Blockchain can help measure non-financial value in procurement

Blockchains provide possibilities to bring social innovation to the forefront and evolve procurement, according to an academic. 

Olinga Taeed, professor of blockchain and social enterprise at Birmingham University, said procurement can be “an instrument for good”, and asked delegates at the Procurious Big Ideas Summit 2019 where social value is in their company’s procurement agenda.

“We need the pioneers that challenge the company to follow this [social value], and deliver a direction to the procurement profession. You don’t deserve to be on the board if you [procurement professionals] are only process driven,” he said.

Blockchain delivers major innovations in procurement, including transparency of non-financial value, a decentralised peer-to-peer system that takes out whole-life cost and speeds transactions, and transparency of a product in terms of both the financial and production journey, according to Taeed.

Blockchain’s capabilities enable companies to align their values to the supply chain more effectively, and strengthens the visibility of social value throughout the supply chain.

The technology gives control to buyers over strategy and ensures companies work with suppliers that share the same values. Taeed explained: “Blockchain allows you to encode your company’s strategic intent into IT and software, known as smart contracts. We are looking forward to a world where your values will drive these things.

“When a supplier bids in a tender document, you say it has to achieve that much on price and social value. The target we try to achieve throughout Europe is 20% on social value.”

Taeed said the only case study proving blockchain so far is that of the currency bitcoin currency, so it is still at the early stages of showing what is possible.

Taeed highlighted that bitcoin was a catalyst that caused big companies to join the blockchain revolution: “I don’t think there can be any large companies not in the sector, but in a small way right now.”

However, government over-regulation poses the biggest blockage to the evolution of blockchain. Taeed said: “In Buenos Aires in November, the G20 said they are going to regulate cryptocurrencies, and over-regulation can suppress enthusiasm. What’s going to happen in the next five years is that the governments, the institutional world, impact investors are now going to start using blockchain as a real tool. The danger right now is over-regulation.”

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