Definition of supply chain transparency:
Supply chain transparency is the process by which companies gather reliable, comprehensive data on how and where their products are sourced and produced. This information is then typically shared with customers and other external stakeholders.
What is supply chain transparency?
Supply chains can be complex, often involving many stages from raw material to finished product. They typically contain a range of different stakeholders, each with their own business practices and ways of working. For a supply chain to be transparent, external stakeholders need access to comprehensive data about a product’s life cycle. To meet these expectations, companies must collect detailed information on the quality, safety, and origins of their products.
Why is supply chain transparency important?
While supply chains play a crucial role in the global economy, the more complex and globalized they become, the greater potential there is for blind spots where insufficient information is available.
This puts companies at risk of being associated with potentially unethical practices. For instance, it is essential to verify that suppliers in your value chain are not involved in environmentally destructive or unethical practices, such as deforestation or human rights abuses.
The topic of supply chain transparency is becoming ever-more relevant to the chemicals industry as companies begin to make greater use of renewable feedstocks. These feedstocks, typically derived from bio-based sources, have the potential to reduce carbon emissions. However, if the farming methods used to produce them rely on deforestation or landscape degradation, any environmental benefit is effectively null.
How can supply chain transparency be achieved?
The first step for companies looking to build a transparent and responsible supply chain is to map out their value chain. This can be achieved through collaborations with suppliers and life cycle assessments (LCAs). Companies should also conduct risk assessments and due diligence audits for issues such as corruption, biodiversity loss, and human rights violations.
Compliance with the highest environmental and human rights standards can be verified by recognized certification bodies. Chain of custody records the entire sequence of control, custody and trade in the supply chain from the initial extraction of a raw material to the finished sales product. The strategy to achieve this goal is to standardize chain of custody models, preferably via independent third-party certification schemes such as ISCC PLUS or REDcert2. Companies should seek EcoVadis or 3rd party audits and encourage others in the value chain to do the same.
Advanced technology also plays an important role in supply chain transparency. One option is blockchain-based product information management systems (PIMs). These may provide customers with detailed environmental and provenance information about their products.
What are the challenges associated with supply chain transparency?
A single company is just one link in a value chain. Even if this organization is dedicated to responsible production methods, the same cannot be guaranteed for all its suppliers. Frontrunners must therefore engage other companies in their value chains, leading by example to inspire greater accountability among all actors.
Furthermore, to build a responsible supply chain, organizations need to remain vigilant against a wide range of potential issues. And while much attention is often focused on carbon emissions, there are many other significant factors that companies need to consider.
Topics covered during a typical supply chain audit include carbon emissions reporting, biodiversity loss, abiotic depletion (the overuse of natural resources such as fossil fuels, minerals, and peat), chemical pollution, workers in the value chain safety & health, and human rights issues.
Another issue to be aware of is greenwashing, when companies misrepresent their environmental credentials using unclear or misleading language. This is the reason that third-party certification is so important – it eliminates the risk of biased internal reporting and establishes common standards that all companies have to meet.
What is the future of supply chain transparency?
Supply chain transparency is becoming increasingly widespread across all industries. We therefore expect to see companies using a blend of digital tools and independent certification to establish responsible chains of custody for their products.
Recent research by Simon-Kucher & Partners suggests that consumers in general are increasingly aware of the environmental impacts of the products they buy. This means they are looking for brands that help them live more sustainable lifestyles. Companies that do not take action on supply chain transparency will therefore struggle to compete with more responsible peers.
Not done learning?
No worries, we’ve got you covered.
Supply chain transparency with blockchain
What are bio-based materials?
How do emissions scopes work?
Are all bio-based materials biodegradable?
What is biomass as a feedstock?
EcoVadis: Our journey to platinum
Learn about Stahl's supply chain transparency journey.
