Manage your supply chain: White & Case says blockchain may be the answer
Blockchain technology provider Integra Ledger has announced it is working with White & Case to develop a proof-of-concept to streamline the time consuming process that is the exchange of environmental, sustainability and governance procurement questionnaires.
ESG questionnaires have historically been a manual task that involve a high degree of repetition and duplication, as law firms or vendors repeat the same exercise multiple times to authenticate their vendors. Law firms have long been trying to find ways to reduce the level of repetition and White & Case says that using Integra’s Blockchain Smart Document technology will streamline the ESG questionnaire process to authenticate and validate the firm’s vendors in order to meet client requirements.
A statement out yesterday (15 April) read: “Blockchain technology is uniquely well-suited for the ESG process because of its ability to create a permanent record of compliance across the legal value chain, which is essential to create trust and verification in the process of legal procurement.”
White & Case is now inviting member firms and technology vendors to participate in the POC.
Tony Cordeiro (pictured right), CIO of White & Case commented, “When you observe where blockchain technology has had early successes, it has been in the context of back office business processes, rather than client-facing, front end applications. A number of months ago, Jose Pariente, our Chief Procurement Officer and I were discussing the process around onboarding of vendors and acknowledged that the legal procurement market has ecosystem inefficiencies that are similar to those in the back office of the financial services industry and large industrial supply chains. We have been working with Integra to determine how a blockchain-based solution might be able to help drive efficiency and improve the integrity of the process. While our work continues, the early returns are promising.”
The POC is similar to a number of initiatives in the financial services sector, including the move by Northern Trust to manage its private equity workflow: in 2017 it launched a blockchain solution that allows the fund to transfer ownership stakes and be managed, serviced and audited throughout the investment lifecycle on a transparent platform offering “one version of the truth” to participants who gain access via secured means.
Speaking at the time, Peter Cherecwich, president of Corporate & Institutional Services at Northern Trust, said: “Current legal and administrative processes that support private equity are time consuming and expensive. A lack of transparency and efficient market practices leads to lengthy, duplicative and fragmented investment and administration processes. Northern Trust’s solution is designed to deliver a significantly enhanced and efficient approach to private equity administration.” In March 2018 Northern Trust announced that audit firms can now carry out audits of private equity lifecycle events directly from the blockchain and just this week the financial institution enhanced the blockchain solution by deploying legal clauses as smart contracts.
Blockchain has become a surprisingly divisive and emotive topic in the legal industry, with some questioning why, particularly where there are already established technology and processes to achieve the same or similar end, the technology needs to be used at all.
In terms of where blockchain fits – or doesn’t fit – in the legal industry, we canvassed the opinion of Dr Anna Donovan (pictured left), who is vice dean of innovation for the faculty of laws at UCL; a member of the Law Society’s Lawtech Delivery Panel; and a member of UCL’s Centre for Blockchain Technology. She told us this:
“Whilst the truly unique use cases for DLT might currently be narrower than early speculation suggested, it is nevertheless the case that this technology can bring significant efficiencies to (and increase the effectiveness of) existing processes for the benefit of both businesses and consumers. In due course, particularly if supported by the right ecosystem, DLT does have the potential to genuinely disrupt (rather than simply augment) current practices.
“It is clear that this is a technology that the market is embracing, offering exciting possibilities for innovation. As with any new technology, DLT can be subject to bold claims as to its current disruptive capabilities, but that doesn’t undermine the fact that it provides opportunities in how we facilitate innovation. From a legal perspective, pertinent questions therefore arise as to how we capture and realise these possibilities whilst protecting against risks where they arise.
“One significant emerging use case is the automation of compliance obligations, including client conflict rules and reporting requirements. In this regard, what’s particularly interesting is how DLT allows regulated entities to transform their relationship with regulators by including nodes that give regulators (such as the Guernsey Financial Services Commission in the Northern Trust example) access to the ledger. Of note is that this does not provide a regulator with any additional information when compared to off-chain systems but rather gave the GFSC access to real time information. This raises the possibility of developing new relationships of cooperation and cocreation between regulators and the entities that they regulate. Thus, whilst we commonly describe DLT itself as a ‘trust’ mechanism, it is also a tool that facilitates the increase of trust between the parties off chain, as well as on.”