This blog post will discuss why traceability is crucial to maintaining or working toward a sustainable supply chain.
Generally speaking, traceability refers to the degree with which a business is able to track a product's development, beginning with raw materials and ending with delivery to the final consumer.
From this definition, it is clear that traceability contributes directly to visibility. By tracking the development of products, companies can collect and utilize data to improve business processes. This tracking can be done on multiple levels, ranging from individual products to entire lots, depending on the goals of the company and the value adds driven by the tracking.
There are many reasons for a business to pursue traceability. On one hand, the advanced visibility that is developed allows for the optimization of procedures in order to minimize expenses and maximize efficiency. As a more in-depth understanding of business processes is developed, new opportunities to identify inefficiencies are created.
Tracking batches and series can be instrumental in addressing problems that may stem from faulty manufacturing or poor quality control. The automotive industry relies on this for recalling vehicles that fail to meet safety standards, and the food industry utilizes traceability to locate sources of contamination by identifying which products come from what places.
More recently, though, traceability has developed an increased focus on sustainability.
Sustainability Through Traceability
According to the United Nations Global Compact, traceability is:
“The ability to identify and trace the history, distribution, location and application of products, parts and materials, to ensure the reliability of sustainability claims, in the areas of human rights, labour (including health and safety), the environment and anti-corruption.”
If you read the first post in this series, the UNGC’s definition should make a lot of sense. Human rights, fair labor, environmental protection and anti-corruption are the pillars of sustainability according to the UN initiative, so it follows that they would define traceability to address these concerns.
The value of traceability in regards to sustainability comes from the reliability of the information coming from a traceable system. When material sources and production techniques are verifiable, third-party certifications are able to confirm any claims being made. These are extremely useful as supply chains continue to increase in complexity, with nearly all products requiring the collaboration of multiple businesses to complete the development of raw materials into final goods.
Third-party certifications add trust to an otherwise opaque system from the consumer’s view. They allow businesses and their customers to unite behind common goals and values, which in turn can significantly increase brand value. These certifications can be used to verify claims relating to all four ‘pillars’ of sustainability. You may be familiar with some like verified organic produce, sustainably harvested timber and fair trade practices, but there are hundreds of others.
If you are concerned that your supply chain is too complicated to verify sustainability claims, you may be interested to know that there are multiple different models that have varying degrees of flexibility. Many industries involve supply chains that are too complex to source 100% verifiable products, regardless of what they are being certified for. Consider all of these models when determining what is appropriate based on your business’s limitations. Below, we discuss some different traceability models.
The Product Segregation model of traceability is the most stringent. Using this model, all materials that are verified are separated from those that are not, never to be mixed again. A model like this is very important for industries like food and beverage, where claims regarding organic, kosher, vegan, and halal products must be strictly enforced.
Within the product segregation model, two submodels exist: Bulk Commodity and Identify Preservation. With a Bulk Commodity model, certified materials are allowed to be mixed with other certified materials of the same type. The Identity Preservation model prohibits this, forcing all certified materials to be segregated based on origin as well.
The Mass Balance model is focused on the ratio of certified and uncertified materials. These can be mixed, as long as the final claims maintain the ratio/percentage of the inputs. If only 50% of the inputs were certified, then only 50% of the outputs can carry the claim. This model is useful for complex supply chains where segregation is not feasible.
Book and Claim
The Book and Claim model allows sustainability certificates to be earned and sold. This model is used when supply chains are too complex to reasonably maintain product verification of any form. Suppliers can get certificates for their materials, then sell these on a trading platform. Businesses that wish to make sustainability claims can purchase these certificates, earning the right to make claims relevant to the certificate regardless of if their products actually contain any of the certified materials.
Developing a Traceable System
The first step to developing a traceable system is identifying the main commodities used and then mapping their movement within the supply chain. When the commodities have been identified and mapped, it’s important to then research any and all sustainability issues that are related to them.
If traceability can successfully address the sustainability issues that are identified, a thorough business case should be developed to justify the project. When determining how to implement traceability, it is important to review existing schemes that have already been developed. Independent, global initiatives exist for nearly all commodities and the issues that they face. The standards set forth by the initiatives are well-researched and proven successful.
Finally, remember that like all sustainable development, implementing traceability will take collaboration and engagement with all aspects and individuals within the supply chain.
Editor's Note: This post was originally published July 28th, 2016 and revised September 30th, 2018.