Business

Using Blockchain-Enabled Financial Models to Enhance Sustainable Forest Management Practices-By Carl Mensah Ahadzi

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With the progress in technology these days, forest management is going toward using more computer-based tools to help make and carry out long-term plans. Different computer techniques, like linear programming and heuristic programming with heuristic rules, are used to find the best way to schedule and simulate things so that they work better and faster. But there doesn’t seem to be a good model for studying sustainable forest management and coming up with answers for its real problems. Researchers think that fine-tuning a model using the latest computer technology and focused on usefulness could help them come up with an organized way to make decisions that will lead to the best answers in the complicated real world.

Sustainable forest management, on the other hand, is a subject that matters all over the world. Forest management is a field of forestry that deals with the general planning and running of forests. It includes legal, economic, and social issues, as well as science and technical ones, like protecting forests, growing trees, and setting rules for how they should be managed. The main goal of managing forests is to make sure that the most goods and services are produced in a way that is sustainable and protects the forests’ water, land, and variety of plants and animals. It is called “sustainable forest management” when you use and take care of woods in a way that takes into account the biological, economic, and social needs of both current and future generations. Sustainable forest management shows that it can work by making money, keeping the forest healthy, and improving the social and economic well-being of the forest workers and the community. It also makes more forest goods available. Sustainable forest management is a new way to look at forests that combines growing new trees, taking down old ones, and getting wood and other forest goods all into one process. This is where blockchain technology comes to fore.

Blockchain technology, a decentralized and distributed digital ledger, has gained attention due to its successful implementation in cryptocurrency systems. It is a decentralized and distributed digital ledger that records transactions across multiple computers, ensuring the trustless nature and security of the network. This technology can bring about real and positive changes in the world, including greater financial security for individuals and communities in forestry and being a scalable solution in such industries. Sustainable forest management is crucial for the health and well-being of both people and the planet. They cover one-third of the Earth’s land mass and perform vital functions such as generating oxygen, providing habitat for wildlife, purifying water, regulating the climate, and providing timber and non-timber products. Deforestation is a key concern, as it is the removal of forests on a large scale and can permanently damage the environment.

Blockchain technology offers several potential advantages for sustainable forest management compared to traditional databases. First, it provides a more secure and efficient solution for data management, making it resistant to data modification and less vulnerable to cybersecurity threats. Second, it can reduce the administrative burden of certification processes and administrative burdens. Tokenization of forest lands allows small-scale investors to participate in sustainable forest management, diversifying ownership and facilitating transfer of ownership. However, there are potential challenges and limitations in this area, such as low digitization within the forestry sector, concerns about regulators and land managers accepting blockchain-enabled evidence base, and interoperability issues.

Incorporating blockchain with existing forest management systems can help ensure the financial viability of sustainable forest management practices. By integrating blockchain with existing systems, forest authorities and the public can easily access and assess the integrity of field data, identifying potential problems and supporting adaptive and collaborative ecosystem-based management. The decentralized nature of blockchain technology can also improve data management in the forestry sector, as it can be recorded directly on a distributed ledger and cannot be altered or removed.

It is worthy of note that blockchain technology has the potential to revolutionize sustainable forest management by providing transparency, traceability, and a decentralized, distrusted ledger for transactions across computers in a network. However, challenges and limitations remain, including the need for regulatory acceptance and interoperability issues. More so, Blockchain technology offers a promising solution to address the challenges of transparency and accountability in sustainable forest management. It provides transparent, immutable, and computable records of the custodianship for each unit of environmental value generated by a forest, allowing for easy measurement and universal understanding of environmental values. This has led to new currencies based on different types of environmental values, such as carbon absorption capacity, biodiversity, and water resource protection.

Smart contracts, self-executing contracts, can reduce information asymmetry between forest owners and buyers, providing a platform for democratization and fair distribution of resources. However, both the technology and legislation around blockchain are evolving, and it may take some time before the full potential of blockchain is realized. Case studies and success stories show that blockchain can be used to support local people at a more granular level in developing countries, such as South America, Southeast Asia, or the South Pacific. Renewable energy sources, where blockchain is also being implemented, may also receive attention in areas like solar panel validation.

Blockchain technology has the potential to radically change forest management and environmental conservation. Companies like Veridium are working to create tokenized carbon credits, allowing investors to invest in the preservation of important forests and obtain verified carbon reduction credits. Organizations like Our Sci in the Congo Basin have implemented blockchain technology for forest management, empowering local people to protect and monitor rainforests. The Woodwell Climate Research Center has launched the Trase platform, providing data and trade flow information for jurisdictional and supply chain due diligence using Hyperledger blockchain.

The Borneo Nature Foundation (BNF) has successfully implemented blockchain technology to share and verify data on ecosystem services contracts between communities and investors, receiving a grant from the UK Space Agency to simulate and trial additional innovations in earth observation-assisted sustainable development. Globalpak, a platform that integrates blockchain with geospatial technology and remote sensing data, aims to streamline global supply chains by securely recording geospatial intelligence and remote sensing data.

Blockchain-enabled financial models have numerous positive impacts on sustainable forest management, enhancing efficiency and transparency in financial transactions, minimizing intermediary trust brokers and associated costs. However, resistance from vested interests may arise during implementation projects. Conclusively, the utilization and implementation of advanced blockchain-enabled financial models present numerous opportunities and potentials to enhance the effectiveness, efficiency, and success of sustainable forest management practices.

The Author is a Chartered Accountant by profession and a Fellow of the Institute of Chartered Accountants Ghana. He is PhD candidate at the Girne American University, he also has an MBA in Finance from the Central University of Ghana and Two (2) Bachelor’s Degrees in Commerce and Law from University of Cape Coast and KNUST respectively. Complimentary to these are Certifications in Big Data/ Data Science from IBM, Certified Scrum Master from Scrum Alliance, and BlockChain from the Blockchain Council. He works currently as the Chief Compliance Manager at the Forestry Commission of Ghana.

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