Steve McNew, Senior Managing Director and Global Leader for FTI Technology’s Blockchain & Digital Assets practice, is one of the industry’s foremost experts in enterprise blockchain, cryptocurrency and the future of the digital assets space. He recently spoke with Mark Cole, Co-General Counsel and Secretary at USD Group LLC, an energy infrastructure solutions provider, about a range of topics, including blockchain opportunities in the energy industry, the importance of innovation during disruptive periods and ESG considerations.
McNew: Mark, you’ve become quite involved with the blockchain industry in recent years, including as an active member of the Texas Blockchain Council and a regular speaker at industry events. I know we both agree that we’re in a real period of disruption, which creates risk and opportunity. Can you give me your bird’s eye view of the industry’s top issues right now?
Cole: I think one of the biggest, most persistent issues is that there’s still a widespread misunderstanding about what blockchain is and isn’t. So many people immediately think ‘Bitcoin’ when they hear the word blockchain. In reality, that’s only one part of the bigger picture.
Even though Bitcoin has been around for a long time, this industry is still in its early days. As it starts to mature, there’s a significant need for education and awareness, in addition to policy guidance and standardized best practices.
McNew: I agree completely. In fact, a survey we issued earlier this year found that more than 80% of decision makers agree that people continue to struggle to distinguish between blockchain technology and cryptocurrency. At the same time, 95% said blockchain investment is a priority. The survey respondents were in the financial services and fintech industries, but in my experience, those findings apply across most industries. Is that consistent with what you’re seeing in the energy sector?
Cole: In terms of awareness, yes, and the issue of education goes hand-in-hand with the ability to execute on projects that actually make an impact. For example, in energy, we have supply chain challenges and the need to track data across a wide range of activities, regions, regulations, partners, etc. Without an understanding of the technology available, how can energy companies leverage it to solve problems? Conversely, if leaders can get to a place where they are familiar with the nuances and recognize the benefits of applying blockchain to different use cases, such as carbon metrics, product and shipment tracking, billing, contracting, etc., I think the possibilities for the energy industry are massive.
To date, the energy industry has often been seen as a tech laggard, and in many cases, partial and siloed solutions have been cobbled together in an attempt to solve some of the challenges I mentioned. However, interoperability between solutions is lacking. This is critical, as we need separate solutions to work together cohesively. I think of it like a railway network — if each rail system has different gauges, trains can’t cross from one to another, but when the gauges are all the same, or built for interoperability, it becomes seamless. If the energy industry can collaborate and invite innovation, we’ll be able to increase efficiencies and lead on some of the major changes that governments and society more broadly want to see. And this requires companies to even rethink how they view data — changing from seeing it as a cost, to an asset.
McNew: ESG is a big part of that. Issues including greenwashing, lack of standardized metrics and tracking infrastructure have the potential to be solved with blockchain. It can help establish benchmarks, transparency and efficiency.
Cole: Yes, the world is demanding more in ESG, and the energy industry needs to engage with that in a transparent way. Yet everyone is struggling with transparency, reliability, standardization and data integrity. There’s a lot of uncertainty about what and how to track for ESG, and a lack of trust in what is reported, due to greenwashing. It’s important to remember that is more than a reputational issue. Serious fines are being handed down for greenwashing, and the overall compliance requirements for ESG are expected to grow. I also think there’s likely to be a rise in legal action relating to ESG — particularly as activists and environmental groups look to hold organizations accountable.
In terms of blockchain’s role in this ecosystem, I think we’re at the front end of seeing the value blockchain can bring to solving some of the challenges in ESG. The way toward fully accepted and defensible standards is to be open and rigorous with the data that’s available, and then refining from there. Blockchain is a great platform for this because it radically decreases the ability to manipulate information and it introduces a great deal of efficiency in the process of tracking and sharing data — which is a key part of what’s needed to shape the conversations around ESG standards.
McNew: Can you tell me anything about how you’re approaching this at USD Group?
Cole: I view the energy industry as a critical part of making the transition to a more sustainable future. To do this, we need radical efficiency, and blockchain has the potential to be an effective vehicle for that.
Efficiency and transparency are priorities for us at USD Group. We have initiatives to establish destination terminals for renewable diesel and sustainable aviation fuel. I would love to establish a process for verified data from those terminals to flow into a system that has data from other sources as well — which ultimately will enable us to transparently and automatically measure, track and validate critical information about our operations and thus support our customers and other stakeholders.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
Senior Managing Director, FTI Consulting
Co-General Counsel and Secretary, USD Group LLC