“Transparency” refers to the process of disclosing information about the suppliers falling in the entire supply chain of a business enterprise, with its customers and the stakeholders. It enables companies and customers to comprehend the production and distribution processes of goods. This entails being aware of the manufacturing processes and locations, the labor laws that apply, the path taken by products from supplier to customer, and any environmental impact. Transparency fosters a sense of trust among all the stakeholders, such as investors, employees, customers, and communities. Knowing the lifecycle of a product allows consumers to make informed decisions and support brands that share their values. Transparency in the supply chain can make or break a firm. For instance, shipments lacking origin documentation are being held up or refused entry at ports, resulting in expensive disruptions that reverberate throughout the supply chain.
“Traceability” works at par with transparency as it entails monitoring the flow of goods and materials along the supply chain. It is crucial to verify the sustainability claims made about the products of a business enterprise and offer a mechanism for tracking them along the supply chain to ensure that ethical, social, and environmental standards are followed at each step. Employing traceability solutions enables businesses to learn more about the origin, composition, and path of their products, from raw materials to the end user. They can use this information to evaluate and control the social and environmental hazards related to their supply chains. Advanced technologies, such as the Internet of Things (IoT), Radio Frequency Identification (RFID), Blockchain, etc., have completely transformed traceability, enabling the collection & verification of data in real-time. By using these technologies, businesses can monitor and record each stage of the supply chain and guarantee that sustainability guidelines and standards are being followed.
Currently, the global supply chain is witnessing the adoption of transparency on two fronts:
The industry for consumer packaged goods (CPG) has evolved into a hotbed of ‘greenwashing’ activity. Businesses in the industry declare that their goods are recyclable, compostable, and sustainable. With millions of workers and yearly sales in the trillions of dollars, the industry is an essential link in any robust supply chain. Customers have turned conscious towards the products they purchase and ensure that they buy a product which has less detrimental effect on the environment and want to know that the businesses they support are making efforts to lessen their carbon footprint, employ sustainable materials, and make sure their goods are eco-friendly. As per a latest report, over 59.9% of buyers are inclined to choose a product which covers sustainable packaging, even though if it is expensive. As a result, CPG businesses are increasingly pursuing additional certifications to prove their dedication to sustainable and ethical supply chains.
The degree of transparency in supply chain that the businesses must offer is being impacted by the continuous enhancements of the regulatory requirements. Governments across the globe are framing regulatory provisions that require businesses to provide in-depth information about their supply chains. Various regulations across nations/regions are being amended over the time to ensure ethical supply chain practices, such as EU Sustainable Corporate Governance initiative, EU Conflict Minerals Regulation, The Jones Act, Dodd Frank Act, etc. In order to improve traceability and visibility across the supply network, businesses are utilizing various technologies, strategies, and tools. Businesses use these to meet the increasing needs of regulators and customers while creating supply chains that are more moral and environmentally friendly. Engaging suppliers is another tactic that businesses employ. This entails collaborating closely with suppliers to make sure they adhere to environmental and ethical standards. Businesses can examine suppliers' adherence to the standards through audits and evaluations, and collaborate with them to enhance their performance.
Transparency and traceability have attracted the interest of managers and leaders belonging to procurement and supply chain space across the organizations and sectors. They are widely focusing on implementing transparency because of the range of benefits
Supply chain transparency fosters a collaborative culture where businesses work together to solve challenges by strengthening the trust between manufacturers and their suppliers. For instance, when suppliers perceive that their honesty and openness are valued, they are more inclined to report issues related to production or other issues rather than accepting shoddy work or unethical shortcuts. As a reciprocal gesture, manufacturers support suppliers by outlining production, quality, and sourcing requirements in detail and by endorsing or taking part in compliance training.
As per an old survey conducted by communications firm ‘Zeno’, in 2020, consumers are 4 times more inclined to trust businesses that have a clear purpose and disclose the working conditions of their suppliers. Also, they're more inclined to buy for the first time from companies they think are more ethical and sustainable than others. A crucial component of the brand of certain businesses is transparency.
A company's ability to monitor products, components, and parts at every level, even in its own inventory, is improved by supply chain transparency since it is based on the collection, verification, and sharing of data. This results in turning an overall operation more efficient by identifying possible disruptions, quality concerns, and bottlenecks that can be avoided. Businesses can also reduce risk by having a better grasp of who their suppliers are and how they do business.
Businesses can more readily comply with an increasing number of rules if they proactively disclose information about their supply chain. Cloud-based technologies are widely used for gathering and standardizing supplier data. Measurement of compliance is impossible without such data, particularly when dealing with global supply networks that are all subject to different domestic and international regulatory bodies. For instance, modern antislavery statutes have been passed in the UK and Australia. The Dodd-Frank Act in the US mandates that businesses make sure their suppliers aren't obtaining minerals from countries that support violations of human rights. Similar laws have been passed since 2022 in Luxembourg, Spain, Australia, Germany, Switzerland, the Netherlands, and Norway.
Following are a few steps to ensure complete and streamlined implementation of transparency and traceability in supply chains
There are several tools at the disposal to finish this initial phase. An organization may start by examining future regulatory risks, historical disruptions, and supplier-related problems. A map of the interests of internal and external stakeholders, known as a materiality assessment, is frequently included in this initial step.
Once the main risks have been determined and ranked, businesses may see the desired supply chain. It will map suppliers and processes, obtain a greater comprehension of commodities flows, and highlight any information gaps that currently exist.
After the supply chain has been identified, gather data on performance and practices that shed light on possible hazards, areas for development, and knowledge gaps. To guarantee the source of origin and chain of custody, a business may need to trace and profile individual units, batches, or lots of finished goods as they move through the supply chain.
Equipped with useful data, the business may now decide how to participate in the supply chain. Usually, a software created with important KPIs in mind is involved in this. The goal is to deal with particular problems like labor-related hazards, environmental effects at supplier locations, or ambiguous origins. The engagement involves monitoring, assistance, communication, and cooperation from suppliers.
Lastly, businesses decide what degree of transparency they wish to implement. This entails choosing how to comply with pertinent legal obligations, respond to stakeholder requests, and validate the information released. The degree of transparency can vary from releasing a code of conduct to revealing traceability starting at the supply chain's raw material stage.