The Growing Importance of Supply Chain Transparency in 2023

In recent years, there has been a growing demand for better supply chain transparency, more so than ever before. Consumers have fundamentally changed what drives them to make purchases, which has forced supply chains to adapt. 

The main drivers behind consumer behavior changes include ethical consumerism, environmental concerns, and regulatory pressures. Consumers are becoming more conscious about the origin of the products they purchase and the social and environmental impacts of the supply chains. 

This has led to companies needing to be more transparent about their supply chains and to provide accurate information about the products they produce. 

Consumer-Driven Transparency 

Real-time delivery updates are no longer the main focus of consumers. They are wanting more insight into the global supply chains, especially given how public supply chain missteps have become. Given that personal consumption expenditures represented nearly 68% of the nation’s Gross Domestic Product in Q4 of 2022 alone, changes are coming.  

Ethical Consumerism 

The consumer-packaged goods (CPG) market has become a battleground for greenwashing. Companies claim their products are sustainable, recycled, compostable, etc. The CPG sector alone employs millions of people and has trillions of dollars in annual sales, making it a crucial component of any healthy supply chain. 

More consumers are voting with their wallets. More than 60% of consumers are more likely to choose a product that has sustainable packaging, even if it is more expensive than the other options. 

This has led to the rise of CPG companies seeking out additional certifications to demonstrate their commitment to ethical and sustainable supply chains. These programs, such as Fairtrade or Rainforest Alliance, provide independent verification of a company's compliance with ethical and environmental standards. 

Environmental concern 

Consumers are becoming increasingly aware of the environmental impact of the products they purchase and want to know that the companies they buy from are taking steps to reduce their carbon footprint, use sustainable materials, and ensure that their products are environmentally friendly. 

As a result, many consumers are now demanding greater transparency in the supply chain. They want to know where the materials for products come from, how they are sourced, and whether they are environmentally sustainable. They also want to know how products are manufactured and whether the production processes are environmentally friendly. 

These demands from consumers have forced companies to adopt more environmentally sustainable practices. Not only are they adapting practices, but it's also become a key pillar of their marketing to consumers and developing brand loyalty. 

Industry-Driven Transparency 

Regulatory pressures 

Regulatory pressures are increasingly affecting the level of supply chain transparency that companies need to provide. Governments around the world are enacting laws and regulations that require companies to disclose more information about their supply chains. This is designed to promote better environmental and social practices, protect human rights, and prevent modern slavery. 

Throughout the years' regulations have popped up concerning running an ethical supply chain. The Dodd-Frank Act requires companies to report on the use of conflict minerals in their products. The EU Conflict Minerals Regulation also mandates companies to conduct due diligence on their supply chains and report on the use of conflict minerals. The Jones Act limits how cargo is transported by sea. 

The European Union is also working on regulations to promote greater supply chain transparency. The EU Sustainable Corporate Governance initiative, which is currently under discussion, would require companies to conduct due diligence on their supply chains to identify and prevent human rights abuses, environmental degradation, and other risks. 

Most recently, in the United States, the Securities and Exchange Commission (SEC) is working on proposed regulation that would require publicly traded companies to disclose their carbon emissions. This isn’t the end of regulations for supply chains. The only question that remains is, can this information be accessed easily? 

Improving visibility 

The inability to access and report on data hurts any attempt at visibility. Sure, a package might be able to be tracked down to the street it’s on, but not knowing the volume of carbon emission that delivery produced is a barrier to true end-to-end transparency. 

To improve visibility and traceability across their supply networks, companies use various tools, strategies, and technologies, including digital supply chain twins, supplier engagement, and certification programs. These approaches help companies to build more ethical and sustainable supply chains and meet the growing demands of consumers and regulators. 

One of the most popular approaches is to implement a digital supply chain twin. This system is a digital representation of the physical supply chain that can be used to create plans and make decisions. For example, before adding a new supplier to the mix, data can be added to the “twin” of the current environment to see if there are any potential negative side effects. Companies can use this system to track products from the source of raw materials to the end consumer, providing greater transparency and accountability. 

Supplier Engagement 

Another strategy that companies are using is supplier engagement. This involves working closely with suppliers to ensure that they meet ethical and environmental standards. Companies can use audits and assessments to evaluate suppliers' compliance with these standards and work with them to improve their performance. Bringing suppliers into the Environmental, Social, Governance (ESG) initiatives boosts regulatory compliance for all. 

Certification programs are key to quick wins for consumers. Being able to put FairTrade certified on a CPG label makes it more likely for consumers to purchase that item. Voluntarily disclosing where and how goods are sourced and manufactured again increases customer loyalty and trust. 

These greater insights into the supply chain can highlight inefficiencies, areas for waste reduction, optimizing operations, and reducing costs. While there may be some risks associated with supply chain visibility, such as exposing vulnerabilities in the supply chain, the benefits far outweigh the risks. Companies that embrace transparency and work to improve visibility into their supply chains are more likely to succeed in today's marketplace. 

Need Help Making Your Supply Chain More Transparent? 

Redwood’s modern 4PL framework via Logistics Platform as a Service (LPaaS) combines logistics execution and supply chain orchestration capabilities to provide unparalleled visibility across customers’ entire supply chain. The Redwood Hyperion sustainability tool gives full carbon emissions visibility to customers as well. Redwood is part of the Open Visibility Network, a consortium of supply chain providers on a mission to enhance global supply chain efficiency. Explore Redwood’s supply chain transparency solutions and connect with our team to add greater visibility to your supply chain.