Why Traceability and Transparency Have to be Top of the Agenda in the Boardroom

As consumers, we want guarantees for the products we buy, whether it’s food, beverages, beauty or hygiene. We are increasingly calling for transparency and effective responses in the event of any health-related problems, environmental negative impacts or labour issues. It’s vital that businesses establish efficient frameworks for transparency, traceability and information flow for management of their supply chain networks.

When it comes to sustainability, FMCG corporations of all sizes need to increasingly ensure full transparency throughout their supply chains, especially when it comes to their suppliers and the sourcing of commodities like palm oil, which remains a major contributor to deforestation.

However major obstacles lie ahead for the sector. It remains very difficult for multinational corporations to accurately monitor their supply chain and identify where environmentally damaging practices are occurring. Soy and palm oil are particularly problematic, as they are mixed and refined at a very early stage and also throughout the supply chain. This can be a significant challenge for businesses, one that in my view clearly needs collective action in addition to what each company is already doing. It is also critical that this topic stays high on the agenda in the boardrooms.

Last year’s CGF Sustainable Retail Summit, where corporate leaders gathered to discuss sustainability issues, highlighted the scale of the problem and how meaningful change on deforestation and sustainability can only be achieved through concerted efforts involving investors, governments, NGOs and the private sector. Fortunately, there are reasons for optimism. A recent report from the TFT revealed that the palm oil industry is becoming more transparent, pointing to a number of large corporations publishing a list of their top suppliers and the mills supplying each of them.

Moreover, technological change is bringing new opportunities for positive change, while Public-Private Partnerships (PPPs) are driving new approaches across the world.  

The Impact of Technology

Emerging technologies like blockchain have the potential to bring greater trust and transparency to business transactions and operations, helping to root out suppliers with poor sustainability credentials. As blockchain works through a distributed ledger system, where all activity is visible to every stakeholder, there is an opportunity for products to be tracked throughout the supply chain.

One company channelling the power of technology to make a positive impact is TRASE, an innovative organisation that uses publicly available data to map the links between production sites and destinations in unprecedented detail. TRASE can show how commodity exports link in with agricultural conditions, including specific environmental and social risks, in the places of production. The technology enables companies, governments and other parties to understand the risks and identify opportunities for more sustainable practices. Looking ahead, FMCG corporations could be able to monitor the activity of their suppliers more closely.

Private – Public Partnerships and Government Action

Furthermore, we’re seeing a greater sense of urgency among governments, attaching greater importance to sustainability credentials in public procurement. They are also demonstrating a willingness to collaborate with the private sector in the form of Public-Private Partnerships (PPPs). The most successful traceability schemes involve multiple stakeholders, including business, government, and civil society organisations who have an interest in the sustainability of a particular commodity.

The Consumer Goods Forum has been influential in the creation of one such partnership, the Tropical Forest Alliance 2020, which brings together representatives from governments, NGOs and the private sector to discuss the importance of traceability and transparency and agree on best practices, as well as other topics related to deforestation.

While these initiatives are promising, it’s important to remember that deforestation and the traceability of commodities are multi-faceted issues which cannot be solved through engagement with the public sector alone. It’s also vital that we persuade investors to get involved in the development and implementation of sustainability initiatives.

Satellite Imagery Technology

The power of satellite monitoring allows companies and also investors to track and manage forest-related sustainability performance. It incorporates functions that allow to evaluate deforestation risk in commodity investments. This enables a company or bank to plot the location of thousands of production mills, farms or municipalities; access alerts and dashboards to track issues such as tree cover loss and fires occurring in those areas; and inform decisions to mitigate or eliminate issues.

At the CGF it’s not just the environmental sustainability pillar that is encouraging a shift towards more transparency. As delegates to this year’s Global Summit in June will soon discover, The Consumer Goods Forum’s End-to-End Value Chain pillar is providing vital support to companies seeking to implement advanced technological solutions to their supply chains, such as blockchain and artificial intelligence.

Technology has the potential to usher in an era of sustainable business practices and consign environmentally damaging business practices to history. Collaborative events like the Summit hold the key to achieving meaningful change on the issue, and to do our job effectively, we need to continue to earn public confidence. That involves transparency.

Ignacio Gavilan
Director, Environmental Sustainability
The Consumer Goods Forum