According to a recently published UNECE Policy Paper, the agrifood, the garment and footwear and the mineral sectors contribute significantly to the economic growth and employment in the UNECE region, while being major sources of global greenhouse gases (GHG) and environmental pollution. Evidence shows that agrifood systems are the second largest GHG emitting sector after the energy sector, accounting for 18.4% of GHG emissions in 2020. Mining accounts approximately for 4 to 7% of GHG globally, while 30-50% of the world’s production of copper, gold, iron ore and zinc are concentrated in water stress areas. The garment and footwear industry also accounts for about 4% of the world’s total GHG emissions.
These sectors are facing major challenges in decarbonizing and tackling sustainability impacts (climate change, biodiversity loss, water consumption, human rights violations), in part due to the lack of visibility in supply chains. Evidence shows that the current level of supply chain transparency is very poor.
For all these sectors, Environmental, social, and governance (ESG) issues are increasingly recognized as a key factor for long-term performance and resilience. Traceability and transparency practices can improve these sectors, especially to support efficiency and circularity in value chains.
In recent years, there has been an increasing amount of policy and regulation at the national and regional levels to introduce mandatory requirements on ESG compliance along value chains. In a context where action has never been so urgent, such new legislation is important to drive forward the sustainable development agenda. At the same time, it needs to consider the needs and capacity of the hundreds of thousands of small and medium-sized enterprises (SMEs) and smallholders, highly involved in upstream value chains, including in developing countries.
The regulatory push accelerates the need for traceability systems, supporting verified and trusted ESG credentials of products placed on markets. It also highlights the need for harmonization and synergies, building on the successful outcomes of The Sustainability Pledge, a project funded by the European Union and implemented by UNECE and ITC , which developed a traceability toolbox already implemented in practice.
The UNECE Team of Specialists on ESG traceability plays a leading role to promote regulatory compliance through ESG traceability approaches for the exchange of data and information in critical sectors for the circular economy. As a global convening platform, the Team of Specialists recently organized a dialogue on the importance of fostering international collaboration along global value chains to build alignment of the instruments available to support regulatory compliance in the UNECE region and beyond.
“Scaling-up transparency and traceability for future ESG decisions implies a huge increase in data volumes and quality. To avoid a parallel increase in costs, we appear to need the interoperability of data access. That is feasible, if we find collaboration across all involved actors ,” said Mr. Christian Hudson, Chair of the UNECE Team of Specialists on ESG Traceability. “The team has started to define the formats and participation needed for that global collaboration, so that traceability and transparency can deliver sustainable and inclusive growth that benefits all participants.”
While the world faces sustainability challenges, regulators are responding by introducing measures and incentives to increase sustainable behaviors. However, incentives may also encourage more greenwashing. Therefore, to maintain their value and fight greenwashing, transparency along the value chain is key, leveraging on technology and digital tools.
To tackle this, the Team of Specialists agreed to engage in the development of the draft UNECE Recommendation 49 ‘Transparency at Scale’, which aims to provide guidance on scaling-up traceability, transparency, trusted information exchange in value chains. More concretely, this future recommendation aims to support interoperability between platforms to allow traceability data to move across actors in the value chain. Multiple traceability platforms, disparate standards, privacy and confidentiality, cost and the lack of business incentives are some of the key challenges to scale transparency, from pilots to global adoption, which the draft recommendation aims to tackle.
The upcoming recommendation could be the basis for a protocol to improve ESG monitoring and reporting in value chains for key sectors, that would include digital product passports (DPPs), conformity credentials and traceability events. A recent UNECE note flags the relevance of UN/CEFACT standards to support DPPs development, especially for B2B, B2C, B2G information exchange in global value chains, considering the needs of all implementing actors, particularly in emerging economies.
To learn more about the recent session of the Team of Specialists on ESG Traceability, visit the webpage and watch the video providing an overview of the draft UNECE Recommendation 49 (produced by Steven Capell, UN/CEFACT Project Lead of Recommendation 49).