We need to know as much as possible about how products are made. This will require new systems that bring greater transparency to global trade and supply chains.
The need is growing daily for an efficient way for companies to organize their reporting on environmental and social standards. Consumers want to know the products they buy are made sustainably, regulators and government officials want to ensure no rules are being broken and companies themselves want to publicize their success in meeting those standards.
Buyers and financial institutions increasingly have a responsibility to understand how their trade transactions and the companies in their supply chains are living up to environmental and social responsibility standards. It isn’t a stretch to imagine a day when companies will need to put as much effort into reporting on those standards as they now do in reporting their financial information to tax authorities. The question now is how to help them make that happen.
We’re already part of the way there, thanks to consumer concerns that the products they buy are not manufactured by children or forced labor, or that their production didn’t contribute to environmental destruction.
Much of the reporting done today on environmental and social responsibility standards differs from economy to economy and even from company to company within a single economy. Some of the existing reporting is voluntary as companies try to reap a benefit from being seen as green or socially responsible. Without readily available proof of their actions, companies can be liable to the charge of “greenwashing” their actions – over-selling their efforts on the environment to entice consumers.
Some reporting is already mandated by law. U.S. and European legislation enforcing environmental standards goes back 50 years, for example, and labor standards are enshrined in law in many economies.
At the moment, the reporting is inconsistent (where it does exist) and mostly only applies to the top segment of supply chains which may involve dozens of companies. The situation is fluid and changing fast. Industry groups are trying to reach voluntary common standards for their members and governments and international agencies are figuring out ways to enforce standards, as well as determining which ones need to be enforced and which should remain voluntary.
Technology is being applied to the problem, with systems offered to companies from a wide range of providers which promise to simplify the collection and dissemination of data they want to publicize or need to report.
Much of the reporting done today on environmental and social responsibility standards differs from economy to economy and even from company to company within a single economy.
Unfortunately, most of these systems are not compatible and certificates are being issued from a variety of different organizations. This is awkward for everyone. It is hard for companies and the overseers of the standards to keep track and does not give consumers, buyers in supply chains, financial institutions or governments the ability to confirm that companies are doing what they say they are doing.
Imagine a piece of furniture manufactured somewhere in Asia and sold to consumers in the U.S. In the current best-case scenario, the wood in the furniture could be certified as sustainable and harvested in an environmentally sound manner. The company itself could have a large pile of certifications – that it pays a fair price to the lumber producers it uses, that its operations are environmentally friendly, that its workforce is treated fairly and that it follows approved safety procedures. The manufacturer might even use some of those certifications on the product to alert consumers to its good practices.
But at the moment it is nearly impossible for a consumer, or even sometimes a regulator, to prove that the certification claims are true and that the furniture in question is covered by that certification. And the mishmash of certification bodies and regulations is a nightmare for the company to keep track of, not to mention the limited ways to advertise the standards it meets on the product itself.
Now imagine that a consumer, a customs agent, a regulatory body and the furniture manufacturer itself could use a cell phone to scan a QR code that would give access to the entire history of the object: when and where it was made; where the wood came from; and most importantly, all the certified care and attention the company put into meeting environmental, social and other standards.
The beauty of this solution is that the organization which would handle the system to provide all that information is already in place. GS1 is the global non-profit federation that handles the barcodes that currently adorn more than 2 billion products worldwide. It has more than 2 million companies and organizations as its members and is now working toward simplifying the complicated tangle of certificates and recognitions involved in those standards.
GS1 won’t set the standards or judge whether the companies are hitting them. The existing (and future) certification mechanisms will continue to do that. GS1 will only provide access to that data through a system that is already familiar and embedded into global business.
The barcode itself is being updated to handle the data required, with QR codes that can store links to much more data starting to appear on products. GS1, together with industry groups, governments and international organizations including ADB, is now working to bring everyone together to create the system that will allow easy access to much more information that will be available to more people and will benefit them all.
There is little time to waste. To make progress on the environment, on social responsibility and labor, we need to know as much as we can about how products are made.
The efforts being made now to develop new systems to drive transparency through global trade and supply chains, including to produce the (auditable) data to populate environmental and social reporting, are important to everyone’s future.