Cybersafetyconnections January 2021 Vol#51
- ESG-Environmental, Social, and Governance are top priority currently.
- How ESG, Cryptocurrency mining and Cybersecurity are related. Cryptocurrency mining, other industries’ energy usage impact in our world.
- ESG growing importance, COVID-19 impact, and Cybersecurity.
- ESG impacts businesses of all sizes and has its challenges.
ESG-Environmental, Social, and Governance are to priority.
What connection do I a CPA (Certified Public Accountant)/CFE (Certified Fraud Examiner) have with cryptocurrency, NFT (Non-Fungible Tokens), and Bitcoin Mining in Twitter spaces? Keep an open mind because it is all connected.
Last week’s blog was on Cryptocurrency and NFT(Non-Fungible Token) Cryptocurrency and the Small-to-Midsized Businesses (SMBs) .This week, another dimension is being added to the blog on the emerging issue known as ESG- Environmental, Social, and Governance.
Let me take you down this road by trying to provide the connection if you’d allow me.
Cryptocurrency is used over the internet and therefore is subject to cyberattacks. The process of bringing Bitcoin a cryptocurrency into existence is called mining and involves the use of energy. A single bitcoin transaction is estimated to burn 2,292.5 kilowatts hours of electricity which is enough to power a typical U.S household for 78 days. Bitcoin Energy Use. And a report of Energy Usage Comparison showed that the Banking and Gold industry consumed more energy at 263.72 TWh per year and 240.61 TWh compared to Bitcoin Mining at 113.89 TWh per year. Ethereum is reported to use 44.5 TWh per year which is about half of Bitcoin usage. Bitcoin Vs. Ethereum. NFTs are minted on Ethereum blockchain.
How Cryptocurrency mining and ESG are related
The increasing use of energy by Bitcoin, Ethereum, and other industries like mining, manufacturing, automobile, and aerospace etc. increases our carbon footprint, increasing the risk of climate change, decreases supply, and increases cost. The increase in carbon emission is leading to global warming that causes melting of the polar ice caps, the rising of sea levels, the disturbance of animals’ natural habitats, extreme weather events, and so many more negative side effects that are dangerous to the planet, to human and animal life, and to our future. High Cost of Carbon Emission.
Here is where this week’s article comes into play. While this blog has focused on cybersecurity for Small-to-Midsized Businesses (SMBs), ESG-Environmental, Social and Governance concerns especially climate issues have come to the forefront of the World Economic Forum’s annual Global Risks Report. The 17th edition was just published. Top List of Global Risks.
ESG-Environmental, Social and Governance examples are provided here. Energy usage falls under Environmental factors as well as natural resources scarcity, pollution, and waste. Social factors include the organization’s values and what it does in relation to labor, supply chain standards, diversity, equity and inclusion efforts, customer privacy, animal welfare, and conservatives. The governance component includes oversight and management structures, diversity in the board of directors, executive and employee compensation, and crisis response. Insight Magazine Fall 2021, ESG.
ESG growing importance, COVID-19 impact, and Cybersecurity.
ESG Growing Importance
Of course, ESG – Environment, Social and Governance is not new. Companies have for years produced reports to show how their operations affect the environment. ESG has been gaining ground and is becoming a business priority as there is a similarity between the unpredictable risk of the pandemic and climate crisis that has had a great effect on the global economy. Investors, employees, customers, supply chain partners, regulators, and stakeholders are now looking for ESG reports to help them increase the rate of investment and move towards businesses that make ESG a priority. And this impacts bottom line. Businesses like automakers are responding by making known their intention on producing more electric vehicles in the coming year, businesses including many accounting associations and nations are setting Net-Zero target. Journal of Accountancy December 2021, Why ESG ?
How COVID-19, ESG, Cryptocurrency mining, and Cybersecurity, are related
COVID-19 has impacted economic growth globally with some countries doing better because of high vaccination rates, digital transformation, and growth opportunities that would allow their economies to recover faster. Because of the different growth rates in global economies, it is not easy for governments to reach an agreement on reducing carbon emissions in order to slow global warming. And with the digital transformation and remote work that came with COVID-19, there was an increase in cyberattacks. COVID-19 urgency made it a priority over the climate risk and cybersecurity risk with government and organizations failing in the area of cybersecurity. Climate Priority
ESG impacts businesses of all sizes and has its challenges.
Is ESG for businesses of all sizes?
While big businesses are able to dedicate resources to EGS issues, small businesses can follow the examples of big businesses to take a look at the risk of disruption to their supply chain, service providers, utilities, and customers to limit the effect of bottlenecks and outages.SMBs can benefit from making faster decisions, having flexibility, and being closer to their customers so they understand customers’ needs.
Challenges of ESG
Reporting Standards
With ESG, there are no global reporting standards so reports from different industries and businesses are not comparable across the globe. Comparability may not be completely realistic even if there was a uniform global standard.
International investors demanded standards that are high quality, transparent, reliable, and provide comparable reporting by companies on Climate and other ESG issues.
The International Financial Reporting Standard (IFRS) Foundation in response to investors’ concerns proposed the formation of an International Sustainability Standards Board (ISSB). ISSB will help with providing a comprehensive global minimum standard of disclosures related to how companies are to report ESG opportunities and risks for investors to make informed decisions.
Regulatory Issues
Another challenge is that ESG reporting is still voluntary and the SEC is looking at ways to make ESG reporting a requirement for public companies and penalties for non-compliance. IFRS and ISSB, Journal of Accountancy December 2021.
Proof of Work to Proof of Stake
Proof of work and proof of stake are two main ways digital currency transactions are verified. Proof of work is more secure than proof of stake and it is slower and consumes more energy. So would moving to proof of stake resolve the energy consumption issue? This discussion will be continued along with Cryptocurrency, NFT and WEB3.Career and calling are kind of together in this space. Proof of Work or Stake?
Conclusion
The ESG, Cryptocurrency mining and Cybersecurity blog is just getting started. Since we live, work and earn income in our COVID-19 world, use energy as individuals and as businesses, interact with each other, and businesses online and offline, Cryptocurrency, Cybersecurity, and ESG affects us all including minting NFTS. So, we need to be concerned and involved in the efforts to limit energy consumption so as to reduce carbon footprint and help halt global warming and its effects.
Subscribe to get the latest post.
Likes, comments, questions and feedbacks are welcome.
