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Trade Procedures Facilitation Domain
Formal Launch of UNECE Recommendation #49 - Transparency at Scale
UN/CEFACT is pleased to launch recommendation 49 at the Bangkok forum. This important recommendation will provide advice to nations on scaling supply chain transparency as a means to combat greenwashing, uplift the value of sustainable goods, and improve market access for exporting nations faced with new ESG regulations being imposed by their export market economies. Access to the project brief is documented.
Traceability & transparency in supply chains is a pre-requisite for high integrity evidence of ESG compliance in supply chains. However, despite the plethora of traceability systems and pilots, none have managed to scale to the volumes necessary to have a real impact on global supply chains. There are two main reasons for this scalability challenge. Either the business incentives are wrong or the implementation models are wrong.
- Business incentives: Supply chain stakeholders need a sound commercial incentive to drive successful traceability systems. Participants must achieve either increased market access because traceability is part of a regulatory requirement (eg EU Deforestation-free regulation) or they achieve a price uplift (because buyers will pay more for certain verifiable qualities) or they avoid a cost (eg avoiding carbon border adjustment taxes because of verifiably carbon neutral produce). Too many traceability pilots do not pay sufficient attention to this business incentive question.
- Implementation model: Most traceability pilots have worked on the assumption that traceability is achieved by providing a single technology platform where all supply chain actors push their data so that an end-to-end picture can be drawn from the data in that platform. This works fine for limited pilots but can never scale to production. To explain why lets use an analogy of the banking system. Asking everyone to engage with the same traceability platform is like saying that we can only make payments to each other if we all use the same bank. The world doesn’t work like that. There are 10,000’s of banks around the world and payments move between systems because there’s an international standard (swift) for inter-bank transfers. It’s the same with traceability. The only scalable traceability solution is a decentralised one where the data stays where it is but can be linked together to form the traceability picture.
The purpose of this project therefore is to provide guidance to UNECE member states on best practice solutions to both of these scalability barriers. Nations that successfully support their domestic industries in implementing the recommendations from this project will benefit in two ways
- Export market access: Exporters that can provide verifiable evidence of compliance with ESG regulations and standards required by their export market customers will enjoy improved market access and potentially price uplifts. Those that cannot provide such evidence may be excluded from markets or face price penalties.
- Border compliance: Importing economies that can verify compliance with ESG regulations and standards at their border will be able to reduce product dumping and unfair competition for their domestic industry. Strong digitally verifiable evidence will increase border intensity and reduce processing costs through automation.
The project lead, Mr Steve Capell, will present the project terms of reference and will facilitate a discussion on the project goals and opportunities for participation in the development of this key UN recommendation.
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