Organisations are increasingly striving to develop a supply chain that adheres to their brand’s sustainability and ethical standards. Here’s how blockchain can enable this…
As our global supply chains become more and more complex, ensuring that contractual commitments around sustainability and ethical practices are met at each stage of the supply chain has become extremely challenging.
Along with this increased complexity, the economic and reputational cost of a lapse in compliance is increasing as well. Organisations want to be part of the solution, not generating bad headlines and being seen as part of the problem.
As such, organisations are increasingly striving to develop a supply chain that adheres to their brand’s sustainability and ethical standards. Starbucks, to name one example, has set a 2020 goal of ensuring all tea and cocoa is ethically sourced. Johnson & Johnson has publicly stated its commitment to determining the use, country of origin and source of 3TG minerals (Tin, Tungsten, Tantalum and Gold) used in its global product portfolio. Such commitments require extreme and committed due diligence in supply chain management.
One way that forward-looking businesses are achieving such diligence is with enterprise contract management. For the first time in the history of commerce, contracts are being completely digitised. This enables procurement organisations to identify, assess and automatically mitigate risk through advanced capabilities like automated supplier checks and region-based regulatory compliance. And emerging technologies like blockchain and artificial intelligence (AI) are poised to dramatically increase the benefits of an enterprise contract management platform.
Today, we at Icertis are working with customers on solutions that will allow them to utilise smart contracts that use a consortium blockchain to create an immutable ledger of transactions. Under such a system, a customer and its suppliers will place their contracts on the blockchain, thus ensuring that the required terms are present in all the related contracts. Once on the blockchain, AI will verify that all necessary contractual obligations are present in the documents. This will ensure the tracking of commitments across a consortium of suppliers, enabling a new level of commercial collaboration, visibility and accountability. And to ensure sensitive information is not exposed, visibility of contracts in the chain will be restricted based on privileges that allow only contracting parties to see their contract, preserving the sanctity of the supply chain.
This technology turns contracts into living business assets to achieve once-divergent goals.
Manufacturers can ensure their suppliers comply to standards and contractual commitments around privacy, sustainability and labour laws. Suppliers, meanwhile, can prove that they comply, while not exposing the details of their subcontracts within the supply chain.
And it’s not just about tea, cocoa or conflict minerals. This technology can also enforce compliance requirements like data privacy (including GDPR), information security, ITAR (International Trade in Arms Regulation) and other regulations.
We are entering a new era of commerce, when contracts stop being static documents forgotten about after execution and actively start reducing risk and creating value for enterprises throughout their lifecycle. Smart contracts powered by AI and blockchain can protect and optimize businesses in ways never before possible, including in their supply chain.