As already said in our article here a clear and effective strategy for ESG has become a “must have” for companies rather than a “nice to have” to demonstrate that the ESG objectives have been achieved.
Organizations are feeling the pressure to redefine their own environmental goals and are starting to implement lasting changes that will reshape internal operations. Issues around the consistency, transparency, and reliability of ESG data are becoming more pressing as governments and supranational bodies in the UK and EU set new mandatory requirements for company reporting on sustainability.
Blockchain technology is one of many emerging technologies that has the potential to help solve some of the environmental problems that we face today. But how?
Using the power of contracts
The starting point is the contract: seizing legal instruments to tackle and address the most pressing ESG challenges allow us to drive changes in a real-world and in a real, effective, and measurable way.
Contracts define the rules, objectives, metrics, and responsibilities between parties, setting clear expectations regarding ESG performance. They can incorporate KPIs, legal parameters, quality benchmarks, and penalties for non-compliance—but traditional contract structures alone are often insufficient to ensure ESG goals are met.
Many organizations recognize the importance of integrating ESG clauses into agreements. However, the challenge lies in operationalizing these clauses—ensuring they don’t just exist on paper but actively drive measurable outcomes.
Trakti: the sustainability angle
There are three pillars to tackle ESG goals: innovation, execution, and commitment: smart legal contracts provide all these three pillars.
To truly embed ESG principles into business operations, companies need contracts that execute, track, and verify ESG commitments. This is where smart legal contracts come into play.
Smart legal contracts provide three essential pillars for achieving ESG goals: innovation, execution, and commitment. They act as self-executing agreements that can automatically monitor, enforce, and report on ESG metrics in real time.Today consumers, investors, governments are asking for real measurements, an auditable system of record that can track emissions, provenance, provide data security, prevent the double-counting of emissions and introduce transparency to prove environmental/ESG performance.
Smart legal contract can bridge the gap between expectation and reality; they can manage, measure, monitor, verify and report data, processes, and workflows. ESG metrics can be implemented in contracts as KPIs and can be measured and reported.
Smart legal contract gives the real change to talk with third systems and external data sources. This capability makes smart legal contracts powerful tools as auditors and as evidence of performance, a digital mirror to real world events.
In addition, notarization on Blockchain technology provides parties with a single source of truth source of truth and a complete and transparent picture on the relationship.They permit to create and introduce elements of effectiveness, efficiency, and certainty of the legal relationship; they are tools to achieve the objectives set out in the contract.
Trakti offers a full no-code modeling environment for Smart Legal Contracts where companies can edit the Smart Legal Contract structure and monitor the sequence of approvals, reviews and authorizations received. This means that stakeholders can easily understand the contracts and operational implications and can see real time how the contract is monitoring the process, rating and qualifying production, automating payment and distributing rewards.
Actors can agree on the clauses and ways in which contracts can be triggered and executed to automate performance checks and to automate the calculation of penalties and incentives to be assigned based on performance.
