The European Union (EU) has reached a provisional agreement on a new law to ban companies from importing products linked to deforestation.

Once the law is in place, companies that export products linked to potential deforestation will be required to verify and issue a ‘due diligence’ statement confirming that the products being placed on the EU market have not led to deforestation or forest degradation, anywhere in the world, after 31 December 2020.

The new laws will apply to cattle, cocoa, coffee, palm-oil, soya, wood, rubber, charcoal, and printed paper products. The rule includes products that contain, have been fed with, or have been made using these commodities (such as beef, furniture, leather, and chocolate), and a number of palm oil derivatives^[1].

Companies will also be required to verify their compliance with any and all relevant laws and legislation of the country of production – where the product was sourced or made. This includes being able to verify that the company acted within the relevant human rights laws, and that the rights of any indigenous peoples have been respected during production.

Stepping up to the mark

Your products may not be linked to deforestation – but if they are in the high-risk group, can you prove that they aren’t linked? Over and above that, can you prove that you have complied with the specific laws of the country in which you produced them?

Now more than ever, supply chain transparency is a key component of the manufacture and supply of global products, as also seen in the recently announced FDA final rule on Requirements for Additional Traceability Records for Certain Foods (Food Traceability Rule). This ruling requires anyone who manufactures, processes, packs, or holds foods destined for the US market that fall on the FDA’s food traceability list (FTL) to meet additional traceability requirements from 20 January 2026, or face penalties^[2].

Transparency solutions enable organisations to re-purpose data to build trust with businesses and consumers alike and meet increased obligations for reporting. This is done by the ability to provide select parties with permissioned access to blockchain-verified records, which prove end-to-end traceability of goods from inception to the point of sale. This helps organisations to provide an audit trail across every critical tracking event and key data element along a product’s journey to market.

Without such a trail of evidence, it is difficult to prove traceability and provenance claims. Paper trails and rudimentary digital storage files can be altered and tampered with, as well as being subject to human error where manual input is needed, ultimately making it harder to prove compliance.

Beyond compliance – unlocking value 

The benefits of digital traceability tools go well beyond regulatory compliance, with food safety and traceability also being of increasing concern for consumers in recent years.

The ability to prove provenance claims and validate the passage of goods along the supply chain is even more essential for businesses to succeed in key markets.

With the rise of conscious consumerism across the globe, organisations can unlock value along the supply chain by adopting end-to-end traceability solutions.

Benefits for the end consumer include enhanced food safety, biosecurity, and the ability to identify environmental and ethical production characteristics such as animal welfare, sustainable production, and quality control in the products they choose – as products can be traced right back to their origins. The ability to communicate these stories to consumers is the golden ticket for many organisations who no longer necessarily compete on price for their slice of the consumer-pie, but on an array of sustainability and environmental, social and governance (ESG) measures.

On average, food recalls cost companies US$10 million in direct costs alone, according to a joint industry study by the US Food Marketing Institute and Grocery Manufacturers Association in 2012^[3] – and the costs today are likely to be much higher.

Traceability solutions can help organisations to save money during a product recall by enabling the company to quickly and accurately identifying which products and batches are affected, allowing for targeted recall efforts rather than recalling all products. This also minimises the damage to a brand’s reputation and prevents potential costly legal action. Additionally, traceability software can help to identify the root cause of the problem, allowing for corrective measures to be put in place, preventing similar issues in the future.

Organisations that adopt business models highlighting product sustainability and provenance stories are likely to meet, and stay ahead of, this changing consumer demand.

Traceability solutions are also of particular interest to boards, as listed companies across the globe are increasingly required to disclose their business practices and operations in annual ESG reporting. A traceability solution is vital to provide proof points and evidence that the company is fulfilling its claims across its supply chain.

For more information on TradeWindow Assure+ and how we can help, contact us.

[1] European Parliament, 6 December 2022: Deal on new law to ensure products causing deforestation are not sold in the EU, https://www.europarl.europa.eu/news/en/press-room/20221205IPR60607/deal-on-new-law-to-ensure-products-causing-deforestation-are-not-sold-in-the-eu

[2] U.S. Food and Drug Administration, December 2022: FSMA Final Rule on Requirements for Additional Traceability Records for Certain Foods, https://www.fda.gov/food/food-safety-modernization-act-fsma/fsma-final-rule-requirements-additional-traceability-records-certain-foods

[3] Food Safety Magazine, 2012, Recall: The Food Industry’s Biggest Threat to Profitability: https://www.food-safety.com/articles/2542-recall-the-food-industrys-biggest-threat-to-profitability