The global economy must be urgently steered away from unsustainable production and consumption patterns, which fuel the climate crisis, deplete natural resources and negatively impact both people and the environment. Global value chains are predominantly linear in nature, and the lack of identification of materials used or parties involved restricts the exchange of information among suppliers, retailers, governments, consumers and other stakeholders. Improving traceability and transparency of value chains can help close such information gaps, which is fundamental to taking targeted action to achieve more sustainable outcomes and to monitor progress towards this goal. 

In this context, the Second Session of the Team of Specialists (ToS) on Environmental, Social and Governance (ESG) Traceability of Sustainable Value Chains in the Circular Economy was held on 6 October 2022 with over 100 participants from UNECE member States, international organizations, private sector and academic institutions.  

In practice, how can industries manage their value chains in a more sustainable way? The ToS aims at going from strategy to action, contributing to better and more informed decisions for sustainable production and consumption through ESG traceability approaches. It also aims at informing the development of enabling frameworks and upscaling good practices and solutions to accelerate progress towards the circular economy.  

Building on the outcomes of its First Session last year, this Second Session looked into the legislative frameworks, incentives, corporate behaviour and the role of advanced technologies for ESG monitoring and compliance along supply chains. With diverse experience in implementation and cooperation with governments, international organizations and the private sector, the ToS addressed approaches for advancing ESG performance and explored vulnerabilities in existing practices, while introducing the best strategies to improve product traceability and sustainability worldwide. “Transitioning to a circular economy calls for intervention of key actors at different levels,” UNECE Executive Secretary Ms. Olga Algayerova highlighted. “This Team of Specialists is uniquely placed to promote collaboration among stakeholders and address main gaps in ESG indicators, methods and standards”.  

Prioritizing sustainable use of natural resources and responsible consumption practices, new policy, legislative framework and institutional arrangements have become a priority for many Member States. Private sector experts shared experiences for advancing ESG traceability and building solid claims on circular performance, probing the role of advanced technologies and exploring opportunities to move forward. Experts also discussed strategies to reduce the carbon footprint in value chains and approaches towards monitoring and reporting on decarbonization, and highlighted the importance of progress rewarding, corporate procurement practices, capacity building and effective collaboration among value chain actors.  

“We need the building blocks, the tools, and the ability for governments, stakeholders, producers, consumers to actually trace and make sustainable value chains more transparent. If you can’t trace it, you can’t measure it, and therefore you can’t improve it. It’s not going to be an easy exercise because value chains are complex but it needs to be done”, said Mr. Aik Hoe Lim, Director of the Trade and Environment Division at WTO.  

A policy brief on traceability, prepared by UNECE, is being finalised in view of its 70th Commission session in April 2023. The paper gives an overview of traceability and circularity approaches in the UNECE region through the prism of their interconnectivity across critical sectors such as garments and footwear, agri-food, transport and logistics, and critical raw minerals.  

In the policy brief, UNECE recommends governments to approach enabling policy options in a three-pillar structure: 

1. Circular strategy: define strategic directions of the circular transition starting with an assessment of the market scenario and market drivers in targeted sectors; 
2. Circular actions and cross-sectoral connectivity: introduce targeted policy measures shaped in a circular economy roadmap, while creating an effective and efficient system of incentives, particularly for SMEs; 
3. From traceability to circularity: enhance the enabling environment for the circular transition through policy options.  

For the next steps, the Team of Specialists decided to work on: 

• The finalization of the mapping and analysis of policy and regulatory frameworks and initiatives, and gaps to be addressed for ESG traceability; 

• The elements of a protocol to promote ESG monitoring and reporting in value chains across different priority sectors; 

• The development of targeted guidelines and tools for MSMEs. 

These topics will all be brought to the 70th UNECE Commission Session next year under the high-level theme “digital and green transformations for development”. The Session will feature relevant instruments and key initiatives of UN/CEFACT on value chain sustainability and the green economy transition.