Abstract
Blockchain technology is one of the most vital and exciting technologies available today. It can transform the business world and the organizations' functions. It offers several possibilities to flourish existing businesses, grow entirely new ones, and severely disrupt traditional organizations. This chapter aims to study the applications of blockchain in procurement, to improve at the same time effectiveness and sustainability, and to define its critical success factors. The chapter presents a model and then describes its application in a real business case. It highlights the critical challenges in this blockchain implementation and the potentials of blockchain in managing sustainable procurement in support of utilities. This blockchain application is for smart metering. The blockchain solution contributes to the three bottom lines: economic, social, and sustainable. It can help support sustainable procurement, reduce errors, improve organizational functions and procedures, and prevent fraud. The chapter includes some challenges and their possible remediations.
TopIntroduction
A blockchain is a ledger filled with a time-stamped series of immutable data records managed by a cluster of servers not normally owned by any single entity. Each of these blocks of data is secured and bound to each other using cryptography. The three main properties of a blockchain solution are:
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Decentralization. Everyone can interact with someone else directly and is the owner or in charge of his/her assets (money, sensitive data) and can manage them.
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Transparency. Through the public address of an actual entity, it is possible to look at all the transactions he/she has engaged in.
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Immutability. Once something has been entered into the blockchain, it cannot be tampered with, and the transmission is fully encrypted.
Blockchain also supports the so-called smart contracts (Vacca, A. et al. 2020). They are computer programs that automatically execute a contract or part of it. Technically, they are code stored on a blockchain solution, triggered by blockchain transactions, and read and write data in that blockchain database. Smart contracts, based on blockchain technology, could reduce infrastructure costs of financial institutions from 13.8 to 18.4 billion euros annually by 2022 (Probst et al., 2016). They could save time and reduce costs in standard transactions. Smart contracts ease, verify or enforce a digital agreement. These programs potentially replace notaries, lawyers, and financial institutions when handling some legal and business transactions.
This chapter reviews and presents an innovative blockchain solution in support of procurement and its critical success factors. The perspective is for the organizations to obtain customers' delight by using blockchain solutions to support an agile, effective, efficient, ethical, and economically sustainable procurement.
Sustainability has become a global corporate mandate, with implementation affected by two key trends. The first is the availability of innovative solutions, such as blockchain, robust, affordable, and flexible. The second is the recognition that procurement strongly impacts sustainability and supports greening the entire supply network.
The business case presented in this paper is relative to an innovative solution for smart metering in an electric network. There are still problems in the quality data collection of smart meters, such as incomplete data collection, quality data loss, and difficulty in data sharing (Yan, L. et al., 2021). This chapter presents a solution for collecting and processing smart quality data using smart meters, blockchain, and smart contract platforms. The solution is designed to realize the automation of data collection and improve the reliability of collected data (Nicoletti, B. et al., 2020). The business case analyzed is very promising from the point of view of the Three Bottom Lines (TBL) of sustainability: ergonomic, financial, and social. Particular attention is devoted to assure also security of the data entered in the blockchain. A thorough analysis and proofs of concept have proved these benefits.
TopLiterature Review And Methodology Used
Sustainability as a concept in the corporate world appeared formally in the 1960s as concerns towards the degrading environment and poor resource management began growing (McKenzie, S., 2004). Stakeholders are now becoming more aware of social and environmental sustainability. Thanks to this awareness, organizations are making efforts to adapt and become more responsible and sustainable. These efforts imply that sustainability should become a significant part of the organization's processes, including procurement (Meehan, J. et al., 2011).
The old thinking was that sustainability would increase the costs of the organizations. Sustainability can improve profitability considering the three pillars: social, society, and environment. This chapter's starting point is acquiring an appropriate amount of knowledge on sustainable procurement.
Key Terms in this Chapter
Prosumer: A consumer who is also a producer of the service or good.
Stakeholder Management: The process of maintaining good relationships with the people who have most impact on the specific work.
Smart Contract: It is a self-executing contract with the terms of the agreement between buyer and vendor being directly coded into a program. The code controls the execution, and transactions are trackable and irreversible.
Energy Grid: An interconnected network for delivering electricity from producers to consumers.
Triple Bottom Lines (TBL): The management framework of three parts: social, environmental, and financial. Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create a more excellent value.
Transparency: Anyone authorized can join the network and, as a result, view all information on that network.
Smart Meter: An electronic device that records electricity consumption and communicates information to the electricity vendor for monitoring and billing.
Sustainable Procurement: The act of adopting social, economic, and environmental factors alongside the typical price and quality considerations into the organization handling of procurement processes and procedures.
IoT (Internet of Things): Group of infrastructures interconnecting objects and allowing their management, data mining, and access to their generated data.
Blockchain: A ledger filled with a time-stamped series of immutable data records managed by a cluster of servers not normally owned by any single entity. Each of these blocks of data is secured and bound to each other using cryptography. The primary distinction between the public and private blockchains is that private blockchains control who can participate in the network, execute the consensus protocol that decides the mining rights and rewards, and maintain the shared ledger.