towards achieving digital traceability goals Blockchain Services & Tooling Application • Perfect for those requiring end-to-end BaaS and BaaS+ allow access BaaS and BaaS+ include tools BaaS+ offers exclusive access software development support or to connect and store proof of to make its use as simple as to Topl app development and custom-made blockchain solutions data on the Topl Blockchain any API accessible service architecture.
BaaS: tiered pricing to meet specific customer needs Startup Professional Enterprise From From From $0/month $50/month $500/month Small scale initiatives and startups Mid-market challengers and clients Market leaders and enterprise clients with potential for growth with existing platforms with existing platforms • Free access to testing network • Free access to testing network • Free access to testing network • Single-user access control • Multi-user access control • Advanced multi-user access • Community support • Direct customer support • 24-hour response time on direct • 20,000 daily API call limit • 100,000 daily API call limit customer support • Pre-purchase Transactions • Pre-purchase Transactions • 1,000,000 daily API call limit • Pre-purchase and 15% discount on Transactions Transactions • After subscribing to Topl's Blockchain-as-a-Service, transactions are needed to use the blockchain • Each time an asset is created, transferred, or updated, a $0.15 fee is applied • Like cloud storage credits, you can pre-pay fees through the purchase of bundled transactions
Strong commercial traction across several key use cases FDA Regulated Energy Logistics Track food/healthcare products from Enable measurement of carbon Support data & asset management source abatement BaaS Offering BaaS Offering BaaS+ Offering • Offers workflow automation and • American energy company engaged in • SaaS-based enterprise asset management authorization services hydrocarbon exploration and supply chain solution provider • Cold chain product traces temperature- • Focus on low costs, high returns, and • TrackX’s Global Asset Management for controlled assets like COVID-19 test kits lowest emissions possible to transform Enterprises (GAME) platform enables the and vaccines for Osang Healthcare long-term future of energy Industrial Internet of Things (IIoT) Media Sourcery cold chain platform Uses Topl blockchain to track water used in Integrates Topl blockchain with core GAME enabled by Topl Blockchain to provide fracking to verify its origin from sustainable platform so customers can confidently and transparency, traceability, & assurance of source securely share verified event data to lower vital HC supplies costs and increase transparency
Agenda Current state of ESG: Promise yet compromise Future of verifiable ESG claims: Blockchain to the rescue The Topl solution: Available today and built for the future Next steps: Working with Topl
Working with Topl BaaS: journey from today to transparency 1-2 weeks 3-6 weeks 1 week Register on Topl’s website & Use internal development cycles to Maintain active subscription for subscribe to tier of preference to develop platform or integrate an continued network access and implement blockchain powered existing solution support solution Phase milestones Phase milestones Phase milestones • Know how to interact with Topl • Develop or integrate application on • Continue to receive blockchain blockchain top of Topl’s blockchain support and network access • Access documentation, tutorials • Move solution to deployment • Purchase required Transactions and community support network • Follow subsequent development • Interact with test network to • Access tiered-based support and cycles to add new features to your design desired use cases API calls solution Ideal for those with in-house development capabilities or traceability solution ready to integrate to Topl
Working with Topl BaaS+: the journey from today to transparency 2 weeks 3-4 weeks 3-6 months 1 week Define project goals, timeline Design project architecture Develop & test features on Deploy solution to live and structure and detailed user stories testnet environment Phase milestones Phase milestones Phase milestones Phase milestones • Define goals, main use • Develop user stories • Develop software platform • Deploy solution to main cases • Design solution and blockchain integrations network • Agree on overall project architecture • Iterate using testing • Maintain active subscription structure and expected • Agree on proposed environment for continued network access milestones solution and user stories • Agree on project & support • Draft project proposal to before development deployment or required • Purchase required begin subsequent phases finetuning Transactions Ideal for those that require end-to-end development support or custom-made advanced solutions
Next steps Incorporate your feedback to clarify any key issues Agree on timeline, deliverables and team members to explore further collaboration Schedule follow-up meeting / call
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