TrusTrace has emerged as an industry leader, meeting the growing demands of global leaders and discerning consumers who prioritise transparency and ethical practices. With strategic partnerships with legislative experts like Kharon and renowned retailers like Nike, Adidas, Marimekko, and Kappahl, TrusTrace stands as a trailblazer in driving supply chain compliance, regulation, and visibility.
To uncover the complexities of supply chain compliance, our TVC MEDIA TEAM spoke with Pauline God, the esteemed Head of Policy at TrusTrace. With her profound expertise in compliance for retailers and fashion brands, Pauline shared valuable insights on how brands can effectively navigate the intricate landscape of supply chain compliance, the challenges they may encounter, and the urgency of taking action now.
- Can you explain the importance of supply chain compliance for brands in the retail and fashion industry?
Supply chain compliance has become essential to business practices, mainly due to the extensive regulations that now govern the apparel and textile industry. Most of these regulations are centred around Supply Chain Due Diligence, with some extending to even sourcing raw materials through Tier N suppliers. Ensuring compliance with these diverse regulations is crucial for brands and imperative from a risk mitigation standpoint and as a means of future-proofing the organisation. Failing to have insights into your supply chain can be financially devastating if it prevents your products from accessing specific markets. Likewise, lacking a comprehensive understanding of risks can be damaging from an investment perspective.
- How do incoming regulations, such as the EU’s Corporate Sustainability Report Directive and Germany’s Supply Chain Act, impact brands?
Several supply chain regulations, including the Corporate Sustainability Reporting Directive (CSRD) and Germany’s Supply Chain Act (known as LkSG), are currently in effect.
The CSRD mandates that companies in the EU provide reports on sustainability issues and their impact on the company’s performance and the well-being of people and the environment. These reports must be audited and will have to be comparable and usable for stakeholders such as investors. LkSG applies to German companies and those with a branch in Germany. It obligates organizations to establish, implement, and regularly update procedures to enhance compliance with human rights and environmental considerations within their value chains. To adhere to LkSG, brands must thoroughly map and scrutinize their direct and indirect suppliers in cases where there is knowledge of risk related to specific geographic locations, materials, or other relevant factors.
Further forthcoming is the EU Corporate Sustainability Due Diligence Directive (CS3D), akin to LkSG. If identified as a potential risk, it will require all companies selling products in the EU market to map and investigate their entire supply chain, even down to Tier N or the fiber level.
So, to question how these regulations impact brands, companies need to understand that they need to significantly increase the time and effort they put into ensuring compliance throughout the supply chain – and that the time to act on this is now.
- With the executive order from U.S. President Joe Biden promoting diverse, secure, and resilient supply chains, how do you foresee the landscape changing for retailers?
The landscape is continuing to shift for retailers. We’ve observed a trend among retailers looking to adopt a comprehensive approach to sustainability communication. Retailers generally remove vague or unclear claims from physical stores and online platforms. They are more stringent in contacting end consumers to avoid accusations of greenwashing.
The intention is to bring less confusion for consumers, empowering them to make well-informed purchasing choices. It also encourages brands to put more effort into supply chain due diligence, risk reduction, and providing evidence to support their environmental claims.
- What challenges do brands typically face when trying to navigate supply chain compliance?
The highly complex and ever-changing supplier network poses a significant challenge when brands attempt to map out and analyze the chain of custody of their products. Furthermore, the limited IT maturity of brands and suppliers introduces additional challenges.
Even brands with PLM or ERP systems often encounter issues with unstructured data and suboptimal system utilization. Therefore, a critical first step is collecting or cleaning up the data. Though this step is vital, it can be very difficult for companies. Managing all this data manually, which is frequently stored in formats such as Excel, PDFs, and emails, brings additional challenges to brands.
- How can technology, like TrusTrace help brands achieve supply chain visibility and compliance?
On a broad scale, technology providers like TrusTrace can help brands gather data from their supply chain that can be used for risk, compliance, and impact management. Different solution providers have different focus areas.
First, technology like TrusTrace can provide tools for brands to map and visualize their multi-tier supply chains so that brands have complete visibility of their supply chains with first-hand data from suppliers. The TrusTrace tools are designed to reduce the manual workload for suppliers and brands to keep the supply chain data updated. For instance, brands can run “autopilot,” meaning they send automatic data collection requests to suppliers whenever new suppliers are detected.
Secondly, the TrusTrace platform enables brands to screen risky networks automatically with third-party risk databases so that brands are alerted about network risks and can take action promptly. Supply chain visibility and risk screening are due diligence requirements by many regulations.
Thirdly, our platform makes evidence collection and management less labor-intensive for brands. Brands need evidence to prove compliance. This evidence can involve hundreds to thousands of documents that must be sorted, translated, and classified. Suppliers can bulk upload proof with digital tools such as AI data extraction, automated translation, and automated document classification. This allows brands to easily link their POs to piles of evidence documents and share evidence and reports with authorities with just a few clicks.
Lastly, different regulations require different aspects of data at various granular levels, and some new rules are emerging without precise data requirements. TrusTrace’s technology enables brands to collect and manage multiple data at acceptable levels easily. The platform is designed for the present and the future with various traceability modules. That means that companies can start their traceability journey quickly by collecting essential data required by current regulations, then, later, scale up to collect more granular data for full traceability – from product to material and lot level. TrusTrace is providing brands with a way to future-proof their business.
- Are there any specific tools or features within TrusTrace that address the unique needs of the retail and fashion industry?
TrusTrace was founded with a vision of a future where all supply chains are traceable, circular, and fair after the four founders saw the devastating effects of irresponsible textile production practices in India. TrusTrace helps fashion brands know, prove, and improve the impact of their supply chains. As such, the entire platform, which has been developed in collaboration with frontrunners within fashion sustainability, is built specifically to tackle the needs of the fashion industry.
The platform is configured to understand and work with different product categories, styles, materials, sourcing models, and value processes and easily create an overview of the complex, ever-changing supply chains inherent to many fashion brands.
- Can you provide examples of how retailers like Nike, Adidas, Marimekko, and Kappahl have benefited from partnering with TrusTrace?
A primary benefit of partnering with TrusTrace, besides the market-leading traceability platform itself, is the access to expert knowledge and peer-to-peer learning and the ability to pioneer innovation in the industry.
Co-development and knowledge sharing become crucial as the requirements and solutions for supply chain risk, compliance, and sustainability continue developing within the fashion industry. For example, Kappahl and Marimekko have worked with TrusTrace as part of the Trace4Value program to create a technical solution for the Digital Product Passport (DPP). While the Digital Product Passport requirements are not finalized, we know much about what data brands are required to collect and share. Through the pilot project, Kappahl and Marimekko have taken great leaps toward readiness for the DPP. They have taken the steps to understand what data is necessary to collect, what they already possess, and what they need to start collecting. This may sound simple, but when looking at almost 100 data points, getting a granular view and getting specific about what’s required and whether your company has it available becomes quite complex.
Another benefit working with TrusTrace provides is customer cohorts, where TrusTrace unites customers with similar ESG ambitions, maturity levels, or sourcing models to discuss how to solve industry challenges best, align requirements, and feed this into product development. This ensures co-creation that delivers on industry and brand needs and allows access to helpful peer learnings, as many roles within a company do not have vast experience in managing traceability.
Finally, creating a traceability program and putting ESG data at the core of operations requires more than just purchasing software. It is a digital transformational program requiring a high commitment from the brand and the solution provider to ensure success. TrusTrace provides traceability tools and technologies and expert guidance to support it, building on the vast experience of implementing enterprise-scale traceability programs.
8. In addition to meeting compliance requirements, what other benefits can brands expect from implementing effective supply chain compliance systems?
By comprehensively understanding a brand’s supplier network and adopting a proactive approach to detecting and addressing risks, brands can significantly enhance their preparedness for any unforeseen situations in the supply chain. This approach also bolsters their ability to withstand business uncertainties.
Implementing effective supply chain compliance systems is strategic in safeguarding your business for the future and maintaining a competitive edge in anticipation of scrutiny by regulatory bodies and organizations seeking vulnerabilities in your supply chain. The ultimate goal, of course, is to identify, mitigate, or prevent the occurrence of adverse practices before they occur.
9. How can supply chain compliance and ethical production practices contribute to building customer loyalty?
Several regulations, such as AGEC, ESPR with DPP, Green Claims with the PEF, and the upcoming Textile Labeling Regulations, emphasize transparency and provide consumers access to specific data points. However, the primary goal is not to expect customers to be highly concerned about the particular details of this data or to base their purchasing decisions on it. Instead, it’s about establishing a baseline of transparency and traceability as a standard practice, even if most customers may not actively use this data in their purchasing decisions.
10. Considering the increasing focus on supply chain compliance, why must brands take action now?
Currently, approximately 25 supply chain regulations are already in effect, and an additional 30 are on their way to creation and adoption. These regulations are expected to come into enforcement within the next two to six years. Achieving full traceability will be time-consuming, especially considering the level of detail and granularity many regulations demand.
To ensure compliance in the coming years, it’s time for businesses to start setting up and training their internal teams and even exploring traceability tools. This proactive approach is essential for meeting the requirements of these forthcoming regulations.
