Companies in forest value chains, including customers, have ambitious climate commitments and other sustainability objectives. Reaching these pathways calls for innovative approaches to ensure the traceability and the transparency of product value chains and business operations. In the present day, we see digitalization and an increasing amount of data to create substantial opportunities for sustainable business operations. In addition, they provide new ways to collaborate with customers, investors, and other stakeholders to create positive environmental impacts.
Customers and investors demand for transparency
There is a strong need for increased traceability and transparency of products and business operations across all value chains. Accountable and meaningful data can help managers learn more about their operations and value chains, both upstream and downstream, and improve performance and sustainability. In addition, customers and consumers demand traceability of product value chains and their lifecycles. Additionally, investors are moving their focus away from non-green companies, thus making traceability and transparency a necessity for the global industry.
New digital tools, such as digital identities and blockchain, make tracking of product lifecycles even easier. They can help, for example, in verifying products’ and raw materials’ origins and make it hard for companies to make unsubstantiated claims. In the future, every product could have provenance and digital identity with environment-related details. Disclosing this type of information to stakeholders is likely to be needed to ensure the industry’s continued social license to operate.
Traceable path from forest to new life
Traceability is an increasingly important part of sustainable supply chain management in any industry, but specifically in forest value chains. With traceability, we can provide meaningful and accountable information for the customers and consumers on, for example, product composition, raw material origin, recycled content, and carbon footprint. Combined with good supply chain governance practices and collaboration within the supply chain, it is a prerequisite for strategic and operational risk management. Traceability is also associated with increased performance and supply chain transformation.
Sustainable sourcing of raw materials has always been at the core of forest value chains. Data flows throughout the chain aim to ensure the traceability of wood and fibers from the forest to the customer. The origin of raw materials is mostly well known and the sustainability of the use of wood can be tracked. The chain of custody and accompanied data on the origin of wood verifies responsibility and sustainability and ensures compliance with applicable regulations. The amount of data produced during the different steps of raw material sourcing and production as well as logistic journeys and customer interactions is extensive. The data is quite scattered, however, and traceability calls for a data infrastructure where this data would be efficiently managed and shared.
The strategies of forerunner companies
Forerunner companies in all industries are already strengthening their organisational capabilities, including good supplier and customer relationships, for future environmental transparency and traceability. This calls for practices, tools, and platforms for integrating and managing product and service lifecycle and value network data and related environmental impacts as well as linking product and material flows with their virtual representations. Accountability and trust constitute the key for sharing traceability data. Digital information-sharing and shared decision-making systems should also support joint decision-making and resource sharing in value chains.
Although traceability and transparency have clear benefits, such as opportunities for increased supply chain performance, environmental benefits, and gaining consumers’ and investors’ trust, there are also challenges, such as the difficulty and the cost of gathering the needed data. The following questions will help you to define the best strategy to tackle the issue:
- What product lifecycle and value network data would be valuable, for whom, and when?
- What is the value of traceability and transparency compared to the investments needed?
- How do we create the needed data infrastructure and what capabilities do we need?
- What are the potential drawbacks and risks of traceability and transparency?
Päivi Luoma, Leading Consultant at Gaia Consulting and Doctoral Candidate at the University of Helsinki
Originally published as a guest blog at www.raute.com