Why Traceability Matters to Supply Chains

Why Traceability Matters to Supply Chains

What are you wearing? Where did it came from? How much energy went into it? How much pollution was generated by its production and shipping?

You almost surely don't know, and you may not care, but brands and retailers are digging deep into their supply chains to better understand the environmental and social impact of the things they make and sell. This is an emerging trend in business that goes by the name of traceability or supply chain transparency. It requires companies to understand the full depths of their supply chains much better than most do. Companies getting serious about traceability include Patagonia, Wal-Mart, Tesco and Gap. More are sure to follow.

"If you don't know where your stuff is coming from. how can you have a sustainability program?" asks Tim Wilson, the CEO of a British company called Historic Futures that specializes in traceability.

Tim talked about traceability on a panel that I moderated at FORTUNE's Brainstorm Green conference about business and the environment. He was joined by Mike Kowalski, the CEO of Tiffany & Co., Kathy Abusow of the Sustainable Forestry Initiative, Jill Dumain of Patagonia, Arlin Wasserman of Sodexo and Jeremy Moon, the CEO of Icebreaker. Icebreaker is a fascinating company that makes clothing from New Zealand merino wool and invites customers to trace their garments back to the farmers who raised the sheep that made it—using a (Get it?)  Baacode. Very cool, and here's the Icebreaker story.

From the composition of that panel, you can see that traceability crosses diverse industries—jewelry, wood and paper, food and clothing. In every case, the goal is to de-commoditize commodities—that is, to distinguish between gold mined under safe conditions in the U.S. and gold mined by children in Africa, or between wood that is harvested sustainably and wood that has been illegally logged. Fortune.com just published a brief story that I did about traceability. Here's how it begins:

Laguna Niguel, Calif. –  Where was the cotton in your shirt grown? Who mined the gold in your wedding ring? What forest produced the paper in the magazine you are reading?

You almost surely don't know, but a growing number of brands and retailers want to dig deep into their supply chains to better understand the roots (sometimes literally) of the products they sell. Their goal: to avoid risks and enhance their reputation as "green" business leaders, says Tim Wilson, the 41-year-old CEO of Historic Futures, a little British company that is riding a big idea in sustainability, known as traceability.

Using Internet-based systems and RFID tags, Historic Futures tracks such commodities as cotton and gold through the long and previously opaque supply chains of Wal-Mart, Gap, and Patagonia, among others.

Patagonia has done a terrific job of explaining traceability to the public on a website called The Footprint Chronicles. (That's a graphic from the site below.) The Environmental Defense Fund spotlighted the work done by Patagonia in its 2009 Innovations Review, which I helped EDF to write. EDF also highlighted Wal-Mart's Love, Earth line of jewelry—which promises customers that the gold and silver jewelry they buy has been mine and produced responsibly.

Here is a link to the EDF report about traceability, headlined Shining a Spotlight on the Supply Chain. Here's a link to EDF's account explaining how Wal-Mart created its Love, Earth line of jewelry, with the help of Historic Futures. Another example of traceability: Wal-Mart and Tesco have vowed not to buy clothing made with cotton farmed in Uzbekhistan, where child labor is rampant, requiring them to ask all their suppliers to know where their cotton is sourced.

Traceability isn't a new idea, of course. We couldn't have organic food or Fair Trade coffee or salmon certified by the Marine Stewardship Council without transparent supply chains that track goods from the store shelf back to the farm or fishery. But judging from the crowd at our Brainstorm Green panel on traceability, you'll be hearing more about it in the years ahead.

Shipping photos CC-licensed by Flickr users smitty42 and grantsviews.