A Guest Blog by Rajinder Bhandal Ph.D., University of Leeds
Have you heard of the concept of sustainable contracting in the context of supply ecosystems? The World Commerce and Contracting Foundation hosted a recent online Academic Symposium on this topic, with fruitful discussions over two-days on the 7th and 8thDecember 2022. Both Rajinder and I were there in participation and attendance. In this blog, written by Rajinder Bhandal from the University of Leeds, she has summarized some of the latest thinking on data visibility and sustainable contracting. Thanks Rajinder!
The academic symposium was a melting pot of academics, researchers, lawyers, C-suite executives, practitioners galore in field of sustainability, ESG, procurement, and contracts all coming together to discuss sustainable contracting. The panel discussions and workshops discussed the current state of matters relating to: ESG in contracts and shared-responsibility, contract simplification, accountability difficulties, sustainable development goals, social value contracting, and data visibility and transfer within supply ecosystems.
Day 1 Panel Discussion: What are we asking our suppliers to do?
Sustainable contracting encompasses a strong need for people to go back to basics with regards to teamwork and communication across a supply ecosystem. For example, what are the real implications of sustainable contracting against a multifaceted backdrop of risk averse lawyers vs. human rights due diligence? In other words, how can you be helpful to one another to ensure that standards are understood? And at best, the standards are implemented from a legal, procurement, and business perspective. One solution: bring in suppliers to the conversation when measuring and reporting on EGS, as a best practice.
Mutual expectation: Supplier expectation vs. Mutual expectation vs. Buyer expectations
The overarching message here conveys conversation and collaboration with suppliers. Of which, trust emanates, unquestionably, as always! Mutual expectation with regards to accountability may help dampen any upstream supply calamities. For instance, regular auditing and monitoring may help reduce risk and eliminate modern slavery from supply ecosystems all together. Thus, trust and transparency may lead to clearer rules of engagement within the supply ecosystem.
Day 2: The Workshop
What does “good” look like?
Supply ecosystems are geographically international, across a diverse audience of stakeholders, upstream, downstream, and spanning all the tiers. It is important to recognise that contract language and contract design may lead to misinterpretation. This is because contracts are traditionally lengthy documents, often containing complex legal terms of reference. Therefore, this may create a situation where there is a dispute. Collaboration and clear communication is needed to understand the origins of the dispute, and any disagreement. One outcome might be to review, update, or even streamline contracts so that they are easily understood in keeping with the target audience.
Smart contracting vs. Smart legal contracting
Smart contracting as a tool may help drive consistency in the supply ecosystem. Contextualised data can be utilised to make optimal decisions and drive down any potential risks in the supply ecosystem. Data is an important component, which may lead to resiliency in the supply ecosystem. It is important to recognise that human agency is paramount when it comes to making sense of the data and making decisions based on data. Smart legal contracting may facilitate in the reporting and measuring of the impact of ESG or sustainable development, for instance, mapping out CO2 in the supply ecosystem.
Lack of use of standards
Standards are not being used! The standards of data, and data in the contract raised the question: what do we mean by standards in the first place?! Did we mention data biases? Talking about data and transparency – it is very difficult to track down / or get access to data from your tier 1, tier 2, and tier 3 suppliers. What are the principles these ‘standards’ are based on? What about data protection? May need to use a proxy – which raises the question: what are our assumptions? Our idealized model of best practice? What are the impacts of a circular economy? Real-time tracking? Just-in-time tracking? Sustainable operations?
In sum, there needs to be a clearer roadmap mapping out methodologies, principles, and standards. We have industry 4.0 – but one panelist noted that we also needed to have “Quality 4.0” to be more in keeping with the digital and technological innovation taking place. How do we ensure that these principles are met? Perhaps a measurement instrument / or even an incentive is needed. The role of technology might help, for example blockchain technology. Who pays for the technology though? What is good practice? Any definition – or is it context specific? All of these questions need to be considered in the context of cyber-security in the supply ecosystem too.
Come Together vs. The Long and Winding Road
Trust, transparency, conversation, collaboration, teamwork, communication seem to be coming out strong in the context of crafting out a path towards data visibility and sustainable contracting. Perhaps The Beatles were right when they said: “All You Need is Love.” So, to what extent can this ‘love’ be fostered to help nurture better working relationships across supply ecosystems towards sustainable contracting of the future?! What are your thoughts? Please leave a comment, thank you kindly…