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The Case for Supply Chain Transparency

  • 4 min read

There is growing consensus every country needs to move towards resilient economies which are circular, sustainable and ultimately—regenerative. Russia's invasion of Ukraine, a newly swaggering China and the pandemic pushed western countries into defensive postures that are de-linking from full globalization. The result is that increasingly, the west regards material and energy supply chains as vital to economic policy and national security.

Climate goals have been drivers of policy for many years. However, the security focus and defensive thinking are new. Official EU reports claim that digitized supply chains, supported by Digital Product Passports, are the keys that unlock self-reinforcing "Twin Transitions" of climate neutrality and sustainable economies.  National security, social cohesion and strategic autonomy are baked into their definition of sustainable economies.  The Twin Transitions are very closely linked. Failing on one means failing on both goals and a climate-neutral single market by 2050. "Green and Digital" are shorthand for the longer descriptions.

Changing consumer preferences are a growing factor, too. Young consumers, especially, are pushing for ethical make and tools that verify the impact of their purchases. Expectations are that short, secure, transparent material and energy supply chains will create fully informed consumers.  Informed consumers may well realign markets towards sustainable purchasing decisions, ethical business practices, stronger human rights and fairer economic justice. Put simply, informed free markets could answer climate change and create healthier versions of capitalism.

 Starting with the EU—makers, suppliers, logistics, retailers and owners will be required to report real-time data throughout a product's lifecycle and resale. Supply chain scrutiny isn't new.  Starting around 2010, global awareness of human trafficking and slavery among fashion producers resulted in regulations for the largest USA and EU retailers. Technology and telecom progress means that it is easier to embark on "green and digital" initiatives, which activate the EU's 2050 goals.

 "79% of fashion executives consider the lack of standards to assess sustainability performance as the greatest hurdle to improving how consumers perceive their sustainability efforts." Business of Fashion, The State of Fashion 2023

What is a Digital Product Passport?

Digital Product Passports (DPPs) are digital systems that can store and share all relevant information throughout a product’s life. Passports provide industry stakeholders, businesses, public authorities and consumers with a better understanding of the materials used in the product as well as a product's environmental impact. Product Passports have two main features: shared inventories and material passports.

“Only companies that do not harm the environment and fully respect human rights should operate in the EU” — Didier Reynders, EU Justice Commissioner

German Supply Chain Act – This Supply Chain Due Diligence Act was approved in July 2021 and is planned to take effect on January 1, 2023. The legislation states that companies with 3,000 or more employees must take appropriate measures to respect human rights and the environment with their supply chains. Read the Act.

European Commission (EU) Conflict Minerals Regulation (Started 2017. In effect, January 1, 2021) – Ensures imported minerals and metals are derived from responsible sources only. Alongside, supporting the development of interdependent local communities. More here

European Commission (EU) Corporate Sustainability Due Diligence Directive  Started February 2022. Expected to be in effect by 2024) – The draft legislation has passed and will require large EU organizations to detect, prevent and mitigate breaches of human rights, such as child labor, as well as environmental hazards in their supply chains. Factsheet here

European Commission (EU) Sustainability Textile Strategy  (Started July 2022. In effect, now) – Fosters only durable, repairable, recyclable, and circular textiles/products that respect social rights. Factsheet here

European Commission (EU) Eco Design for Sustainable Products Regulation  (Started March 2022. Expected to be in effect by May 2023. Product Seizures begin by May 2024) – Furthers greener, circular, energy-efficient products that disclose environmental sustainability information (via digital product passport). Factsheet here

European Commission (EU) Corporate Sustainability Reporting Directive (CSRD)  (Started March 2021. First Set of Standard Compliances begin by January 2024) – Upholds ESG+ Markets for investments, finances and accountability for community-based products. Read CSRD here

European Commission (EU) Unfair Commercial Practices Directive  (Stared March 2022. In effect now) – Fosters consumer protection from greenwashing and other false claims through e-commerce transparency. Factsheet here with link to 2021 update.

Security and Exchange Commission’s Climate Disclosure (SEC) (Started 2010. In effect, now) – Urges for all businesses with US Public companies to report climate-related financial disclosures. Comments.

New York Fashion Sustainability and Social Accountability Act – If passed, it will require New York fashion retailers and manufacturers with over $100 million in annual revenue to make required social and sustainability information available. Link to NY Senate bill progress.

Fabric Act – If passed, this would improve fair pay and sustainability. Link to naitonal Fabric Act website

California Transparency in Supply Chains Act– Signed into law in 2010, it requires large retailers and manufacturers to disclose activities focused on eradicating human trafficking from the supply chain and educating consumers on how to purchase goods from responsibly managed supply chains.

Swiss Code of Obligations – Effective in January 2022, supply chain reporting requirements relating to conflict minerals and child labor were added to the Swiss Code of Obligations.

Read how digitized supply chain transparency supports the "Twin Transitions" of climate neutrality and sustainable economies.  These policies move toward a defensive stance on material and energy supply chains as vital to economic policy and national security.
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