Today’s information-rich marketplace allows products to be differentiated not only by intrinsic qualities and prices, but also by their conditions of production and, particularly, their social and environmental impacts. Firms must manage supply chain information to effectively source responsibly produced inputs to avoid both reputational and regulatory risks. Contemporary companies have numerous interacting supply chain objectives, which they address with silo-ed, disconnected tools, with varying results. Amassing and organizing sufficient trustworthy information on supply chains to allow firms to manage production impacts and reputational risk is difficult, leading to several unmet needs for industry and society.
We have described the need on an industrial and societal level:
1. Regulatory risks - According to the EUTR (EU Timber Regulation), effective from March 2013, all companies importing wood or wood products to EU must have a due diligence system (DDS) in place. The core of the due diligence concept is that companies must conduct a risk assessment and risk minimization to prevent the import of illegally harvested timber in their supply chain. If companies accidentally import wood products from illegally harvested sources, there is a huge risk that they will also support corruption in the countries concerned. In addition, illegal logging has major consequences in many places in the world, including the destruction of ecosystems, loss of valuable natural heritage, increased CO2 emissions, breach of local and forest-dependent people's rights, etc. Companies can choose to develop their own DDS or to only material with a 3rd party certification, such as FSC (Forest Stewardship council), where legality is included as part of the certification standard. However, it is rare that any company can purchase certified content for 100% of their supply chains, as enough certified material is simply not available. R will help companies to deal with regulations such as EUTR in a more efficient and effective way.
2. Limited Volume – 3rd party certified material that verified legality & other sustainability aspects (such as Forest Stewardship Council) is often unavailable for all required inputs. ResponsibleSource will open new markets via a risk-based approach that can be applied to all material - certified or not.
3. Resource Intensive – Global supply chains are often very complicated and non-transparent, making supply chain management extremely time-consuming. On-site auditing systems for certified material are extremely resource intensive, requiring audits at all points in value chain. ResponsibleSource will reduce complexity and improve transparency in supply chains, while increasing resource efficiency by requiring auditing only at points of identified risk in a supply chain.
4. Manipulation Risks - Current supply chain management practices rely on easily falsified paper trails, leading to artificially inflated volumes and product substitutions. ResponsibleSource’s use of Blockchain for volume reconciliation, combined with forensic technologies to verify physical attributes of timber, will provide tamper-resistant digital product tracking.
5. Technological Siloing–Current systems do not effectively integrate product certification, regulatory compliance, logistics, and supply chain tracking in a coherent and easy-to-use supply chain management system. ResponsibleSource will allow companies to integrate all aspects into one system that works with day-to-day business management, lowering transaction costs, increasing efficiency, and avoiding risks arising from communication breakdowns.
1. Forest Conversion-Current sustainability certification systems focus on low-risk production areas, unintentionally devaluing environmentally critical tropical forest areas, which are often converted to types of land uses. RS will help firms reach sources in other regions, increasing supply chain flexibility while supporting forest-dependent people's livelihoods. By lowering transaction costs for sustainably produced materials, the initiative would also provide lower-cost options for global consumers, helping scale up responsible production.
2. Illegal timber trade–Illegal timber trade remains a challenge with severe impacts on global markets and on communities and environments in the countries of harvest. Ensuring legal sourcing and production of timber will reduce negative impacts of ongoing illegal production and have positive impacts on national economies of impacted countries.
3. Corruption and Fraud–Easy manipulation of current supply chains feeds illegal logging provides opportunities for bribery, funds armed conflict and causes significant loss in government revenues. By providing more reliable means of tracking supplies, ResponsibleSource would help limit these significant negative economic and political impacts in high-risk producing countries.
Some minor cases of fraud regarding timber regulations or certification systems have been made public; the situation could easily explode if a major, international brand is found to have been using a certification label or compliance with environmental regulation as means of “greenwashing” their supply chain. As a result, firms are now looking for robust alternatives they can manage themselves, avoiding incurring additional reputational risks by connecting their reputation to an external certification systems’ brand.
When the ResponsibleSource service is in place, it can be applied to a whole range of commodities such as palm oil, soy, cocoa, cotton etc.