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Meeting new traceability requirements: simplifying complexity

Updated: Feb 8

New regulatory requirements are affecting European companies in terms of traceability. This is a recent phenomenon, deeply linked to the seriousness of the environmental and human issues identified in several business sectors. The aim of the regulator, in encouraging companies to implement better traceability, is to enable companies to better control their supply chains, and to manage the impacts and risks on their own activities.
European companies have to conduct due diligence encompassing all links in their supply chains.

The demand for traceability is a phenomenon of unprecedented scale, and its intensity is worth explaining to gain a better understanding of the operational complexity it imposes on companies.

Two aspects characterize these new regulations, and almost single-handedly sum up the intensity of the phenomenon developing around traceability:

- Regulations are developing in a relatively short space of time

Before the beginning of 2020, i.e. roughly before the first presentation of the European Green Deal, traceability focused essentially on the achievement of supply security and flow efficiency objectives. In three years, the scope of traceability has significantly expanded: it now extends well beyond the monitoring of logistical flows and encompasses everything happening around the life cycle of a product.

- Serious consequences for companies that do not exercise greater control over their supply chains

Operating on the principle that without optimal traceability, a modern business can no longer function properly, European authorities, starting in 2022, began strengthening the obligations imposed on European companies to conduct due diligence, encompassing all links in their supply chains.

Traceability provides end-to-end visibility into the functioning of the supply chain, without which the company cannot meet new requirements for compliance, reporting, impact measurement, and transparency. Over time, dynamic traceability will become a form of a "license to operate," like the obligation of keeping accounts for any business. One could thus summarize the importance of the subject: without traceability, there is no access to the market. Penalties in a market economy have rarely been more dissuasive.

To understand the origin of this phenomenon, it is interesting to delve into an article from the World Economic Forum dated 2020 that points out supply chains still too focused on achieving supply security and flow efficiency objectives, at the expense of sustainability issues. If nothing changes, they warn, there is a high risk to the resilience of companies, associated with the drift of supply chains that have "become very extended, rigid, and dangerously opaque."

Is it surprising that, at the time when WEF experts were making this analysis, Europe was voting on the Green Deal with strong measures around product passports, combating deforestation, and imposing on companies an enhanced duty of vigilance regarding the protection of human rights?

We must salute the avant-gardism of companies that have decided to launch end-to-end traceability projects. Their teams combine an awareness that the transformation of supply chains can only come about through healthy collaboration between the various players in the chain, with a definite taste for technological innovation.

To facilitate the implementation of these projects, many of these companies are turning to technological platforms dedicated to traceability. Certain functionalities are already emerging as must-haves and market standards: flexibility of data collection tools, automation of checks, tracking of product and material flows at different levels of aggregation and collection of CSR data, to name but a few.

For these companies, resorting to a technological platform addresses three recurring factors of complexity in this type of projects:

- Diverse, difficult-to-access, and unstructured data.

- Disjointed technological environments that nevertheless need to communicate.

- A diversity of actors with whom coherent onboarding strategies must be developed within the framework of a chain of custody between actors.

All these issues obviously unfold over time and require an approach of continuous, iterative, and progressive improvement, well-known in the improvement of industrial processes. Initiating a "traceability journey" allows addressing progressively various transparency, compliance, and operational control issues, based on their degree of urgency or impact on the company's activities.

What matters above all is to start something, set one's ecosystem in motion to quickly create the conditions for a healthy and balanced collaboration among the actors. This is also what a traceability project serves for: to build a path of continuous transformation. An article by Tarik Ibnouzahir, Sales Director @Tilkal


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