For enterprises with complex, global supply chains, the risk associated with sourcing materials from unethical suppliers has never been higher.
The risk may come in the form of a hefty fine against a company for the misdeeds of a contractor who misuses customer data. Or it could come in the form of negative news stories about unsustainable or unethical mining practices that hurt the brand’s esteem with customers.
The strongest protection a buyer has against a bad supplier is the contract. As the foundation of the commercial relationship, the contract enshrines standards for sustainability, ethics and labor laws the buyer expects its suppliers to uphold.
Limitations with Traditional Contract Management
Yet on its own, the contract does not provide ample visibility down the supply chain, and thus does not fully protect the company from risk. That’s because while a buyer knows what standards it has included in contracts with direct suppliers, it has been difficult if not impossible for the buyer to know what standards that supplier is setting for its subcontractors, and those subcontractors with its subcontractors. The more tiers a supply chain has, the less visibility the final buyer has.
And the challenge doesn’t just run down the supply chain: Just as companies want to know their suppliers are being ethical, ethical suppliers want to be able to show to their customers that they are complying with all rules and regulations yet may be barred from sharing contract details that prove it.
Blockchain Offers a New Way
Today, Icertis and Mercedes-Benz Cars announced a partnership to develop a cutting-edge new approach to sourcing that leverages the power of blockchain to address the carmaker’s hardest sourcing and contracting challenges. The announcement of this partnership follows a successful proof-of-concept by the two companies.
Mercedes-Benz Cars will use a consortium blockchain built on the Icertis Blockchain Framework to verify that suppliers all the way down the supply chain have included required sustainability and ethics clauses in their contracts.
As materials flow up the supply chain, each tier will upload their compliance information on to the blockchain. The immutable nature of blockchain means that this compliance information cannot be altered, and can serve as a system of record.
Simultaneously, the technology will also keep information secure: the consortium will be structured to only flow necessary information up to Mercedes-Benz, giving suppliers assurance that they aren’t divulging sensitive commercial information while showing that they are in compliance.
At scale, this technology will give Mercedes-Benz a global view of its supply chain, allowing for deep visibility into parts of its supply chain that may be originating risk.
Driving Innovation Forward
It’s beyond exciting to work with Mercedes-Benz, one of the most innovate companies in the world, to apply this cutting-edge technology.
And this is just the beginning.
Moving forward, companies with complex supply chains who want to use the Icertis Blockchain Framework will have the option to leverage Icertis’ AI capabilities to automatically verify the contractual obligations around agreed terms, such as sustainability.
The technology can also be used to enforce compliance requirements like data privacy (including the GDPR), information security, International Trade in Arms Regulation (ITAR), Foreign Corrupt Practices Act (FCPA) and other regulations.
This technology is now becoming part of the Icertis vision to turn contracts into live contracts, unlocking value, improving business agility and reducing risk.
To learn more, please visit our Blockchain page.