In this article we cover...
- Introduction - A radical overhaul for nonprofit transparency
- How blockchain technology can help increase donor support
- Using digital currencies to make disaster relief more efficient
- Supply chains and immutable evidence
- Real world use cases - smart agriculture and improving livelihoods
- Next steps with increasing your impact
As the adoption of blockchain continues to increase we are seeing new and innovative ways of tackling business problems with the technology.
For the social sector, where often we see barriers to success due to a lack of transparency, accountability, and limits with the ways donations can be accepted, blockchain technology can have vastly impactful implications.
It provides new ways to deal with humanitarian aid, governmental accountability, as well as corporate and individual giving. Something that is vital at a time when we see increasing numbers of missions launched to tackle social and environmental problems but who are faced with a growing distrust in online philanthropy.
So how will blockchain technology increase the impact created by the social sector in this year? Let’s take a look at some of the key areas it can help nonprofits and corporations with social missions to achieve their objectives.
A radical overhaul for nonprofit transparency
I was recently on a podcast with fundraising expert Jason Lewis and we spoke in length about transparency. Times and attitudes have changed and donors today expect more. In general, nonprofits and charities suffer from a lack of transparency with how donations are allocated.
About one third of Americans don’t trust charitable groups to spend their funds well, and more than 60% of people globally don’t have faith that groups can accomplish their missions.
To address the issue of transparency many nonprofits provide annual or quarterly impact reports outlining details of the organisation’s success, funding, and expenses. Some also opt to list with Charity Navigator or seek a rating with GuideStar to help build confidence with the donor community.
Though much of this reporting offers aggregate statistics and a broad view of transparency, the reporting is historical and it gives little insight into the impact at the program level and how funds are being used day to day.
Corruption is also a huge issue particularly in less economically developed countries where many of the programs are run. Whether it’s misplaced aid, bribery, there is the potential for irreparable damage to an organisation’s image.
ACFE reports that organisations suffer average losses of $150,000 per investigated case due to occupational fraud and corruption. And in 2012, former United Nations Secretary General Ban Ki-moon said 30 percent of all U.N. development assistance was lost to corruption.
The report also found that organisations with specific anti-fraud controls in place had 14.3%–54% lower cases and where there were frauds, they were detected 33.3%–50% more quickly.
How blockchain technology can help increase donor support
Blockchain can provide nonprofit organisations with the ability to account for their activities, track funds transfer from the donor to beneficiary, and show that employees and volunteers are fulfilling their obligations. With every transaction intricately recorded, any misuse of funds becomes apparent.
A good example is Britain’s Start Network (includes 42 leading aid agencies such as Oxfam, Care International and Save the Children) which has teamed up with social enterprise start up Disberse to use blockchain.
This exciting partnership could lead to the transformation needed in the way money flows through the humanitarian system. It could catalyse a new way of working, one that is transparent, fast and which drives accountability to taxpayers and those affected by crises. - Sean Lowrie, Director of Start Network
By using blockchain, donors can now be reassured that their funds have reached desired destinations and the money spent on the project. Rather than publishing huge reports that are often hard to validate, nonprofits can simply provide audit trail feedback. The ability to track funds in real time helps to build donor confidence, trust and, ultimately, to generate additional funding.
Using digital currencies to make disaster relief more efficient
In 2008 I travelled to Myanmar on a relief mission following Cyclone Nargis. Due to political unrest and the challenges faced by the NGO community a group of us, volunteers from a small foundation, decided to make our way down to the Myanmar delta from Singapore to distribute member support.
The first 72 hours after a disaster are crucial; response must begin during that time to save lives with a number of essential steps to mitigate the loss of life. One of these steps, and that which supports all others, is the mobilisation of funding.
The time it takes to assess an affected community’s needs, provide sufficient support, and gear up international supply chains to manage donor support means that can take several months for NGOs to actually deliver relief. Complexity is the issue here - There is too much that needs to happen between the person wanting to help and the person needing help. High operational overheads, slow financial transfer processes and high fees, and a misalignment of community needs, all contribute to an old school inefficient process.
When we made the decision to travel to Myanmar it was because of the issues the large international NGOs were having distributing funds to the smaller charities working on the ground. So we took physical cash with us to give to those charities as well as the village heads in affected areas.
Blockchain can have a huge impact when dealing with disaster relief. Enabling decentralised, fast and almost zero cost transfer of value is one of the most exciting features of the technology, and it knows no borders. The transparency and immutability features of blockchain mitigate the risks of funds being misused and the ease of delivery is a huge benefit to aid agencies.
And the user experience obstacles that we have seen over the last decade have been overcome. Organisations such as Stellar are introducing technology that will mean blockchain can operate in the background without the nonprofit needing to know.
Stellar’s Protocol 15 update in December 2020 launched important new features such as Claimable balances and Sponsored reserves that facilitate development of financial applications that gain all the advantages of blockchain efficiency, but without the end users ever needing to know that these new ways of working are being powered by people like Stellar.
We’re on the cusp of seeing a wave of new solutions for tackling nonprofit field work particularly during times of disaster relief when speed and efficiency are vital.
Supply chains and immutable evidence
Supply chains offer a plethora of issues that can be tackled by blockchain technology in the areas of process management, supply chain auditing, and consumer insight. It’s a growing area that's driven by corporate governance and consumer sentiment and there’s plenty of evidence to show that brands need to be ethical to survive.
In April 2020, Nestle, a Swiss food and drink processing company, partnered with a party certifier, The Rainforest Alliance, to independently provide data and bring its transparency and sustainability efforts to life for consumers. Nestle has expanded the use of the IBM Food Trust blockchain technology platform in the launch of Zoégas whole beans and roast and ground coffee in Sweden.
At Task we’re seeing these same use cases emerge with ethical brands that want to bring their consumers closer to producers with blockchain technology central in that mission.
An example is Loving Earth who produce quality, organic, real chocolate achieved by working with small producer communities around the world. Their ethos is to support those communities as best they can which means closing the gap between the people who purchase their chocolate and the producers in the south American and African continents that produce the raw materials.
Using Task, Loving Earth will allow their customers to scan QR code on the chocolate wrappers that launches a direct connection to the producer communities. These consumers can then donate directly to that community and in this case Loving Earth will also facilitate the funding of tree planting to help regenerate the land that’s being impacted.
Sending funds to a remote project is not new, however using Stellar’s blockchain means that a donation from an individual or organisation can be split and distributed to hundreds of farmers at almost zero transactional cost, with local off ramping (i.e. as a farmer you can send the money into your local bank account) - removing multiple middle-men inefficiencies that have plagued these initiatives for decades.
Real world use cases - smart agriculture and improving livelihoods
Elon Musk makes a valid point “We’re running the most dangerous experiment in history right now, which is to see how much carbon dioxide the atmosphere can handle before there is an environmental catastrophe.”
The issue of climate change has accelerated and, despite scientific concerns, progress with implementing mitigation strategies has been slower than expected. But change is happening and when we look at the innovations taking place in smart agriculture, much being driven by the need to hit the 2030 targets, there’s reason for optimism.
Blockchain promises a reliable source of truth about the state of farms, inventories and contracts in agriculture, where the collection of such information is often incredibly costly. And the use of data and information becomes increasingly crucial for the agriculture sector to improve productivity and sustainability.
According to NASSCOM 2019 report, there were more than 450 startups in the agritech sector at a year-on-year growth rate of 25%. Many of these organisations are focused on regenerative farming techniques where soil treatment and crop distribution can have a huge impact on CO2 levels in the atmosphere - as documented in Netflix’s 2020 movie Kiss the Ground.
Approximately 3.4 billion people – or 45% of the world’s population – live in rural areas. Roughly 2 billion people (26.7% of the world population) derive their livelihoods from agriculture. Many of these people are in low income households which provides an ideal opportunity to help improve their livelihoods whilst also helping the environment.
Startups like NORI and CarbonX have taken an early lead in developing the future, tokenised carbon markets and their ability to succeed is dependent on a network of social enterprises that can drive demand.
SmartAgro work with indigenous minorities and Khmers living in the mountainous region of Cambodia across the provinces of Mondulkiri, Kratie and Tbong Khmum. A process they teach is the introduction of cover crops - a cover crop is a plant that is used to cover and protect the soil during the off season or when the soil would otherwise be bare and unprotected.
At the moment, conventional agriculture emits 25% of all GHGs worldwide, on the Asian continent it is 42%. If farmers stop tilling the soil and integrate cover crops, they can sequester between 1-4t CO2 from the atmosphere per hectare per year and reverse global warming depending on the scale they implement these practices on. This is a huge opportunity for humanity, society and the planet as a whole. - Marc Eberle, SmartAgro
SmartAgro can track and verify the change in farming techniques and by using Stellar blockchain to verify the accuracy of the data, a business model is implemented that connects these small producers to funders who want to incentivise the process - farmers earn rewards whilst contributing to environmental sustainability.
You can listen the full SmartAgro story and how they are using blockchain technology on our podcast: SmartAgro Podcast
Next steps with increasing your impact
The renewed interest in the crypto markets in 2020, in particular the real-life adoption of Bitcoin to be used as a purchasing mechanism, is seeing a new wave of use cases for the underlying technology - blockchain.
The social sector is perhaps the most important with the growing number of out-of-season natural disasters occurring and the ongoing pressure to fix our environment and implement services that support resource conservation and recycling.
Blockchain is a critical piece of the puzzle and its ability to facilitate the fast transfer of digital money across borders, and to provide transparency and accountability for how funds are spent goes a long way to ensuring maximum social and environmental impact is achieved.
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