Explainer: Supply chain traceability and transparency

Why It Matters

Global supply chains are responsible for an estimated 80 percent of world trade emissions, yet the average multinational has visibility into fewer than two tiers of its supplier network (OECD, 2025). This opacity creates systemic risks: deforestation hidden in soy and palm oil supply chains, forced labour embedded in mineral extraction, and carbon-intensive processes concealed behind layers of intermediaries. According to the UN Global Compact (2025), 72 percent of corporate sustainability failures can be traced to supply chain blind spots where companies cannot verify the origin, labour conditions, or environmental impact of the materials they purchase.

Regulation is closing the gap between what companies claim and what they can prove. The EU Deforestation Regulation (EUDR), which requires companies to demonstrate that seven key commodities are deforestation-free using geolocation data, entered into force in June 2023 with compliance obligations beginning December 2025. The Corporate Sustainability Due Diligence Directive (CSDDD), adopted in 2024, mandates human rights and environmental due diligence across value chains for large EU companies. Germany's Supply Chain Due Diligence Act (LkSG) has required companies with 1,000 or more employees to monitor their supply chains for human rights violations since January 2024. Together, these regulations are transforming traceability from a nice-to-have reputational tool into a legal obligation with financial penalties.

The market for supply chain traceability solutions has responded accordingly. Allied Market Research (2025) projects the global supply chain traceability market will reach $41.7 billion by 2030, growing at a compound annual rate of 13.2 percent from $18.9 billion in 2024. Companies that invest early in traceability infrastructure gain regulatory readiness, consumer trust, and operational efficiency that translate into measurable competitive advantage.

Key Concepts

Traceability vs. transparency. These terms are related but distinct. Traceability is the technical ability to track a product, component, or material through each stage of the supply chain from origin to end consumer. Transparency is the organizational practice of disclosing supply chain information to stakeholders including customers, regulators, and civil society. A company can have internal traceability without external transparency, but effective transparency requires underlying traceability systems.

Chain of custody models. Four primary models govern how products are tracked through supply chains. Identity preservation maintains complete physical separation and documentation from source to final product, used in premium organic and single-origin supply chains. Segregation keeps certified and non-certified materials physically separate but allows mixing of certified materials from different sources. Mass balance tracks the ratio of certified to non-certified inputs across processing facilities, allowing mixing provided the accounting balances. Book and claim uses tradable certificates decoupled from physical product flow, offering the lowest traceability but broadest accessibility.

Digital product passports (DPPs). The EU's Ecodesign for Sustainable Products Regulation (ESPR), adopted in 2024, mandates digital product passports for batteries (effective February 2027), textiles, electronics, and other product categories. A DPP is a digital record containing a product's environmental footprint, material composition, repairability score, and supply chain origin data, accessible via QR code or RFID tag. DPPs create a standardized data layer that enables traceability across the product lifecycle.

Due diligence obligations. Modern supply chain regulations shift the burden of proof from regulators to companies. Under the EUDR, importers must submit due diligence statements with geolocation coordinates for every plot of land where commodities were produced. Under the CSDDD, companies must identify, prevent, and mitigate adverse human rights and environmental impacts throughout their value chains.

Interoperability standards. GS1, the global standards organization, provides the most widely adopted product identification and data-sharing standards, including Global Trade Item Numbers (GTINs), Serial Shipping Container Codes (SSCCs), and the Electronic Product Code Information Services (EPCIS) standard for event-level traceability. EPCIS 2.0, released in 2022, enables standardized sharing of who, what, where, when, and why data across supply chain partners.

How It Works

Building a traceable supply chain involves four interconnected layers: data capture, data transmission, data management, and data sharing.

Layer 1: Data capture. At the point of origin, data is captured through GPS-enabled devices, satellite imagery, IoT sensors, and mobile applications. For agricultural commodities, geolocation data pinpoints the farm or plot of land where crops are grown. Satellite imagery from providers like Planet Labs and Maxar verifies land use patterns and detects deforestation. In manufacturing, IoT sensors and RFID tags attached to components record production parameters, timestamps, and handling conditions. Workers can report conditions through mobile platforms like ELEVATE's worker voice tools.

Layer 2: Data transmission. Captured data flows through the supply chain via standardized protocols. Blockchain-based systems, used by platforms like Circulor and Minespider, create immutable records of custody transfers that cannot be retroactively altered. API-based integrations connect enterprise resource planning (ERP) systems across supply chain partners. Edge computing processes data locally at factories and warehouses before transmitting summaries to central platforms, reducing bandwidth requirements and improving latency.

Layer 3: Data management. Central platforms aggregate, validate, and store traceability data. Companies like SAP, Oracle, and Sourcemap provide enterprise-grade supply chain visibility platforms that map multi-tier networks, calculate risk scores, and generate compliance reports. AI and machine learning algorithms identify anomalies, flag potential non-compliance, and predict supply chain disruptions based on historical patterns and external data signals.

Layer 4: Data sharing. Validated data is shared with stakeholders through regulatory filings, consumer-facing interfaces, and B2B data exchanges. The EUDR requires companies to submit due diligence statements through the EU Information System. Consumer-facing applications allow shoppers to scan QR codes and view product origin stories. Industry data-sharing platforms like the World Business Council for Sustainable Development's PACT (Partnership for Carbon Transparency) enable standardized exchange of product carbon footprint data between trading partners.

What's Working

Unilever's end-to-end palm oil traceability. Unilever has achieved 97 percent traceability to mill level and 83 percent traceability to plantation level for its palm oil supply chain as of 2025, covering more than 1,600 mills and 250,000 smallholder farmers (Unilever, 2025). The company uses satellite monitoring through partnerships with Earthqualizer and Aidenvironment to detect deforestation in real time, triggering engagement or suspension of non-compliant suppliers. This system processes over 30 million hectares of satellite data annually.

Nestlé's blockchain coffee traceability. Nestlé deployed blockchain-based traceability across its Nescafé supply chain in partnership with OpenSC, enabling consumers in 20 markets to scan QR codes and trace their coffee back to specific cooperatives in Brazil, Colombia, and Vietnam. The platform has onboarded more than 150,000 smallholder farmers and processes 500,000 traceability transactions monthly (Nestlé, 2025). Farmers benefit from digital payment records and premium price verification.

Circulor's battery materials tracking. Circulor, a London-based startup, provides traceability for battery supply chains covering cobalt, lithium, nickel, and graphite from mine to vehicle. Volvo, Jaguar Land Rover, and Polestar use Circulor's platform to verify that battery materials are sourced without child labour and meet carbon intensity thresholds. The platform tracks materials across 15 countries and has processed more than 2 billion traceability data points since launch (Circulor, 2025).

EU EUDR early compliance results. By late 2025, early movers in EUDR compliance demonstrated that geolocation-based traceability is technically feasible at scale. Cargill reported mapping 98 percent of its direct soy supply chain in Brazil to plot-level coordinates. The compliance effort has also driven consolidation in the traceability technology market, with significant acquisitions including SAP's purchase of Trayport and Sourcemap's $100 million Series D funding round (TechCrunch, 2025).

What Isn't Working

Sub-tier visibility gaps. Most companies can trace products to Tier 1 suppliers but struggle beyond that. A 2025 McKinsey survey found that only 6 percent of companies had full visibility beyond Tier 2 (McKinsey, 2025). Raw materials extraction and early-stage processing, where the greatest environmental and human rights risks concentrate, remain the least visible stages. This gap persists because sub-tier suppliers are often small, informal, and lack digital infrastructure.

Smallholder inclusion challenges. Traceability systems designed for large commercial operations often exclude smallholder farmers who produce 30 to 40 percent of global commodity volumes. Digital literacy barriers, lack of smartphone access, poor internet connectivity, and the cost of compliance create structural exclusion. When smallholders are cut from traceable supply chains rather than integrated, traceability can inadvertently worsen rural livelihoods rather than improve them.

Data fragmentation and interoperability. Despite standards like EPCIS 2.0, most supply chain traceability systems remain siloed. Different industries use incompatible identifiers, data formats, and platforms. A product moving from agricultural origin through processing, manufacturing, logistics, and retail may pass through five or more separate traceability systems with no automated data transfer between them. This fragmentation increases costs and reduces the reliability of end-to-end traceability claims.

Cost burden on upstream suppliers. The cost of implementing traceability systems disproportionately falls on upstream suppliers in developing countries. Compliance with the EUDR requires investments in GPS mapping, documentation systems, and third-party verification that can cost smallholder cooperatives $50,000 to $200,000 annually (Proforest, 2025). Without financial support from downstream buyers, these costs risk pushing smaller suppliers out of European markets.

Greenwashing through selective transparency. Some companies publish traceability data for their most compliant supply chains while obscuring higher-risk sourcing. Selective transparency can create a misleading impression of responsible sourcing. Without standardized disclosure requirements and independent verification, consumers and investors cannot easily distinguish genuine traceability from performative transparency.

Key Players

Established Leaders

• SAP — Enterprise supply chain visibility platform with integrated sustainability modules used by 440,000+ customers globally.
• Sourcemap — End-to-end supply chain mapping and traceability platform covering 150+ commodities across 190 countries.
• Unilever — Industry leader in palm oil traceability with 97% mill-level and 83% plantation-level coverage.
• Nestlé — Pioneer in blockchain-based consumer-facing traceability across coffee, dairy, and cocoa supply chains.
• GS1 — Global standards organization maintaining GTIN, SSCC, and EPCIS standards for product identification and traceability.

Emerging Startups

• Circulor — Blockchain-based traceability for battery materials and critical minerals supply chains, used by Volvo and Polestar.
• Minespider — Blockchain platform for mineral supply chain traceability and responsible sourcing compliance.
• OpenSC — Joint venture between WWF and BCG Digital Ventures providing blockchain traceability for food and commodity supply chains.
• Altana AI — AI-powered supply chain intelligence platform mapping global trade networks for risk identification and compliance.

Key Investors & Funders

• World Business Council for Sustainable Development (WBCSD) — Operating the PACT initiative for standardized product carbon footprint data exchange.
• European Commission — Funding development of EU Information System for EUDR compliance and Digital Product Passport infrastructure.
• Breakthrough Energy Ventures — Investing in supply chain decarbonization and traceability technology startups.

Sector-Specific KPI Benchmarks

Action Checklist

• Map your full supply chain. Identify all Tier 1 through Tier 3 suppliers and map material flows from origin to final product for your highest-risk commodities.
• Assess regulatory exposure. Determine which regulations apply to your supply chain including EUDR, CSDDD, LkSG, and US customs enforcement, and identify compliance gaps.
• Select a traceability technology stack. Evaluate platforms based on commodity coverage, geographic reach, interoperability with existing ERP systems, and ability to meet regulatory data requirements.
• Adopt GS1 and EPCIS standards. Ensure your product identification and event data follow globally recognized standards to enable interoperability with trading partners.
• Invest in upstream supplier capacity. Provide financial and technical support to smallholder farmers and small suppliers to enable their participation in traceability systems.
• Implement satellite monitoring. Deploy satellite-based deforestation monitoring for agricultural commodity supply chains to meet EUDR geolocation requirements and detect non-compliance in near real time.
• Prepare for Digital Product Passports. Begin collecting the material composition, environmental footprint, and supply chain data required for DPPs in product categories covered by the ESPR.
• Publish a transparency report. Disclose supply chain mapping progress, traceability coverage, and due diligence findings annually to build stakeholder trust and demonstrate regulatory readiness.

FAQ

What is the difference between traceability and transparency? Traceability is the technical capability to follow a product or material through each stage of its supply chain, documenting who handled it, where, and when. Transparency is the practice of disclosing that information to external stakeholders. You need traceability infrastructure to achieve meaningful transparency, but having traceability does not automatically mean you are transparent; that requires a deliberate decision to share data with customers, regulators, and civil society.

Which technologies are most important for supply chain traceability? The most impactful technologies are satellite imagery and geolocation for verifying origin and land use, IoT sensors and RFID tags for tracking products through processing and logistics, blockchain or distributed ledger technology for creating tamper-proof custody records, and AI/machine learning for processing large datasets, detecting anomalies, and predicting risks. The right combination depends on your industry, commodity type, and regulatory requirements.

How much does it cost to implement a traceability system? Costs vary widely depending on supply chain complexity. Enterprise-grade platforms typically cost $500,000 to $2 million annually for companies with $1 billion or more in procurement spend. Smaller implementations using SaaS-based solutions can start at $50,000 to $100,000 per year. The upstream data collection costs, particularly for geolocation mapping and smallholder onboarding, often represent the largest expense. Companies should budget 0.05 to 0.2 percent of procurement spend for comprehensive traceability.

Will the EUDR affect companies outside the EU? Yes. The EUDR applies to any company that places covered commodities (soy, palm oil, cattle, cocoa, coffee, rubber, and timber) or derived products on the EU market, regardless of where the company is headquartered. Non-EU exporters and producers must provide the geolocation and deforestation-free verification data that EU importers need for their due diligence statements. This makes the EUDR a de facto global standard for these commodity supply chains.

How do I address traceability gaps in sub-tier supply chains? Start by mapping known suppliers and asking Tier 1 partners to disclose their own supplier networks. Use trade data analytics platforms like Altana AI to identify likely sub-tier suppliers based on shipping records and customs data. Join industry initiatives like the Responsible Minerals Initiative or Roundtable on Sustainable Palm Oil that provide shared infrastructure for sub-tier visibility. Accept that 100 percent sub-tier traceability is a journey; prioritize the highest-risk materials and geographies first.

Sources

• OECD. (2025). Due Diligence Guidance for Responsible Supply Chains: Implementation Progress Report. Organisation for Economic Co-operation and Development.
• UN Global Compact. (2025). Supply Chain Sustainability: A Practical Guide for Continuous Improvement. United Nations Global Compact.
• Allied Market Research. (2025). Global Supply Chain Traceability Market Size, Share and Forecast 2024-2030. Allied Market Research.
• Unilever. (2025). Palm Oil Traceability and Transparency Report 2025. Unilever plc.
• Nestlé. (2025). Responsible Sourcing Report: Blockchain Traceability Deployment Across Coffee Supply Chains. Nestlé S.A.
• Circulor. (2025). Battery Materials Traceability: Platform Performance and Impact Metrics. Circulor Ltd.
• McKinsey & Company. (2025). Building Resilient and Transparent Supply Chains: Sub-Tier Visibility Survey Results. McKinsey Sustainability.
• Proforest. (2025). EUDR Compliance Costs for Smallholder Producers: Assessment and Recommendations. Proforest.
• TechCrunch. (2025). Sourcemap Raises $100M Series D to Scale Supply Chain Traceability Platform. TechCrunch.