**Washington D.C.:** The US Forced Labor Prevention Act has driven global mandates for detailed supply chain traceability, prompting companies to adopt AI-driven digital mapping tools. Emerging standards and regulations across North America and the EU aim to address compliance risks and environmental, social accountability challenges in sourcing.
In recent years, digital supply chain mapping has transitioned from a niche practice to a mandatory regulatory requirement, following the enactment of the U.S. Forced Labor Prevention Act. This pivotal legislation has prompted global mandates for companies to enhance their visibility into end-to-end supply chains and to collect credible chain of custody data to demonstrate the origins of their goods. Following the United States’ lead, similar regulations have been established in Canada, Mexico, and the European Union, rendering comprehensive supply chain traceability standard practice.
The push for enhanced transparency has offered significant improvements in how supply chains are managed; however, the current framework still faces challenges that could benefit from improved standardisation and the digitisation of all supply chain data. Reports indicate that while many companies have long been mapping their supply chains down to the raw material level, the absence of a cohesive standard can create hurdles for businesses, regulators, and enforcers.
Companies that engage in supply chain mapping often identify five to 25 times more upstream suppliers than their direct suppliers. This discovery is crucial as unknown suppliers can lead to non-compliance with various U.S. regulations, including Dodd-Frank and Section 307 of the Tariff Act of 1930. Sourcing from unidentified suppliers can pose risks by potentially involving “bad actors,” which could compromise both product integrity and consumer safety.
Different approaches to supply chain mapping have emerged, each with varying levels of effectiveness. Some providers utilise publicly available data for rapid mapping, offering a general overview that might be outdated and hard to verify. Conversely, traditional supply chain management platforms often only engage with Tier 1 suppliers, failing to address the broader visibility challenge many companies face.
A more effective solution integrates AI-driven automation alongside supplier-verified data collection. This method onboarders direct suppliers onto a platform, which subsequently expands to include each upstream tier. Each discovered supplier is accompanied by traceability data, or chain of custody data, documenting transportation and payment records to create a transparent audit trail.
The importance of knowing upstream suppliers is underscored by historical incidents. For instance, in 2019, a prominent U.S. shoe and apparel company identified significant quantities of Brazilian leather within its supply chain. The company halted sourcing from Brazil pending assurance that the materials did not contribute to environmental harm, leading to a swift policy adjustment from Brazilian authorities. This case illustrates how digital supply chain mapping can not only influence responsible procurement practices but also catalyse legislative changes.
Furthermore, public commitments to transparency can encourage industry-wide actions, as demonstrated when numerous apparel brands uncovered links to state-sponsored forced labour in Turkmenistan. This revelation led 12 companies to sign the Responsible Sourcing Network’s Turkmen Cotton Pledge, effectively linking their sourcing policies to social responsibility and pushing competitors to adopt similar supply chain mapping efforts.
The regulatory landscape is evolving, with stringent measures under the Forced Labor Prevention Act encouraging companies to be proactive in their supply chain understanding. For example, an apparel company onboarded its direct suppliers and, within a month, identified a noncompliant upstream supplier. This early identification allowed the company to terminate relationships with noncompliant sources before facing potential detention at import.
Efforts to standardise digital supply chain mapping are also gaining traction. The European Union’s Deforestation Regulation (EUDR) demands extensive supply chain data and risk assessments prior to market entry. Compliance requires companies to track geolocation data for every farm used in shipments of commodities such as cocoa and palm oil. Noncompliance could lead to significant financial penalties, positioning these stipulations as critical to future supply chain operations.
In the United States, the U.S. Customs and Border Protection (CBP) is currently developing interoperability standards to facilitate seamless supply chain data exchange under its ACE 2.0 initiative. This programme aims to improve transparency while enabling secure, real-time data sharing among global entities, laying the groundwork for a system that requires standardised digital supply chain data across all imports.
The advancements in digital supply chain mapping reveal a pivotal shift for industries reliant on comprehensive supply chain transparency. Establishing clear standards would not only enhance compliance but also ensure that businesses striving for ethical practices are not disadvantaged compared to those taking shortcuts. In a landscape where enforcement agents may face a plethora of documentation, a unified data exchange platform could streamline processes, making digital supply chain mapping an essential component of global trade.
Source: Noah Wire Services
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