1. Operations & Supply Chain

New Supply Chain Due Diligence Laws Necessitate Greater Traceability

The call for brands and retailers to fortify their supply chains with robust traceability solutions has never been more urgent. Countries across the globe have enacted tighter due diligence laws to prevent child labor, poor working conditions, and environmental abuses, ranging from the United States’ Uyghur Forced Labor Prevention Act, to the German Supply Chain Act (LkSG), and a new Canadian law that just went into effect this year aimed at eradicating modern slavery. These mounting regulations have made it abundantly clear that a superficial understanding of an enterprise’s supplier base is no longer sufficient. Companies are now expected to have a comprehensive and documented list of every link in their supply chain.

To comply with these forceful new supply chain laws, brands and retailers must implement comprehensive due diligence processes to ensure thorough risk assessments, effective mitigation measures, and robust monitoring systems. Businesses must scrutinize every tier of their supply chain, from raw material sourcing to final product delivery, ensuring that each segment adheres to stringent human rights and environmental standards. This requires a shift from traditional supply chain practices to a more transparent, multitier approach. Companies will need to invest in technologies and platforms that offer real-time visibility and traceability across their entire supply chain, enabling them to quickly identify and address any areas of concern.

In the near future, this traceability will need to extend to the component level for every item on the bill of materials at all tiers, underscoring the necessity for advanced digital platforms to manage these intricate processes. Such platforms offer more than traditional record-keeping; they enable real-time visibility and documentation, which is critical for adhering to rigorous standards of new global due diligence laws. Such technologies allow for swift identification and remediation of supply chain inefficiencies, underscoring a company’s commitment to ethical practices.

Artificial intelligence-powered traceability solutions provide detailed insights from the procurement of raw materials to the distribution of finished goods, creating the documentation and assurances that are key to complying with global due diligence laws. Traceability tools allow companies to identify and map intricate relationships between various entities in their supply chain, ensuring greater transparency.

Furthermore, a raw material traceability dashboard can categorize purchase orders based on risk levels, offering granular insights into the country of origin, entities involved, and various supply chain tiers. This feature is critical for identifying and mitigating potential risks in the supply chain, enabling companies to proactively address issues before they escalate into larger regulatory or reputational problems. A robust vendor compliance program includes an extensive audits module that collects vital data about suppliers. This module should cover a range of aspects, including environmental audits, technical audits, CSR, labor standards, and more, ensuring that every supplier and raw material provider in the chain adheres to the ethical standards expected by regulators and consumers alike.

Investing in traceability solutions is a strategic necessity, pivotal not only for adhering to new regulations but also for defining a brand’s values in a market that increasingly prizes transparency and ethical practices. The companies that respond proactively to this call will be the ones leading the charge in the future of sustainable business, while gaining a competitive advantage by securing the trust of their customers. The message for brands and retailers is clear: The time to reinforce your supply chain with robust traceability solutions is now.

Stephane Boivin is the co-founder of Pivot88, the trusted SaaS provider of quality, compliance, and traceability solutions to brands and retailers around the world.

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