Traceability and Transparency are becoming more and more prominent terms in the sustainability dialogue. Instead of good marketing and easy-to-sell strategies, consumers are asking for data communication and visibility, to validate what is being told from a marketing perspective. We can’t speak about sustainability without transparency and traceability proven by data.
First of all: What is the difference between transparency and traceability?
Transparency means the possibility to see and understand the whole value chain of a product, whilst traceability focuses on every single step of components or articles. Transparency is the macro-view of the value chain and traceability can be understood as the micro-analysis of a supply chain. Together they give a holistic understanding of a product and its journey.
Developments, especially in the international trade and the globalisation of markets make it difficult to trace suppliers and sub-suppliers and the request for innovative technological solutions is increasing exponentially.
In order to communicate properly to the consumer and proof the sustainability of an article this data needs to be documented, secured and made accessible to the customer.
Traceability and transparency do not only look at the article itself and where it was produced, it should furthermore give a wholesome picture of the workforce, transportation, production itself and the overall impact it has. It is an invaluable tool to improve the sustainability of products and raw materials regarding their environmental and social impact and is a clear sign for good business practice.
As consumers have understood the problematics around sustainability marketing and the green washing happening, they request a validation of the statements made. Concurrently investors are starting to put pressure on companies to become not only sustainable but also able to report data through reporting standards to improve their portfolio and move towards green bonds and ESG funds.
An overall transition towards data driven business models is perceivable not only amongst brands but more and more also along the supply chain. Instead of mass balancing we are and should be looking at product segregation models to receive reliable information.
Especially in the leather industry the traceability technologies are increasing fast, as we want to know where the raw materials are coming from and preferably also how the animal was treated. But these concepts and needs can be adopted to any industry and their supply chains.
We have now looked at it from a consumer point of view, but there are also perks for the supply chain and the companies themselves. Transparency also helps the company to discover possible risks and problems within the supply chain and take actions. Knowing what is going on in the value chain makes a company much more stable and reduces risks, which could lead to a number of problems if not dealt with correctly. This stability and risk-reduction is music in the ear of investors, which is why well-performing companies regarding ESG standards, are becoming very attractive in the investment world. Those standards, a collection of voluntary and obligatory criteria, should help companies identify critical data and give benchmark opportunities within their industry to help companies and consumers compare with similar players of the industry. In order to implement these standards properly we need to support especially SMEs in this process, who are often struggling with the increased administrative and financial burden.
Back to the arguments in favour: It has a positive social impact, as transparency leads to reforms regarding workforce, working hours, salary and ethics. If companies and value drivers along the supply chain feel the eyes of consumers and investors on them, they ultimately will improve their social performance. International standards lead to positive changes and adoption of certain principles.
The transparency efforts of companies are well-received by consumers and play an important role in the decision-making of young generations (but not only). Trust and reliability that come with traceability and transparency will have more and more impact on buying decisions and therefore have an impact on the financial-performance of companies as well.
Last but not least the new visibility of the supply chain offers the opportunity to collaborate much more and communicate with all stakeholders (multi-stakeholder collaborative system), which is the most effective way to work towards the goal of full traceability and transparency. This could be the beginning of a dialogue that includes not only brands and consumers, but opens up for the entire value chain and changes the way we do business.