Meeting Escalating Disclosure Requirements Demands Physical Proof

“Show, don’t tell” may be a best practice for fiction authors, but it is also becoming sage advice for supply chain transparency.

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Everyone from consumers to downstream supply chain partners are seeking out specifics on products’ origins and sustainability profiles. This includes raw material sourcing, labor conditions and environmental impact.

“It’s important for companies to not only communicate what they know but to also provide robust evidence and proof to build trust and credibility,” said Monica Jonas, chief operating officer at Oritain . “Brands must go beyond compliance to embrace full disclosure and proactive improvement.”

Beyond assuaging potential customers and business partners, verifying compliance is a must to meet an increasingly stringent regulatory environment.

Although goods produced with forced labor or child labor have been prohibited entry to the United States for almost a century under section 307 of the Tariff Act of 1930, the Uyghur Forced Labor Prevention Act ( UFLPA ) has thrust this law into the spotlight. Part of section 307, UFLPA went into effect in June 2022, establishing a rebuttable presumption that withholds any import with ties to risk origins. In the two years since, Customs and Border Protection (CBP) has detained over 8,000 shipments collectively valued at $4 billion, and only around 40 percent of those were eventually released.

Canada and Mexico—which have a free-trade agreement with the U.S.—have followed suit with forced labor import bans. And the recently passed European Union Forced Labor Ban not only covers foreign imports to the E.U., but also compliance within member countries.

“As more countries start putting new forced labor laws in place, companies will no longer be able to pick and choose which countries they sell compliant goods to, while turning a blind eye to their supply chain for other markets,” said Jonas. “It will eventually make the cost of compliance cheaper than keeping divided supply chain management systems.”

To achieve the level of transparency needed for both Customs challenges and consumer communications, Jonas said tools like enterprise resource planning (ERP) systems and chain of custody trails—either paper or digital—don’t cut it. An ERP is valuable for data storage and usage, but these systems can’t verify the information input, such as vendor declarations. Meanwhile, chain of custody tracking is susceptible to fraud.

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“The validation of data is the biggest challenge to overcome,” said Jonas. “If the source is subjective or information comes from a vendor declaration, there should be independent methods to determine the accuracy. Likewise, when companies need a definitive black or white result to have confidence in their merchandise’s compliance, a gray weighted risk percentage can prove unhelpful.”

Adding complexity, companies tend to outsource their manufacturing. Suppliers can also change from season to season depending on external variables like weather patterns or geopolitical situations. “Outsourcing places a lot of trust in manufacturers or suppliers, with companies having little control and visibility into whether the documentation provided truly reflects the reality,” said Jonas. “Without testing the physical product, it’s nearly impossible to substantiate claims made on paper, which means you’re still flying blind from a regulatory standpoint.”

While these solutions alone can open up companies to compliance risks, they can be used in combination with physical verification such as forensic testing to provide scientific proof and confirm data. For instance, Oritain’s technology analyzes samples for isotopes and other trace elements that indicate exactly where materials come from—such as where cotton was grown based on soil markers.

Among the solutions that can work in tandem with forensics are supply chain mapping, which gives companies an overview of the path their goods take. Similarly, supply chain mapping platforms can trace each entity that touched a product—from raw material supplier to spinning mills, textile manufacturers and cut-and-sew facilities. Lastly, physical trackers can also support product authentication and chain of custody proof. Oritain often sees companies first map out their supply chain to determine which materials might be non-compliant, and then work to weed out compliance issues with suppliers.

For many companies, supply chain verification is still a work in progress. Regardless of where they sit in the supply chain, there are plentiful reasons to advance capabilities—and quickly. Brands could lose merchandise if they cannot provide evidence to Customs within the 30-day detention timeframe, and they could also face more scrutiny from CBP . Meanwhile, suppliers who are tied to non-compliant goods could sour their retailer relationships, leading to canceled orders or lost contracts. Consumers are also following such developments more closely, and companies shouldn’t be giving them a reason to switch brands. Improving transparency may be a boon for compliance, but it’s also good for the bottom line.

“Getting transparency right is critical for businesses to remain competitive,” said Jonas. “Without visibility, you risk damaging your reputation, delaying merchandise arrivals and losing consumer and investor trust—all of which companies cannot afford right now.”

Click here to learn more about Oritain.

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