Deep dive: Supply chain traceability & transparency — what's working, what's not, and what's next

A 2025 McKinsey survey of 1,200 multinational companies found that only 6% could trace their supply chains beyond tier two suppliers, despite 78% naming full traceability as a strategic priority. The gap between ambition and execution defines the current state of supply chain traceability and transparency: regulatory mandates are accelerating, technology platforms are maturing, and consumer expectations are rising, yet most organizations still lack visibility into where their materials originate, how they are processed, and under what labor and environmental conditions they reach the final product. For European executives facing the EU Corporate Sustainability Due Diligence Directive (CSDDD), the EU Deforestation Regulation (EUDR), and Digital Product Passport (DPP) requirements, understanding what actually works in traceability is no longer optional.

Why It Matters

Supply chain traceability and transparency have shifted from corporate social responsibility talking points to hard regulatory and commercial imperatives. The EU's regulatory framework now requires companies operating in or selling into Europe to demonstrate verifiable traceability across multiple dimensions.

The CSDDD, which entered into force in 2024, mandates due diligence on human rights and environmental impacts across the entire value chain. The EUDR, effective since December 2024, requires importers of seven commodity categories (cattle, cocoa, coffee, oil palm, rubber, soya, and wood) to prove that products were not produced on land deforested after December 31, 2020, using geolocation data tied to specific plots. The Digital Product Passport regulation, phased in starting 2027, will require product-level data on materials, manufacturing processes, carbon footprint, and recyclability for batteries, textiles, and electronics.

The commercial stakes match the regulatory pressure. A 2025 Bain & Company analysis estimated that supply chain opacity costs European companies between 3 and 8% of revenue through inefficiencies, compliance penalties, reputational damage, and inability to access sustainability-linked financing. Companies with advanced traceability capabilities report 15 to 25% fewer supply disruptions and 10 to 18% improvement in supplier quality performance, according to a Gartner supply chain benchmarking study (Gartner, 2025).

For investors, traceability capability is increasingly a proxy for operational maturity. BlackRock's 2025 stewardship report specifically flags supply chain opacity as a material risk factor, and sustainable finance frameworks such as the EU Taxonomy require verifiable sourcing data for taxonomy-aligned activities in forestry, agriculture, and manufacturing sectors.

Key Concepts

Tier mapping refers to the process of identifying suppliers beyond the first tier (direct suppliers) through the second tier (component manufacturers), third tier (raw material processors), and fourth tier (extractors and farmers). Most companies have visibility only into tier one. Full tier mapping requires a combination of contractual disclosure requirements, technology platforms, and on-the-ground verification.

Chain of custody models define how traceability claims flow through the supply chain. The four primary models are: identity preserved (physical segregation of traced material throughout processing), segregated (traced material kept separate but may be commingled with other traced material), mass balance (traced material mixed with non-traced material, with bookkeeping credits tracking proportions), and book and claim (tradable certificates decoupled from physical product flow). Each model offers different tradeoffs between assurance level, cost, and practical feasibility.

Interoperability describes the ability of different traceability systems, data formats, and verification standards to exchange information. A garment may pass through cotton farming (tracked by Better Cotton), yarn spinning (tracked by TextileGenesis), fabric dyeing (tracked by a proprietary brand system), and retail (requiring a DPP). Without interoperability, each handoff creates a data gap.

Digital Product Passports are standardized digital records attached to individual products or product batches, containing information about origin, composition, manufacturing, environmental footprint, and end-of-life instructions. The EU's DPP framework mandates machine-readable data accessible via QR codes or RFID tags, with data hosted on decentralized infrastructure to prevent single-point-of-failure risks.

What's Working

Commodity-Specific Traceability Platforms

Sector-specific traceability platforms have achieved meaningful scale in several commodity chains. Sourcemap, a supply chain mapping platform, now hosts traceability data for over 150,000 supplier facilities across 190 countries, enabling companies such as Mars, Patagonia, and IKEA to map multi-tier supply chains for specific commodities. In the cocoa sector, Barry Callebaut's "Forever Chocolate" program uses GPS-mapped farm polygons combined with satellite deforestation monitoring to trace 72% of its cocoa volume to individual farm level as of 2025, up from 43% in 2022 (Barry Callebaut, 2025).

The diamond industry demonstrates what mature traceability looks like. De Beers' Tracr platform, built on blockchain technology, tracks diamonds from mine to retail using high-resolution imaging and unique digital identities for each stone. By 2025, Tracr had registered over 3 million diamonds, covering approximately 30% of global rough diamond production. The platform reduced provenance disputes by 85% among participating retailers and enabled premium pricing of 5 to 12% for fully traced stones (De Beers Group, 2025).

Satellite and Remote Sensing Integration

Satellite monitoring has transformed deforestation-linked commodity traceability from a sampling exercise to a near-continuous surveillance capability. Starling, a satellite monitoring service developed by Airbus and Earthworm Foundation, provides monthly deforestation alerts at 1.5-meter resolution for palm oil, soy, cocoa, and rubber sourcing areas. Nestlé uses Starling to monitor 100% of its palm oil supply chain, covering over 1,800 mills and their associated sourcing areas across Indonesia and Malaysia. In 2024, the system flagged 127 deforestation alerts, of which 94 were confirmed after ground verification, triggering supplier engagement or suspension protocols (Nestlé, 2025).

The European Space Agency's Copernicus program provides free, open-access satellite imagery at 10-meter resolution through the Sentinel-2 constellation, updated every five days. This data underpins the EUDR's "benchmarking system" that classifies countries and regions by deforestation risk level, directly affecting due diligence requirements for importers.

Regulatory-Driven Adoption in Europe

The EUDR has catalyzed a step-change in traceability investment. A 2025 survey by the European Forest Institute found that 67% of affected importers had invested in new traceability systems since the regulation's announcement, with median investment of EUR 1.2 million per company. The regulation's requirement for geolocation data (latitude and longitude coordinates for plots of land where commodities were produced) has driven adoption of GPS-enabled farm registration platforms in producing countries. Indonesia's national palm oil certification system, ISPO, integrated geolocation requirements in 2024, registering 4.2 million hectares of palm oil concessions with plot-level coordinates (European Forest Institute, 2025).

What's Not Working

The Tier Two Visibility Wall

Despite advances in tier one supplier mapping, most companies hit a wall at tier two. A 2025 CDP supply chain survey found that while 89% of responding companies could identify their tier one suppliers, only 31% had any visibility into tier two, and just 7% could identify tier three suppliers. The barriers are structural: tier one suppliers often resist disclosing their own supplier networks due to competitive concerns, contractual relationships beyond tier one are indirect (the buying company has no direct leverage), and the sheer volume of sub-suppliers in complex products (a typical automobile involves 30,000+ components from 4,000+ suppliers across 5 to 8 tiers) makes comprehensive mapping resource-intensive (CDP, 2025).

The problem is most acute in sectors with long, fragmented supply chains. In the textile industry, a single cotton t-shirt may pass through 8 to 12 entities across 4 to 6 countries before reaching the consumer: cotton farm, gin, spinner, knitter, dyer, cut-and-sew factory, finishing plant, brand warehouse, and retailer. Each handoff represents a potential traceability gap.

Data Quality and Verification Challenges

Traceability systems are only as reliable as the data they contain. A 2025 investigation by the Accountability Framework Initiative found that 23% of "traceable" palm oil volume in major brands' supply chains could not be verified through independent field checks, due to errors in GPS coordinates, outdated mill lists, or mismatched volume accounting. In the cobalt supply chain, the Responsible Minerals Initiative reported that 15% of smelter audits identified discrepancies between declared and actual sourcing countries, raising questions about the reliability of chain-of-custody documentation (Responsible Minerals Initiative, 2025).

The challenge intensifies in mass balance and book-and-claim models, where physical product and traceability claims are partially or fully decoupled. Critics argue that these models enable "paper traceability" without genuine supply chain transformation: a company can purchase mass balance credits for sustainable cocoa while physically receiving conventionally sourced cocoa, creating marketing claims that do not correspond to the actual product consumed.

Interoperability Fragmentation

The proliferation of traceability platforms has created a fragmentation problem. A 2025 World Economic Forum analysis identified over 400 distinct supply chain traceability platforms, standards, and data systems operating globally, with minimal data exchange capability between them. A European food company importing coffee, cocoa, palm oil, and soy may need to interface with 6 to 10 different traceability systems, each with its own data format, verification methodology, and reporting cadence.

The GS1 standards organization has proposed the EPCIS 2.0 framework as a universal data exchange standard for supply chain events, and the EU's DPP framework specifies interoperability requirements. However, adoption remains uneven: fewer than 20% of traceability platforms had implemented EPCIS 2.0 compatibility by early 2026, according to GS1's own assessment.

Cost Burden on Smallholder Producers

Traceability requirements disproportionately burden smallholder farmers who produce the majority of key commodities: 80% of the world's cocoa, 60% of coffee, and 40% of palm oil. GPS-based farm registration, record-keeping, and compliance documentation impose costs that smallholders cannot absorb. The International Institute for Sustainable Development estimated that EUDR compliance costs for smallholder cocoa farmers in West Africa range from $50 to $150 per farmer per year, against average annual incomes of $800 to $1,500. Without financial support from downstream buyers, these costs risk excluding smallholders from European supply chains entirely, shifting trade toward large plantations with existing compliance infrastructure (IISD, 2025).

Key Players

Established Companies

Sourcemap: Supply chain mapping and traceability platform used by over 300 brands across food, apparel, and electronics sectors to map multi-tier supplier networks.

SAP: Enterprise software provider whose SAP Responsible Design and Production module integrates traceability data with ERP systems, supporting DPP compliance for manufacturers.

SGS: Global inspection, verification, testing, and certification company conducting over 100,000 supply chain audits annually across 140 countries.

Bureau Veritas: Assurance provider offering end-to-end supply chain verification services, including EUDR compliance audits and mass balance certification.

Startups

TextileGenesis: Blockchain-based traceability platform for the textile industry, tracking fiber-to-retail supply chains for brands including H&M, Lenzing, and Birla Cellulose.

Tilkal: Paris-based supply chain transparency platform using distributed ledger technology to provide immutable traceability records, working with Carrefour and Danone.

OpenSC: Joint venture between WWF and BCG Digital Ventures, providing traceability solutions for seafood and agricultural commodities using IoT sensors, blockchain, and satellite data.

Altana AI: Supply chain intelligence platform using machine learning to map and monitor global trade networks, processing customs and shipping data to identify supply chain risks.

Investors

Emerald Technology Ventures: Climate technology venture capital fund with significant investments in supply chain transparency startups.

Breakthrough Energy Ventures: Bill Gates-backed fund investing in technologies that reduce greenhouse gas emissions, including supply chain decarbonization and traceability.

European Investment Bank: Public finance institution providing concessional lending and guarantees for supply chain traceability infrastructure in developing countries.

What's Next

Three developments will shape the traceability landscape through 2028.

First, AI-powered supply chain mapping will move from pilot to production. Altana AI and similar platforms use machine learning algorithms trained on billions of customs records, shipping manifests, and corporate filings to automatically map supply chain relationships, including undisclosed sub-tier suppliers. Unilever's 2025 pilot of AI-based supply chain mapping identified 340 previously unknown tier three and tier four suppliers in its palm oil supply chain, 12% of which were associated with deforestation risk areas. As these tools scale, the tier two visibility wall will erode significantly.

Second, interoperability standards will consolidate around the EU's DPP framework and GS1's EPCIS 2.0. The European Commission's 2025 implementing acts for battery DPPs specify standardized data schemas, API requirements, and decentralized data hosting architecture that will become the de facto global standard. Companies investing in DPP-compatible systems now will have a structural advantage as requirements expand to textiles (2027), electronics (2028), and potentially food and chemicals (2029+).

Third, the economics of traceability will shift as compliance becomes table stakes. Currently, traceability is a cost center for most companies. By 2028, fully traced supply chains will enable dynamic pricing, preferential financing (sustainability-linked loans with traceability-based KPIs), carbon footprint optimization through granular emissions data, and circular economy capabilities (products designed for recovery require lifecycle traceability). The companies that treat traceability as a strategic capability rather than a compliance burden will capture disproportionate value.

Action Checklist

• Conduct a baseline assessment of current supply chain visibility, documenting the percentage of spend traceable to each tier level
• Map regulatory exposure across CSDDD, EUDR, DPP, and sector-specific requirements (conflict minerals, forced labor import bans)
• Select a traceability platform with EPCIS 2.0 compatibility and API-based integration with existing ERP and procurement systems
• Establish contractual traceability disclosure requirements with tier one suppliers, including cascading clauses requiring sub-tier disclosure
• Implement satellite monitoring for deforestation-linked commodities, with automated alert and response protocols
• Allocate budget for smallholder support programs in sourcing regions to prevent supplier exclusion due to compliance costs
• Pilot AI-based supply chain mapping on one high-risk commodity to identify undisclosed sub-tier suppliers
• Develop a DPP readiness roadmap for product categories subject to upcoming EU requirements

FAQ

Q: How long does it take to achieve full supply chain traceability? A: Full traceability to raw material origin is a multi-year journey. Most companies can achieve tier one mapping within 3 to 6 months, tier two visibility for priority commodities within 12 to 18 months, and tier three or deeper mapping within 24 to 36 months. The timeline depends on supply chain complexity, supplier cooperation, and investment in technology and personnel. Companies with existing supplier engagement programs and digital procurement systems can move faster. A realistic near-term target is to trace 80% of spend for high-risk commodities to origin within 24 months.

Q: What is the cost of implementing a comprehensive traceability system? A: Costs vary significantly by company size and supply chain complexity. For a mid-sized European manufacturer with 200 to 500 tier one suppliers, typical implementation costs include: traceability platform licensing ($150,000 to $500,000 per year), supplier onboarding and data collection ($200,000 to $600,000 in the first year), satellite monitoring subscriptions ($50,000 to $200,000 per year), and internal team costs (2 to 5 FTEs). Total first-year investment typically ranges from $500,000 to $2 million, declining to $300,000 to $800,000 per year in steady state. Large multinationals with complex global supply chains should budget $5 million to $15 million for a 3-year traceability program.

Q: Should companies use blockchain for supply chain traceability? A: Blockchain provides value in specific use cases where immutability, decentralization, and multi-party trust are critical: conflict minerals chain of custody, high-value goods authentication (diamonds, luxury goods), and cross-border transactions involving parties without established trust relationships. For most general traceability applications, centralized or federated database architectures with strong access controls and audit trails deliver equivalent functionality at lower cost and higher transaction throughput. The EU's DPP framework is technology-agnostic and does not require blockchain. Companies should evaluate whether their specific use case requires the properties blockchain provides before committing to a distributed ledger approach.

Q: How do companies verify traceability claims from suppliers? A: Verification requires a layered approach combining digital monitoring, documentation review, and physical inspection. Best practice includes: cross-referencing supplier-declared data with independent sources (satellite imagery, customs records, trade databases), conducting risk-based third-party audits with unannounced components, implementing isotope testing or DNA tracing for high-risk commodities (effective for timber, cotton, and some minerals), and deploying IoT sensors (temperature, humidity, GPS) for shipment-level tracking. No single verification method is sufficient; effective programs combine automated monitoring for continuous assurance with periodic deep-dive verification for high-risk supply chains.

Sources

• McKinsey & Company. (2025). Supply Chain Transparency Survey: Global Results and Regional Analysis. New York: McKinsey & Company.
• Gartner. (2025). Supply Chain Top 25: Benchmarking Advanced Traceability Capabilities. Stamford, CT: Gartner Inc.
• Barry Callebaut. (2025). Forever Chocolate Progress Report 2024/25. Zurich: Barry Callebaut AG.
• De Beers Group. (2025). Tracr Platform: Three-Year Impact Assessment. London: De Beers Group.
• Nestlé. (2025). Responsible Sourcing Annual Report: Deforestation Monitoring and Supplier Engagement. Vevey: Nestlé S.A.
• European Forest Institute. (2025). EUDR Implementation Tracker: Industry Readiness and Compliance Investment. Joensuu: EFI.
• CDP. (2025). Supply Chain Report: Tracking Progress on Environmental Disclosure Beyond Tier One. London: CDP Worldwide.
• Responsible Minerals Initiative. (2025). Smelter Audit Results and Chain of Custody Verification: 2024 Annual Summary. Alexandria, VA: RMI.
• International Institute for Sustainable Development. (2025). Smallholder Compliance Costs Under the EU Deforestation Regulation. Winnipeg: IISD.