The session “Supply chain traceability: how far is far enough,” which took place in London last month (22-23 March), saw industry experts from food and beverage company, Nestlé, confectionary brand, Tony Chocoloney, and networked ingredients marketplace, TraceGains, discuss how to leverage one-tier relationships, and technology within the supply chain.
The panel discussion included Nestlé UK, sustainable sourcing manager, Robin Sundaram, Tony Chocoloney impact navigator, Pavi Ram, and Paul Bradley the senior director of product marketing of TraceGains. While, Mark Hooper, commercial director of sustainable supply chain data platform, SEDEX, moderated the session.
Supply chain traceability and mapping
Supply chains are a top issue for many organisations, governments, policymakers, and consumers. The need to ‘map’ a supply system is a prerequisite for tackling many modern supply chain difficulties.
“When we looked at our supply chain, we started with ingredients that we didn’t know how to play with straight away,” explained Nestlé UK’s Sundaram.
“We started by looking at what and where the risk was in the supply chain. For instance, deforestation risks, child labour, cocoa, and human rights challenges.
“And then the second question was how do you then start to tackle it?”
To tackle these risks, Nestlé began working with its suppliers and getting them to open up and start necessary discussions within their field of communication. The company also worked with NGOs and third parties who could support their imports of hazelnuts and cocoa.
“Hazelnuts for those who don’t know are mainly from Turkey,” continued Sundaram.
“Mainly migrants, Kurdish farmers and anyone who knows the history of the Turks and Kurds know they’ve not always got on. There were real issues there.
“So Fair Labor Association was a third party who helped broker the discussions and helped us develop a programme for each one.”
Similarly, Ram explained that cocoa is Tony Chocoloney’s biggest risk but said dealing with one product is a lot simpler.
Tony Chocoloney also relies on its suppliers and depends on third parties to aid with due diligence. However, Ram claimed that Tony Chocoloney takes full responsibility for its cocoa.
“We have a sourcing model with five sourcing principles and traceability is the very foundation. We believe that unless you know where and under which conditions your commodity is grown, you cannot take full responsibility for it,” she pointed out.
Ram also added: “With cocoa, the two biggest sustainability issues are labour issues such as child labour, and deforestation. Knowing where your cocoa is grown, and who is growing it, helps you identify the risks in both these issues.”
She shared that the farms Tony Chocoloney sources from, have been GPS polygon mapped. GPS polygon mapping traces the entire perimeter of a farm, providing an additional layer of insight for increased transparency and traceability.
Sundaram believes the agronomists (experts in the science of soil management and crop production) in the sourcing farms are part of the overall solution as they are the ones helping and working with farmers on the ground. Through agronomists, Nestlé’s hot beverage drinks brand, Nescafé, was able to identify issues such as children going hungry despite their mothers working all day on the farms due to not having enough money for food.
Sundaram explained: “On the farm, they are growing herbs and spices and all the things that could be used to feed the family. We trained agronomists to help them cook food that could help. So, we’ve switched the way we do things on the ground by asking the right questions. We’re relatively lucky in that we’ve got the resources to implement that level of detail and expense.”
Ram added that Tony’s had something called “Tony’s open chain”, which is an industry-led collaborative initiative to transform the cocoa sector and make the sourcing model available for other companies.
She explained: “We’re making it more efficient. It’s a win-win for everyone. It’s a win for the farmers because it means they’re selling more of their cocoa at a higher price, with the mapping done.”
While, adding that there are are several team members working on the traceability. Plus there is the legislation on one side and the collaboration of companies coming together on the other.”
The importance of leveraging tier-one relationships
Sundaram suggests the best success is when you’ve got engaged suppliers.
He said: “They’re the ones that are leading on a lot of it and we’re working with them.
“If they are really happy to support a point in their resource, that’s a big win.”
Tier one suppliers are partners that directly conduct business with, including contracted manufacturing facilities or production partners. Companies need to develop a relationship with suppliers in their supply chain to get full transparency on their businesses. So, for Nestlé and Tony Chocoloney that would be the factory that produces their products.
Tier two suppliers are the source where Tier one supplier get their materials. For example, the factory that supplies Nestlé and Tony Chocoloney with cocoa.
Tier three suppliers or partners are one step further removed from a final product and typically work in raw materials for instance the workers that farm cocoa to Nestlé and Tony Chocoloney.
Sundaram explained: “We’ve worked with an amazing charity called Unseen and they manage the [UK] Government’s modern-slavery helpline, and help us deliver training to our staff around that.
“We share all of our supplier information to Unseen and not just us, M&S, Tesco, and others are involved. They’re building a picture of where modern slavery is happening and where it’s moving around the country. Now, that’s a great start. But you need tier one, tier two and tier three to build because that’s where the biggest risks are.”
Sundaram pointed out that although organisations like Unseen are giving companies a great start, businesses need tier one, tier two and tier three to further build on the supply chain because that is where the risks lay.
Nestlé has tried to implement management into tiers of its supply chain by encouraging suppliers into training with Unseen. Suppliers are given more information on how the slavery system begins and how to avoid it happening within the supply chain. Nestlé has made this a mandatory step for suppliers that want to work with the company.
Sundaram said: “More and more we’re looking at it through procurement and contract tenders. Once you get tier one on board the rest will follow and that’s one of the approaches we’re taking.”
TraceGains’ Bradley has something that he describes as a “360-degree view of supply performance” through the tiers, where a decision around prioritising every single node in the supply chain, where those resources are going, where companies need to invest and what it could lead to.
He continued: “It involves an understanding of who the supplier entities out there that we want to invest in, build strong relationships with and collaborate with. I would suggest that we look across multiple dimensions.
“We’re concerned about ESG performance and its various aspects, but we should be focusing on whether that supplier is responsive to my requests. Do they consistently deliver good products? Does that product perform well in my manufacturing environment? Are there recalls? Are there regulatory things happening out there and what landscape is unfolding for that person?
“Those are all the things where there are multiple sources of data out there in the world, that data can be aggregated, that data can be brought to bear. That can give us a richer platform for relationships for driving priorities and choosing where are we going to dig in and do the right things in our supply chain.”
Technology and data within the supply chain
The imperative for businesses is loud and clear; more than ever before, supply chains need to be technology-driven and digitally enabled to be resilient, flexible, and transparent.
Turning to data and analytics to manage the supply chain can give companies better insight into aspects of their operations like customer demand and delivery inefficiencies.
Sundaram explained technology and data offer great insights and it’s future-proof.
“We’re using the technology that was developed for the Mars missions to dig into the ground,” he said.
“We know how much carbon there is and how much it goes back. The farmers themselves now can use that information to implement things in their farm-by-field, because they’ve got this information technology that’s allowed us to do that.”
“I know several people in this room have similar technology, like Starling, which uses satellite to see where deforestation is occurring and then you can see if it is in your supply chain, and then you can jump straight on that supplier and ask what’s going on and do something about it. That is a great technology edge.”
There is room for more new innovative technology that can benefit companies.
Ram added: “The technology used today will become advanced. We see that in our traceability because of mapping data and our GPS, Polygon map. The quality of that mapping data has improved, and it keeps improving year after year, which means that by improving the mapping data, you have improved, the satellite data as well. Originally, farmers were not able to see the risk of deforestation three years ago, but now they are.”
Bradley shared that it’s very easy to have an unrealistic expectation of what technology solutions can do for us.
“Boots on the ground in a field in say Kenya is not something that any technology platform itself can provide,” he said.
Ram supported this by stating technology can help make things better but won’t always replace having people on the ground investigating and asking the right questions.
On one side of filling that white space where technology can play a part is that you can’t always be everywhere all the time and you can’t always see what is going on, pointed out Sedex’s Hooper.
Bradley added: “Lifting some of that burden from the people on your organisations who have to do the work is a key part of what technology systems can do.
“Data is just data until someone reacts to it, but systems can still do something really valuable in making the data present when the data is necessary and when those decisions need to be made.”
The future of human rights due diligence in supply chains
The panel briefly discussed the future of human rights due diligence in global supply chains. As legislation and stakeholder pressure around the world pushes companies to address and prevent human rights abuses in the supply chain, the mechanisms to do so can drive unintended consequences.
“Legislation is there so that due diligence practices are being implemented and practised. So that, you don’t get your head blown off when you are trying to do the right thing and you still find issues, because you can say no, look, this is how I’ve implemented the different steps of due diligence. So, it also protects you a little bit,” said Ram.
In the closing remarks, the panel touched on how organisations should tackle supply chain visibility.
More consumers want to know, what’s in my food or whatever it is that you’re producing. Where is it coming from? How’s it been made and how are the people working on it being treated, Sundaram highlighted.
“It’s becoming more and more important. If you don’t do it, you’re going to find yourselves left behind when the regulation comes whether that’s human rights or environmental due diligence. It’s a case of companies prioritising and taking one step at a time.”
Meanwhile, Ram concluded: “If not now, when? Now is the time to ask the questions. Now is the time to put people and the planet over everything else and the profits and businesses will follow.”