Companies are ramping up to create more transparent supply chains in response to consumer demands, NGO pressure and growing mandatory due diligence legislation, while at the same time initiating efforts to trace products along the value chain, to be able to label them with sustainability attributes.
The digital traceability market is growing, but are these solutions sufficient, or do companies need other tools and support?
Visibility for informed decisions
The ask for transparency has been building up for a while now and has certainly claimed the limelight during the past 18 months. Companies have been called out for their non-responsible purchasing practices, linking them publicly to factories. Lockdowns, logistics issues and import bans are forcing buyers to map their supply chain well beyond tier 1 and 2. Companies who had already mapped their supply chain were better able to respond by diversifying their buying or re-routing shipments.
In 2016, the Chinese government implemented a country-wide environmental inspection frenzy, leaving an estimated 40% of Chinese factories with temporary or definite closure, fines and improvement plans on one side of the supply chain, and puzzled brands and retailers on the other side. Puzzled, because suddenly they were faced with delivery issues, not because their tier 1 suppliers failed inspections, but rather the sub-suppliers and lower tiers. With suppliers of raw materials or components being forced to close, yet not knowing they were part of the supply chain, left upstream clients in the dark of what to do next.
Brands and retailers have started to publicly share their supplier lists from as early as 2005, covering mostly tier 1 suppliers. More companies followed after the Rana Plaza disaster in 2013, culminating in the Transparency Pledge and the creation of several disclosure initiatives, such as the Open Apparel Registry or the Sustainability Map by ITC. According to Fashion Revolution, 100 textile and footwear brands were disclosing their supplier list in 2017, increasing to over 250 in 2020, including beyond tier 1 suppliers.
Today, more and more companies are looking for digital solutions to support them with their transparency objectives. QIMAone’s annual survey shows bigger quality and supplier communication issues for companies with a low degree of supply chain digitization. This, combined with the challenges of the last eighteen months, should be the final argument needed for companies to start their transparency journey.
Traceability for greater agility
Traceability allows companies to take this one step further by tracing products as they pass along the value chain from raw material to consumer. [CT1] Being able to do this, across ever more complex supply chains, gives companies the opportunity to manage quality, safety and sustainability more effectively. Digital traceability makes transactions visible, more effective and secure, allowing companies to react with agility when issues arise.
With rising demand, the number of traceability solutions on the market is growing exponentially. Building on transparency, or supply chain visibility, more companies are taking their first steps in tracing products along the value chain. Where transparency is very much pushed by emerging due diligence legislation across the globe, traceability objectives are more focused on circularity, gathering data and the creation of credible claims.
Meanwhile, policy makers and watchdogs have turned their attention on greenwashing, assessing the validity of generic sustainability claims on, for example, net-zero ambitions, and product-level sustainability claims. In 2021, the European Commission released the results of a sweep of websites looking for breaches in consumer law, concluding that “in 42% of cases [green] claims were exaggerated, false or deceptive”. Many countries around the world are strengthening or proposing new legislation to regulate green claims made by companies.
For companies to pass the test, verified data and processes are needed to back up claims. Digital solutions which record and link transactions will not be enough. Verification onsite of transactions and processes combined with innovative tracing tools must be part of a comprehensive traceability program to ensure proof of product origin, authenticity and integrity.
Clearly, transparency and traceability are a new business imperative. Combining best practice tools and local presence will get you there, one step at a time.
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