Background

Traceability and transparency are increasingly called on to help halt and reverse forest loss. In November 2021, 145 countries restated their commitments to conserve, protect, sustainably manage, and restore forests and to work toward halting forest loss and land degradation in the Glasgow Leaders’ Declaration on Forests and Land Use (COP26 2021). Close to 90 percent of forest loss is associated with expansion of agriculture, resulting in increasing calls for better solutions to identify and help manage the risk of forest loss associated with commodity supply chains. The role of traceability and transparency has been widely recognized in the application and enforcement of laws that underpin sustainable production, efforts by companies to ensure sustainable sourcing of agricultural commodities, and efforts by stakeholders and civil society to enhance accountability. There is growing momentum of government commitments at the national, regional, and international levels; private sector commitments and pledges; and requirements for disclosure, monitoring, and reporting. Delivering on these commitments requires robust traceability and transparency systems.

Objective and methods

This independent research project, undertaken by World Resources Institute with support of the United Nations Food and Agriculture Organization and a team of consultants on behalf of the Forest Data Partnership, seeks to provide an updated evidence base on traceability and transparency in commodity value chains. The report aims to inform collaborative action among governments, the private sector, and civil society organizations that are working toward enhancing traceability and transparency. It focuses on seven commodities: cattle, palm oil, soy, cocoa, timber, coffee, and rubber, but also offers insights applicable to other commodities.

Traceability and transparency can have different meanings to different stakeholders in different circumstances. This report uses the following working definitions:

• Traceability refers to the ability of an actor to link a product or unit of material with information about its history of locations, owners, and transformations between points in the supply chain, such as from production site to end user. The information associated with commodities also includes sustainability aspects at the production site, notably forest loss.
• Transparency refers to the making available of information by any stakeholder. The information that is made available will often relate to the traceability of commodities, but can include broader information that is relevant and useful in the context of halting and reversing forest loss such as sustainability policies and practices, commitments, land use information, monitoring, or outstanding grievances. There can be different levels of transparency, ranging from information sharing within an organization or peer companies, to sharing with specific stakeholders, to sharing publicly.

Traceability and transparency tools and initiatives, while providing much needed information, do not alone lead to reduced forest loss. Traceability and transparency are not solutions in themselves but are necessary to support decisions by supply chain actors that affect forest cover. While the causal link between traceability and transparency on one side and forest conversion on the other is complex, increased access to information is a precondition for producing commodities without inducing forest loss.

This report’s research draws on three sources of information collected and analyzed between October and December 2022. First, we surveyed 94 tools and initiatives that generate, collect, process, and distribute relevant information about agricultural and forest commodities through a global mapping exercise. Second, we conducted over 70 interviews with representatives from government, the private sector, civil society, and academia. Third, we undertook case studies to delve into more detail, covering regions and commodities of global importance. The case studies are on palm oil in Southeast Asia, cocoa and timber in West and Central Africa, soy in Brazil, and cattle in Latin America.

Conclusions

This report draws out three categories of findings based on these information sources:

• An overview of enabling conditions and success factors for traceability and transparency
• An assessment of how traceability and transparency can underpin the ambitious objectives to address forest loss in the public and private sectors and identify key gaps
• Priority actions to improve traceability and transparency

Enabling conditions and success factors

Enabling conditions can be critical for the success of traceability and transparency.

• Public funding and civil society involvement in design and management lead to higher levels of disclosure in traceability and transparency tools and initiatives, highlighting the importance of ownership structure and funding sources.
• The regulatory environment requires transparency on commodity production (e.g., including due diligence requirements and mandatory national or jurisdictional standards, reporting standards, or assurance mechanisms) and governance structures set up to successfully implement and enforce legal frameworks.
• Reporting standards, definitions, and methodologies are consistently applied across a whole sector and within initiatives.
• Governments make data available and accessible, supporting traceability and transparency within supply chains and facilitating agreement on standards for data disclosure and publication.
• Shared goals and trust among actors enable data sharing and avoid duplication of efforts, building on and expanding the reach of individual supply chain solutions.
• Collective action relies on agreement among companies, governments, financial institutions, and civil society on the demands for data.
• Equitable cost sharing to set up and maintain data collection and traceability systems enables broad participation.
• Continued investment in technical innovation creates the conditions for better data quality and usability, which are important for tools and initiatives to be effective.

In addition to the enabling conditions, there are also common success factors associated with specific tools and initiatives, which the report lays out with examples. 

• Clear scope and corresponding metrics of success enable targeted initiatives that can be evaluated.
• Internal or external verification and audit processes assess the validity of reported data and build data credibility.
• Aligned or consistent definitions, metrics, scopes, and reporting mechanisms and alignment on what constitutes credible evidence make it possible to compare disclosed results from several sources. Safeguards for sharing data effectively are needed to protect sensitive information, reduce duplication of efforts, and enhance transparency. 
• Clear frameworks and rules for consistent data collection and reporting across sectors, commodities, and geographies enable broad uptake and reduce cost.
• When datasets are user-friendly and well-documented, and data and methods are accessible (published and easy to find) and interoperable (different datasets can be used together), target audiences are able to act upon information. 

Existing and future traceability and transparency tools and initiatives can support policy objectives to halt and reverse forest loss by building on existing efforts and closing gaps:

Current traceability and transparency tools and initiatives have developed rapidly to meet evolving needs. This report lays out a list of successful examples across several geographies and commodities that illustrate that enhancing traceability and transparency is achievable and can be part of efforts to address forest loss. In many cases, changing voluntary and regulatory requirements have encouraged innovation and the development of solutions to meet these requirements. Governments should continue to raise the level of ambition reflected in systems, requirements, and pledges, while providing the necessary guidance and support to help private sector actors navigate these changes.

Despite the rapid progress seen to date in developing traceability and transparency solutions, more concerted and aligned action from all groups is necessary in the near term to address forest loss in agricultural and forest supply chains. Individual companies and collaboration platforms have adopted pledges to remove deforestation from supply chains, but to date only 36 percent of the largest companies have commitments and many of these companies are not systematically monitoring their progress toward meeting them. Much of the effort to date has been focused on individual supply chains and small pilots. Similarly, governments have signed commitments to halt and reverse forest loss, but in many cases more funding and staff are needed to meet these commitments, and to expand government-owned traceability and transparency tools and initiatives. There needs to be a shift both in the pace and scope of action taken to apply traceability and transparency to achieve sector-wide transformation.

The ability to achieve full traceability back to the point of origin depends on various factors, including geographic complexity, the number of tiers of a supply chain, whether the supply is from only direct or also indirect sources, and the proportion of smallholders in the supply chain. There are examples where full traceability has been achieved, but traceability of indirect supply and for smallholder producers remains challenging, requiring investments of time, financial resources, and effort. For some commodities, individual units of products are easier to trace, but for others (e.g., soy, coffee, cocoa, palm oil), raw materials and derived products are blended in the supply chains.

Governments play a key role in collecting and sharing data and should make more data available to help fill remaining gaps. Traceability and transparency tools and initiatives in many cases rely on public sector information, such as farm legality and licensing data, as well as forest monitoring systems. Traceability and transparency can be advanced more rapidly when private sector traceability data can be integrated with data from government forest monitoring systems and sources of information on land tenure, including on legality and other contextual information. Further improvements can also be made in terms of the accessibility and usability of public sector data. For example, even when government data are available, systems could be further improved to allow integration of relevant datasets and information flows across state and federal agencies. Government action is needed at the jurisdictional, country, and international levels to expand the data and information available for use, which is a key component of a conducive enabling environment for achieving transparency and traceability on commodity production. However, in many cases, providing additional data will depend on the provision of adequate capacity development support.

While gaps remain, in most instances enough data and information exist for supply chain actors to take meaningful steps toward assessing the risk of forest loss in supply chains, and to prioritize areas for action. Data gaps remain such as in data availability for individual commodities (some commodities have been prioritized, and interest in others is now rising), for certain producer groups (primarily related to smallholder farmers), and for specific types of data (some kinds of geospatial data are difficult or expensive to obtain, and a lot of contextual data, such as around land tenure, are often not available). While continued investments are needed to improve data availability, quality, usability, and interoperability, data gaps should not be used to delay action. Solutions should start from the problem, not the available technology, to avoid limiting ambition to what is already common practice and avoid bias in selecting tools and resources.

Individual supply chain projects and pilot approaches have been a useful source of experimentation and learning, but to address forest loss in supply chains, a sector-wide transformation is needed. Solutions developed by individual actors or small consortia remain limited in reach in part because data remain siloed or are not shared across actors, or because of a lack of adoption by peer companies. Private sector–led approaches will cover only a portion of markets, typically the activities of the largest enterprises, which are subject to international investor and buyer pressure. The largest private sector actors engaged in the “visible” economy, such as major meatpackers, soy traders, and palm oil traders, have taken voluntary measures to set up traceability systems. However, in all these cases their market shares, while meaningful, do not cover all production. More emphasis can be placed on recruiting more private sector actors, including small and midsize enterprises, to join collaborative efforts aimed at sector transformation. Enhanced collaboration within and among supply chains, collective action approaches, and scaling up successful strategies are all essential building blocks. However, these approaches all rely on funding and time to build trust among actors and align on definitions and can be harder to fund than new tools and initiatives. Rather than creating new systems, a necessary focus is on strengthening the linkages of existing systems, protocols, and datasets, and the certifications across both the public and private sectors.

For a sector-wide transformation, governments in producing and consuming countries need to continue raising the bar with respect to traceability, reporting, and disclosure requirements as well as supporting information flows across public and private sectors. Relying on private sector financing and innovation limits the ability of traceability systems to reach full market saturation. Even if these systems are strong and fully implemented in these supply chains, private sector efforts cannot on their own fully transform sectors. The lack of efficient information flows and exchange across multiple private sector actors limits effective policy design and interventions. Government efforts, regulations, and systems, in collaboration with private sector efforts, are necessary to ensure that traceability systems cover the entire marketplace. Furthermore, the public sector can help facilitate information flows and accessibility by and for market actors.

Producing countries need support in developing, implementing, and maintaining sector-wide traceability and transparency tools and initiatives. Government approaches to achieving market-wide uptake of tools and initiatives through required standards, certification, or disclosure mechanisms are needed to “raise the floor.” However, this may not occur unless there is investment from consuming countries, philanthropies, and private sector sources to accompany changing market requirements. Such investments enable producing countries to pursue traceability and transparency tools and initiatives—both for public sector purposes, such as improving governance, enhancing revenue collection, and meeting national-level commitments and climate targets, and to improve market access for producers. Improved market access is particularly important in supporting vulnerable actors that may otherwise be excluded from markets and supply chains. The interests and needs of vulnerable actors such as smallholders need to be considered in traceability and transparency tools and initiatives starting in the design phase.

Broad uptake of transparency and traceability initiatives rests on collaborative approaches that manage to ensure that all supply chain actors participate and that collected information is of a high quality. The credibility of tools and initiatives will derive from their broad uptake, as long as strong mechanisms are in place for systematic quality control and data verification. Such quality management is essential to achieving public trust in systems that self-reported data will not always enjoy.

International dialogue can advance traceability and transparency by setting expectations and creating guidance. International fora such as the Forest, Agriculture and Commodity Trade (FACT) Dialogue; the Amsterdam Declarations Partnership; and the Forest and Climate Leaders’ Partnership can advance discussions around topics that require government participation or support. This includes finding an equitable cost-sharing mechanism to avoid the burden of traceability and transparency being placed on smallholders or other upstream actors. International alignment would also be useful in agreeing on best practices for data gathering undertaken in an inclusive manner, considering current power imbalances in supply chains, and safeguarding privacy concerns and ownership of data collected, especially when it concerns data collected about individual producers. These fora could agree on best practices for funding traceability and transparency tools and initiatives, which should include a requirement for robust impact evaluation and a mandate to learn from and build on existing experiences. Government dialogue could also serve as a useful avenue for sharing lessons about efforts to implement traceability and transparency at the national or jurisdictional level. Further, governments can assess existing and planned initiatives in-country based on the key elements and success factors identified in this report and apply the lessons from collaborative approaches presented in this report. Government dialogue can help align on methods for data gathering and reporting, and on what constitutes credible evidence based on existing initiatives such as the Accountability Framework initiative and the Science-Based Targets Network.

Government, the private sector, and civil society need to expand the ambition and scale of action now to improve and increase traceability and transparency while engagement and dialogue continue. Making progress on some issues, such as definitions and specific data requirements, may take time and should not distract from the urgency of the forest loss crisis. There needs to be a dual approach to simultaneously pursuing better alignment on standards, reporting requirements, and datasets, while putting into place traceability systems. Today’s existing solutions can be used more fully while work progresses in parallel to define and establish tomorrow’s approach to traceability and transparency among the public and private sectors and civil society.

This report draws out the following priority actions by category of actor to improve traceability and transparency.

Private sector actors in supply chains should make the necessary effort to collect information, build up traceability systems, and disclose information where appropriate. Private sector actors should, jointly with other stakeholders, pursue an equitable solution to the additional costs created by increasing demands for traceability and transparency; collaborate with other actors to find ways to ensure that cost does not cut out vulnerable upstream producers from markets; and put in place safeguards to protect privacy. They should, jointly with other stakeholders, work toward aligned standards for data disclosure and publication. They should support greater consistency within the objectives and reporting standards set in policy measures. They should work toward coherent and aligned commitments and take measures to address specific challenges facing smallholders and small and medium-sized enterprises in supply chains. 

Governments of consuming countries should closely work together with those of producing countries. This will often include a range of activities, from providing technical and financial support to setting up and rolling out approaches to traceability and transparency. They should prioritize funding coordinated and integrated approaches and initiatives that build on and expand existing successful projects. They should carefully work with producers and supply-chain actors toward meeting consistent objectives and reporting standards.

Governments of producing countries should “raise the floor” by setting up assurance systems for commodity production and create market signals by setting national standards for traceability and transparency. They should provide the necessary data to create effective traceability and transparency systems. They should, jointly with other stakeholders, work toward consistent objectives and reporting standards set in policy measures. Where they provide tools and platforms, governments should ensure that cost does not limit access to tools and platforms, especially among vulnerable upstream producers, and put in place safeguards to protect privacy. They should also set up support mechanisms to prevent smallholders from being excluded from markets. 

Civil society organizations should continue developing technical solutions to integrating datasets, tools, and systems. They should ensure that cost does not limit access to tools and platforms, especially among vulnerable upstream producers, and put in place safeguards to protect privacy. They should leverage innovation and learn from other sectors to facilitate data sharing. They should support consistent objectives and reporting standards set in policy measures. They should bolster efforts to collaborate with existing initiatives, and support smallholders and other vulnerable actors in targeted projects. 

The Glasgow Leaders’ Declaration on Forests and Land Use restates the commitment of 145 countries to conserve, protect, sustainably manage, and restore forests and to work toward halting forest loss and land degradation for climate, development, and other targets (COP26 2021). Close to 90 percent of forest loss is associated with the expansion of agriculture (FAO 2022b; Pendrill et al. 2022), resulting in increasing calls for better traceability and transparency solutions to identify and help manage the risk of forest loss in these commodity supply chains (Goldman et al. 2020; Pendrill et al. 2022). The role of traceability and transparency in the application and enforcement of laws that underpin sustainable production, efforts by companies to ensure sustainable sourcing of agricultural commodities, and efforts by stakeholders and civil society to enhance accountability are also recognized in international processes, such as the Amsterdam Declaration Partnership and the Forest, Agriculture and Commodity Trade (FACT) Dialogue.¹ The FACT Dialogue, launched in 2021, aims to promote sustainable development and trade while protecting forests and other critical ecosystems.

This independent research project, undertaken by World Resources Institute (WRI) with support from the Food and Agriculture Organization of the United Nations (FAO) and a team of consultants on behalf of the Forest Data Partnership, seeks to provide an updated evidence base that can inform and advance collaborative actions on traceability and transparency.

Traceability and transparency: Research objectives

The aim of this research was to assess traceability and transparency tools and initiatives that help address forest loss associated with forest and agricultural commodity supply chains to draw out the enabling conditions that support these systems and identify success factors and priority actions. The research focused on soy, cattle, timber, palm oil, cocoa, coffee, and rubber as the commodities identified as those most closely linked to forest loss.

Traceability and transparency can have different meanings to different stakeholders in different circumstances.

They are often considered critical, and designed specifically for meeting and monitoring compliance with market requirements and commitments made at company, national, regional, and international levels to halt and reverse forest loss associated with forest and agricultural commodity supply chains, and to support increasing requirements for disclosure, monitoring, and reporting. However, the terms traceability and transparency are not used consistently. The ambiguity in terminology is explored further in “Results from a global mapping of traceability and transparency tools and initiatives.” For the purposes of this report, the working definitions for traceability and transparency are the following:

• Traceability refers to the ability of an actor to link a product or unit of material with information about its history of locations, owners, and transformations between points in the supply chain such as from production site to end user. The information associated with commodities also includes sustainability aspects at the production site, notably forest loss.
• Transparency refers to the making available of information by any stakeholder. The information that is made available often relates to the traceability of commodities, but can include broader information that is relevant and useful in the context of halting and reversing forest loss such as sustainability policies and practices, commitments, land use information, monitoring, or outstanding grievances. There can be different levels of transparency, ranging from information sharing within an organization or among peer companies, to sharing with specific stakeholders, to sharing publicly.

Thus, even when applying these working definitions, a specific action of generating or sharing information may be accurately described as contributing to either traceability or transparency (or both) depending on what information is being shared, by whom and to whom.

Traceability and transparency systems can provide information to stakeholders on the origin of a commodity, along with other attributes that link to forest loss. A wide array of traceability and transparency tools and initiatives exist, from earth observation; use of information technology to trace product-related information from source to end user; and methods for data verification to provide assurance of credibility using internal processes, voluntary and/or mandatory certification, or systems of compliance and disclosure.

These systems support efforts by the following:

• Producing and consuming governments to develop, apply, and enforce laws that underpin sustainable production based on information about the links among commodity supply chains and forest loss
• Private sector actors (companies and financial institutions) involved in supply chains to monitor production and manage the supply base including to ensure and demonstrate sourcing of sustainably and legally produced agricultural and forest commodities
• Civil society to enhance accountability
• Donors and philanthropies interested in addressing forest loss

In addition, the following are factors relevant to traceability and transparency that are not always directly referred to:

Enabling conditions and interdependencies are terms often used to describe certain underlying factors that can influence the likelihood that any given traceability or transparency system or initiative will achieve its objective(s).

• Enabling conditions are often broad external factors relating to the policy, regulatory, or cultural context within which the traceability or transparency system is operating. These factors both motivate and facilitate the emergence and use of traceability and transparency systems, as well as translate information provided by these systems into impacts on the ground.
• Within the enabling environment, interdependencies often exist among stakeholders within a shared process, for example, one stakeholder may be dependent on data provided by another stakeholder to make progress, but these data may not be publicly available or published in a format that is usable. In addition, decisions that affect one part of the supply chain (such as changes to legal frameworks) can affect supply chain actors in other geographies.

Enabling conditions and interdependencies are critical for the effective implementation of traceability and transparency systems and are drawn out throughout the report and reviewed in “Summary of findings.”

Evolving global conditions driving traceability and transparency

The need for traceability and transparency is not a new phenomenon. For more than 20 years, traceability and transparency have been applied in the forest and other sectors, from which other forest risk commodity actors can learn. There are also useful lessons in the development and implementation of government-mandated systems that institute broad market requirements in the forest sector, complementing and building on voluntary initiatives, sometimes led by the private sector, to improve timber supply chain governance.

There has, however, been a step change in the last 10 years with the recognition of the role that some agricultural commodities play in driving forest loss—contributing to the 11.1 million hectares (ha) of tree cover loss in the tropics in 2021 (Weisse and Goldman 2022). This is in turn increasing demand for traceability and transparency tools and initiatives, an expansion of their coverage in both commodities and users, and continuous evolution in technology. For example, over the past two decades, there has been a shift from paper-based traceability systems to digitalized processes for mapping, monitoring, verification, and sharing of information as in the case of timber (discussed further in Appendix F).

Figure 1 depicts this evolving landscape through examples of corporate and international commitments, development of certification standards, and industry initiatives.

Figure 1 | Illustration of the evolving and increasingly crowded space addressing forest loss and related issues

Note: WWF = World Wildlife Fund; FSC = Forest Stewardship Council; PEFC = Programme for the Endorsement of Forest Certification; CDP = Carbon Disclosure Project; ISEAL = International Social and Environmental Accreditation and Labelling Alliance; FLEGT = Forest Law Enforcement, Governance and Trade; RSPO = Roundtable on Sustainable Palm Oil; RTRS = Round Table on Responsible Soy; UN-REDD = United Nations–Reducing Emissions from Deforestation and forest Degradation; FCPF = Forest Carbon Partnership Facility; ISPO = Indonesia Sustainable Palm Oil; UK SCI = United Kingdom Soft Commodities Initiative; TFA = Tropical Forest Alliance; EUTR = European Union Timber Regulation; MSPO = Malaysian Sustainable Palm Oil; NYDF = New York Declaration on Forests; GFW = Global Forest Watch; ADP = Amsterdam Declarations Partnership; SBTi = Science Based Targets initiative; TCFD = Task Force on Climate-related Financial Disclosures; SDGs = Sustainable Development Goals; AFi = Accountability Framework initiative; SBTi FLAG = Science Based Targets initiative Forest, Land and Agriculture; COP15 = 15th Conference of the Parties; TNFD = Taskforce on Nature-related Financial Disclosures; GFANZ = Glasgow Financial Alliance for Net Zero.

Source: Compilation by authors.

Alongside these developments, means of providing assurance have evolved from voluntary-based, private sector–led certification to an increased role of national government–led systems. For example, a Timber Legality Assurance System (TLAS) (see “Traceability and transparency through the supply chain,” Box 6) is a core component of the bilateral Voluntary Partnership Agreements (VPAs) under the European Union (EU) Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan.² These government-led traceability and transparency systems emerged to meet timber market requirements in the EU, United Kingdom (UK), and United States but more importantly were developed to improve sector-wide forest enforcement in VPA countries.³

Government commitments and actions

Traceability and transparency systems are components of government-led actions in both producing and consuming countries, although the distinction is not always binary, given the important role of domestic markets and the fact that some countries are engaged primarily in processing and transshipment. At the national and subnational levels, governments are working to strengthen the enabling conditions to provide greater traceability and transparency from production and processing to end user markets.

Producing countries, through processes such as designing and implementing a TLAS, have increasingly seen the benefits of traceability and transparency tools and initiatives as part of improved natural resource management and governance. Traceability, transparency, and monitoring approaches for forest resources may also be used, for example, increasingly as part of compliance with climate commitments and supporting efforts to access climate finance. They may also be used in managing resources through greater collaboration among actors, as shown in the collaboration between the Ghana Forestry Commission and the Cocoa Board (see Appendix D).

At the same time, consuming countries and markets are taking responsibility for the footprints of their consumption of forest risk commodities and forest products (in the context of this report, forest products include timber, wood products, and pulp and paper, but not non-timber forest products). They are also building on the experiences with timber regulations: For example, the United States, UK, and EU have developed or are discussing regulations on agricultural commodities and forest products to ensure that consumption of these commodities does not drive forest loss and supports the production of commodities in compliance with the laws of the country of origin. In addition, the joint declaration from Brazil and China on cooperation on climate change expressed an intention to collaborate toward eliminating illegal deforestation, which highlights the broad interest in the topic even among consuming countries that are not pursuing regulatory options at this time (MMA 2023).

Traceability and transparency tools and initiatives will be important in meeting due diligence requirements at least in some import markets, along with supporting frameworks, guidance, and other resources, as shown in Box 1.

Private and financial sector commitments and actions

In addition to government commitments to combat climate change, there has been a plethora of private sector commitments and pledges to reduce the impact of agricultural production on forests and forest loss, all of which require greater levels of traceability and transparency (see Figure 2).

Most major private sector companies, including producers, traders, and manufacturers of key commodities, and many consumer-facing brands have committed to addressing forest loss (often articulated as commitments to “deforestation- and conversion-free” supply chains) and developed programs of work to deliver on this. Ambitions on traceability and transparency vary—Table 8 in “Traceability and transparency through the supply chain” describes a range of approaches. Coupled with this are climate change commitments, such as the Race to Zero Campaign supported by the United Nations Framework Convention on Climate Change (UNFCCC).⁴ However, as shown in the 2022 Forest 500 annual report, three out of four companies do not have a deforestation commitment for all the forest-risk commodities in their supply chains (Forest 500 2022a). Thus, private sector actors are responding to increasing demand for information about products and their associated supply chains through traceability tools and disclosing information through varying levels of transparency.

Notwithstanding this increasing move toward company pledges driven primarily by large corporations, companies working alone cannot achieve the scale and pace of change required. Therefore, collective action is needed, such as through the Consumer Goods Forum Forest Positive Coalition, which has developed commodity-specific roadmaps and reporting requirements for four commodities: palm oil; soy; pulp, paper, and fiber-based packaging; and beef.⁵ The Coalition of Action has 20 members among the leading retailers and manufacturers that aim to leverage their influence to catalyze wider transformation in commodity supply chains, production landscapes, and jurisdictions globally (CGF 2021). Further examples of collaborative action are discussed in “Collaboration beyond individual supply chains” and in Appendix H. Further, to achieve market-wide uptake of tools and initiatives, other types of companies, including small and medium-sized enterprises, need to be part of the process. The role of other supply chain actors is described in more detail in “Traceability and transparency through the supply chain.”

Financial institutions (FIs) are increasingly making commitments to act on deforestation. Examples of this include the Glasgow Financial Alliance for Net Zero,⁶ a commitment made at the 26^th UNFCCC Climate Conference (COP26) by 30 FIs with more than US$8.7 trillion in assets to tackle agricultural commodity-driven deforestation (Global Canopy 2021); the Task Force on Climate-Related Financial Disclosures,⁷ which is now mandatory in the UK; and the Taskforce on Nature-related Financial Disclosures.⁸ However, the majority of FIs to date have not taken steps to actively assess or manage deforestation risks within their portfolios. In fact, according to the 2022 Forest 500 annual report, two-thirds (93) of the 150 FIs providing $2.6 trillion in finance to the companies with the highest exposure to deforestation risk do not have deforestation policies covering their investments but are lending to companies in key forest-risk commodity supply chains (Forest 500 2022a).

Recognizing the importance of the finance sector in creating change, both the UK government and the European Commission are considering options for mandatory due diligence obligations for financial institutions, potentially in line with those under development for private sector corporations, such as the EU Corporate Sustainability Due Diligence Duty (EC 2022; GRI Taskforce 2020; 2022).

Transparency and the role of civil society

Civil society continues to play an important role in monitoring action, ensuring that credible and verifiable data are used, shared, and reported on, and in holding actors accountable to commitments.

Alongside the focus on accountability, civil society actors have supported the development of traceability and transparency tools and are often at the forefront of developing new systems and generating new data, as shown in “Innovation and direction of travel of technological applications for traceability and transparency,” while also supporting the development of guidance including, for example, the creation of the Accountability Framework initiative and other certification and assurance processes (see Appendix G). Civil society has also been leading efforts to monitor progress toward company commitments, such as the assessments by Forest 500, World Wildlife Fund (WWF), and SPOTT.

Addressing forest loss through traceability and transparency

This report recognizes the important and increasing role of traceability and transparency in the application and enforcement of laws that underpin sustainable production, efforts by companies to ensure sustainable sourcing of agricultural commodities, and efforts by stakeholders and civil society to enhance accountability. Governments play an essential role in supporting the process, providing an enabling environment that improves consistency (e.g., what information is needed, definitions, reporting formats), while supporting the availability and usability of the data from the ground up to the end user. While global supply chains are complex and traditionally not established to provide information pertaining to forest loss, traceability and transparency tools and initiatives are constantly evolving in line with technological advancements. What is not possible today could be possible tomorrow. Thus, it is important to not limit aspirations based on what traceability can deliver today.

Working collaboratively, governments, private sector actors, financial institutions, and civil society are increasingly supportive of consistency in data collated, transferred, and shared throughout the supply chain, and across all producer and consumer markets. Civil society is also working to create a consistent framework of definitions and means of assurance. While progress is being made, this consistency takes time to achieve. However, alignment is an essential enabling condition for broad-scale application of traceability and transparency in commodity supply chains.

It is important to note that traceability and transparency tools and initiatives, while providing much needed information, do not alone lead to reduced forest loss. More information, more tools, and more reports do not automatically lead to changes in behavior. Traceability and transparency are not solutions in themselves but are necessary to support decisions by supply chain actors that affect forest cover.

The causal link between traceability and transparency on one side and forest conversion on the other is complex (Pendrill et al. 2022), and relates to a number of other challenges such as poverty, lack of secure land tenure, power imbalances in supply chains between upstream and downstream actors, and disconnects among actors in the supply chain. Increased access to information does not solve all these issues, but does enable better decision-making in supply chains to avoid forest loss. For instance, access to easy-to-use and consistent data on forest areas, land allocations, and crop cover can enable companies to avoid sourcing from commodity production areas that overlap with forest areas. Early warning deforestation alert systems are important tools to prioritize enforcement action to protect remaining forest areas and understand patterns of conversion pressure to inform government policy. Software designed to enable smallholders to easily map their farms with smartphones makes linking products to the impact of production on the ground easier and can be a way to collect data in a more inclusive manner.

None of these examples necessarily leads directly to reduced forest loss, but traceability and transparency underpin the shift to consistently considering forest loss risk in decisions. All these examples enable more effective monitoring of the impact of commodity supply chains on forests, which is necessary for civil society actors to hold companies accountable.

This report is not intended to be a review of the status of traceability and transparency tools and initiatives per se, nor of compliance with specific market and regulatory requirements. Due to the wide variety of traceability and transparency systems and the fact that they are often developed for a specific purpose, this report cannot define a prescriptive list of recommendations and best practices for policy development for specific contexts. Each supply chain, sector, geography, and situation requires a targeted approach. However, the report does highlight limitations, opportunities, and the core elements of traceability systems along with enabling conditions and success factors required to the extent possible.

Structure of the report

This report considers the use of traceability and transparency through the lens of a commodity supply chain, from the point of production to end use, looking both at individual approaches and at collaborative efforts. It aims to draw out and better understand interdependencies and enabling conditions that are needed to deliver improved and more sustainable resource use on the ground.

It assesses this ecosystem through a focus on data related to forest loss: how data and information on forest and agricultural commodities are generated, passed on within and across supply chain entities, and disclosed, and how innovation is tackling data gaps and remaining challenges.

However, it does not address overarching questions related to the sustainability of land use, living incomes for farmers, and power dynamics within supply chains, and topics that do not directly relate to forest loss, including human rights and labor issues.

The information, examples, and analysis within this report are therefore intended to support decisions and actions made by a range of actors—from those in the private sector, governments, and civil society, including monitoring bodies and researchers.

The next chapter, “Research process,” describes the methodology we used to map the development and application of traceability tools and initiatives, assumptions, and research questions. “Results from a global mapping of traceability and transparency tools and initiatives” (and Appendix A) summarizes the results of the global mapping of traceability and transparency tools and initiatives used across commodity supply chains globally.

The remainder of the report follows the approach of a commodity supply chain, from data availability and usability at the point of commodity production (see “Availability and usability of data at the point of origin and/or production”) through the supply chain (see “Traceability and transparency through the supply chain” and “Collaboration beyond individual supply chains”) to the end user, including downstream actors or wider reporting and disclosure commitments (see “The role of public reporting and disclosure”). Traceability and transparency tools and initiatives are rapidly evolving to meet changing demands and address data gaps, inconsistencies, and usability constraints (see “Innovation and direction of travel of technological applications for traceability and transparency”). The final chapter, “Summary of findings,” reviews our findings and suggests priority areas for action.

Stock-take of traceability and transparency tools and initiatives: Key findings

We carried out a mapping survey of 94 tools and initiatives focused on the six commodities most associated with forest loss: palm oil, soy, timber, cattle, cocoa, and coffee. Rubber was not in scope at the time of the mapping survey, but we have provided examples in the rest of the report. Additionally, we carried out a survey of published evaluations on the effectiveness of these tools and initiatives, which is discussed in “Operational and funding models.”

The tools and initiatives reviewed focused on palm oil, soy, cattle, timber, and cocoa, with less coverage of coffee and rubber. Tools and initiatives exist in country, regional, and global applications, recognizing the global nature of these commodity supply chains, but may focus on different sections of supply chains.

Figure 2 | Coverage of global mapping survey: Geographic focus, in terms of regions of production of surveyed tools and initiatives (left), and focus areas of surveyed tools/initiatives within supply chains

Source: Authors.

Definitions of traceability and transparency

We carried out the mapping to help identify the interdependencies and enabling conditions that affect the usage and potential impact of traceability and transparency tools and initiatives. To do so, we examined the approaches taken in traceability and transparency tools and initiatives. However, during the literature review, no consistent, precise definitions of the terms traceability and transparency were seen to be universally used.

In fact, there was much overlap in the usage of the two key terms. For example, transparency may refer to the ultimate aim of being able to see through a whole supply chain—for all required information about a supply chain to be available and to be shared externally and internally (Bateman and Bonanni 2019). Under this definition, traceability, related to the preservation of information about a commodity as it moves through a supply chain, is required to meet full transparency. However, a simple definition of transparency is also sometimes used, referring to the simple act of disclosing information (i.e., being able to see into the operations of one stakeholder) (AFi 2020a). Under this definition, a stakeholder could be fully transparent about its operations by disclosing that it has little information on traceability in its supply chain and no targets or policy to change this, so under this definition transparency and traceability could be wholly distinct concepts. However, an upstream company being transparent and disclosing such information may aid in the traceability of a downstream company and therefore help its decision-making in terms of choosing whom to do business with.

Thus, in the process of generating information and placing it in the hands of decisions-makers, the choice of how to define exactly which parts of this process count as traceability or transparency is not consistent across the sector. Unfortunately, this can slow efforts to align, coordinate, and amplify the work of stakeholders working in different contexts related to commodity-driven forest loss. This inconsistency, or lack of clarity and understanding, has been recognized, and Table 2 gives sources that outline workable definitions of traceability and transparency.

The broad working definitions for this report, detailed in “Traceability and transparency: Research objectives,” were chosen to balance the work that has gone into scoping more rigorous definitions, presented in Table 2, with the common uses that are seen in the literature, and to provide some level of distinction between transparency and traceability.

Furthermore, Table 3 gives core elements of traceability systems that we identified during the research process. Not all systems include all elements, depending on the scope and purpose.

This report treats transparency not so much as a system with components but the process of sharing data and information under certain conditions, which applies to both traceability systems and other contexts for collecting and sharing data.

Functions of tools and initiatives

Using the working definitions as given in “Traceability and transparency: Research objectives” for the 94 tools and initiatives covered in this mapping survey, 72 can be described as primarily to do with traceability and 22 can be described as primarily to do with transparency. However, many tools that provide traceability may also provide an element of transparency in that they may or may not provide information to stakeholders beyond the direct users of the tool. Therefore, for this initial delineation, we define transparency initiatives as those primarily developed to catalyze information sharing or make existing information more usable, while traceability tools and initiatives are those that primarily aim to help stakeholders using the tool or partaking in the initiative understand the flows of commodities and impacts of their production.

Figure 3 shows one way to categorize the tools and initiatives and highlights the area of overlap between traceability and transparency.

Figure 3 | Categorization of traceability and transparency tools and initiatives

Source: Analysis by authors.

To further investigate the functions and use of tools and initiatives, we categorized them according to the type of information they provide and the level of transparency with which this information is accessible. The categorization used draws from the work presented in Table 4 to identify key features of traceability and transparency, but is not presented as a new definition or analytical framework that this report advocates to be universally applied. Instead, this is a way to understand what the tools and initiatives produce information about, how they help stakeholders use and share information, and who can use this information.

The four broad categories into which tools and initiatives were grouped are as follows: those that generate data about production circumstances or trade flows of commodities; gather and/or process data into more easily accessible or decision-ready information for different audiences; provide a disclosure mechanism for stakeholders to communicate private information; or share information (i.e., this tool or initiative can be used as an information source for interested stakeholders—this was further broken down into the level of transparency of this information).

Most tools and initiatives fit into more than one of the above categories. For example, Trase uses processed satellite data to generate new spatial datasets about land use for different commodities; processes existing data (e.g., producing models of trade flows drawing on sources such as customs data); and shares information through reports and an online platform. The vast majority of tools shared information that they produced. Information was shared with varying degrees of transparency. A low proportion of tools facilitated third parties sharing information by providing disclosure mechanisms. Those that did not share data were often frameworks to guide stakeholders in generating or sharing their own information, such as the Global Reporting Initiative and Accountability Framework initiative. Likewise, some initiatives were focused on building capacity to facilitate greater traceability or transparency.

We provide a more thorough breakdown of how these categories, and further subcategories, vary with each other and with funding and governance models in Appendix A, while key findings informed by this survey are illustrated in the below sections.

Of the tools and initiatives in the sample that generate raw data, over 70 percent produce new data to track the sustainability impacts of commodities at the location of production. Of these, 66 percent draw from satellite imagery. This reflects the effort invested in building a clear idea of what may be driving forest loss, and the dominant role that remote sensing now plays in informing stakeholders of on-the-ground impacts.

However, a significant number do not generate raw data. Of the tools and initiatives that share data, about 26 percent do not generate any raw data, deriving their outputs wholly from existing datasets. Of those that both generate data and make information relevant to sustainability impacts available, 78 percent also draw on other existing datasets (e.g., publicly available data or data available for a fee) to supplement or contextualize newly generated information. Tools using information on land ownership and adding satellite-based deforestation alerts to inform estimations of company exposure to deforestation risk are a common example. In summary, tools that share on-the-ground insights focus on how to use data that already exist, as well as on the creation of new data. This reflects the value that can be drawn from reusing and combining existing, available data in innovative ways to produce or infer usable insights.

Through the supply chain—data transfer and usability

Data generated about the origins and movements of commodities are generally processed into information that improves the capability to assess risk of production upstream, including through sustainability ratings of companies or production areas, as well as more actionable information on commodity flows.

Forty percent of surveyed tools provide outputs focused on commodity flows. Given the drivers for traceability and transparency outlined in the introduction, this is not surprising. However, tracking commodity flows can be subject to commercial sensitivities, as businesses may not want to disclose details of their trade with third parties, and be technically complex. For example, and as discussed further in “Traceability and transparency through the supply chain,” products from different origins with different sustainability characteristics can be mixed or processed into new products (e.g., palm oil derivatives, or poultry products coming from soy-fed chickens) at several points in the supply chain, while traveling through different legal jurisdictions and through the custody of various companies.

Governments in producing countries develop national traceability systems for certain commodities within their borders. However, stakeholders operating from downstream in global supply chains may also have to trace through international trade and through stages of the supply chain post-import, so by the time a product reaches them it may be hard to link the information they have about a product with data from systems based in the producing country. Tracking within a supply chain is often undertaken by companies themselves or within closed membership groups, highlighting the commercial sensitivities of data sharing.

There are a growing number of private consultancies offering supply chain mapping and risk assessments that are core components of a traceability and transparency system, often to larger corporations. These partnerships between expert consultants and private companies often see the combination of the companies’ internal logistical or procurement data with data generated by the consultancy (e.g., through satellite imagery or other accessible datasets, such as customs data) to build assessments of whole supply chains and environmental impacts.

Data availability, cost, and funding

As mentioned above, almost a third of the tools that share information do not generate new data, only collate, process, and re-share existing information. There are tools and initiatives that release data or process insights for free (45 percent of surveyed tools), and there are many that share this only with initiative members or within a supply chain (17 percent) or for a fee (33 percent).

Collation and sharing of information are often services charged to users of the data, often including their own company-relevant data. This charge to users represents both the level of effort and expertise required, and the tangible financial value of such insights. There is a growing industry commercializing information generated from data that are freely available by processing data into usable forms. This could imply that many published datasets are not fully or properly used by stakeholders (see “Data ownership and access” and “The role of governments” for a discussion on data sharing and utilization). A lack of usage could, for example, be partially due to a lack of resources, technical expertise, or access to computing power among stakeholders who could best utilize existing datasets—a motivating factor behind the development of Global Forest Watch’s Small Grants Fund.⁹

However, the level of transparency¹⁰ appears to correlate with the funding and governance models of the tools (see Figure 4) and with different objectives. For example, those that are most transparent or are entirely focused on transparency tend to be led by civil society, and although these tend to have diverse or mixed funding sources, almost 90 percent of them have as primary funding sources governments of the countries they operate in, government foreign aid, philanthropies, or nongovernmental organizations (NGOs). That is not to say that different stakeholders have different or opposing agendas, but it could imply that different aspects of traceability and transparency work are most effectively carried out by different stakeholder groups. Likewise, this could imply that a sustainable funding model, obtained, for example, through fees or donations, is a key factor in determining the level of transparency of tools and initiatives. This is discussed in “Evaluation and effectiveness of traceability and transparency tools.” In addition, tools set up to trace products for a company have different objectives than those that assess company performance, which focus more on accountability.

Figure 4 | Tool/initiative transparency levels and funding/governance

Notes: The above figure shows how the level of transparency of surveyed tools/initiatives varies by funding source and governance structure. Each column shows a breakdown of funding sources (top row) and governance structures (bottom row) for a specific level of transparency. For example, most tools/initiatives that restrict access to information to a single entity or organization (termed firm-internal transparency) are funded by clients/customers, and three-quarters are either governed as a private company or private sector led; Many tools/initiatives receive funding from more than one sector, and different tools and initiatives may share different levels of information with different audiences, so total percentages can sum to more than 100; CSR = corporate social responsibility.

Source: Analysis by authors.

Operational and funding models

Tools and initiatives can be set up in a range of operational and funding models, including off-the-shelf solutions or systems developed by internal or external experts. Funding sources can include external funding from donor agencies or private philanthropies, internal funding through government or other revenue allocations, or a mix of both. Depending on the scope, purpose, and complexity, cost can vary widely. In the forest sector, the upfront development of government-owned traceability systems in Latin America was found to cost as little as $300,000 and as much as several million US dollars. However, it is difficult for external analyses such as this report to assess the cost of system development since there are frequently several government agencies involved and costs are not usually published or shared (Stäuble et al. 2022).

When deciding on whether to develop a system in-house or hire external system developers, system owners should consider several factors, including the complexity of the planned system and in-house capacity, relative cost, and how long-term maintenance and upkeep of the system can be performed and funded. In either case, the system owner needs to develop the knowledge, capacity, and commitment to maintain the system in the long run (Stäuble et al. Forthcoming).

There may also be a correlation between motivation and system sustainability. In the case of government-owned systems, agencies in charge of funding and maintaining systems set up with external financial assistance can face issues finding long-term support for system upkeep. Governments that decide to develop and implement a system with their own resources in some cases can also show more long-term ownership over the system. However, the context varies widely across system owners and countries. In either case, funding models need to be considered at the outset, including sufficient funding for maintenance and upkeep of the system over time, including potential additional development costs to respond to the evolving data landscape, whether through user fees or fines generated by the system itself, or from external sources (Stäuble et al. Forthcoming).

Box 2 summarizes considerations related to funding models for timber traceability systems developed by governments, which can provide lessons for other types of tools and initiatives, as analyzed by an upcoming WRI publication (Stäuble et al. Forthcoming).

Evaluation and effectiveness of traceability and transparency tools

Much attention has been placed on ensuring the accuracy of the data available in these traceability and transparency tools through rigorous, peer-reviewed, methodological research. However, very little has focused on the impact (measurable change for forests and people) of the tools that employ these data. Without such evidence it is not possible to establish a clear causal link between the use of traceability and transparency tools and improvements in natural resource management, nor is there evidence about the effectiveness of tool features or conditions.

This leaves unanswered questions about, for example, the most useful data types, minimum standards on data quality, best tool design, most effective dissemination methods, and more. Without robust answers, this lack of knowledge has real consequences: There is a risk of wasting valuable and limited resources by duplicating efforts to analyze, combine, or deliver data and insights; there is a risk of confusing key stakeholders with competing information or creating unnecessary reporting burdens that are not useful; and a risk of delivering data in ways that will never contribute to decision-making because they are not accessible or usable, or because the necessary enabling conditions are not in place.

While our review of tool evaluations was not exhaustive, it indicates that few tools have implemented ways of measuring the impact of open data or drawing lessons about the best way to deliver such information.

Findings

Of the 94 tools and initiatives covered in the global mapping, 85 percent have not conducted, or at least have not publicly shared, evidence that their work is effective in preventing commodity-driven deforestation or supporting other environmental impacts. Though this doesn’t mean these tools aren’t effective or impactful—some tools indeed do offer anecdotes or user stories as examples of their potential usefulness—these few examples do not amount to a clear signal, nor are they strong evidence on which practitioners can base future projects. Our findings illuminate a missed opportunity to learn from advances in data science to create the biggest impact.

The importance of evaluating tools and initiatives

Investing in impact evaluations of traceability and transparency tools offers opportunities to gather clear evidence, allowing stakeholders to better align around fewer tools that are most effective, and therefore to provide consistent information across more users and sectors. Better information about the most effective tools would make it possible to more efficiently allocate resources to increase adoption of data for decision-making in key user groups. Impact analysis could lead to more effective tools providing rigorous evidence that does the following:

• Demonstrates causal links between the availability of certain data and outcomes for forests, carbon sequestration, or other natural resources
• Compares data delivery mechanisms in meeting the unique needs of stakeholders in diverse geographic and social-political contexts
• Identifies key enabling conditions to increase the effectiveness of tools
• Illuminates gaps in causal chains between data availability and outcomes for forests
• Explores unintended consequences of tools

Where evaluations have been conducted, they provide valuable lessons for the future funding of tools, selection of data, and tool-dissemination strategies. Some of these valuable findings are presented in Table 4.

Challenges to be addressed

Barriers that are often cited as reasons why evaluations have not been undertaken include cost, time, expertise, and challenges in accessing information. Allocating funds for an impact evaluation could be a low priority, especially in the face of the significant costs of handling large datasets and web or app development.

Time poses a unique challenge because the generation of data on land use change can be slow and some datasets are gathered only annually, so determining impact may take years. In many cases, forest loss is due to multiple factors, and it may be difficult to isolate the impact of one factor such as a traceability and transparency system.

Expertise may also play a key role; evaluation and research of traditional sustainable development work often looks at a limited target population to determine the impact of interventions. Traceability and transparency tools, however, do not normally have such a clearly defined target audience. Many are available to anyone with an internet connection, which makes it difficult to understand who uses the tool and for what purpose, and to associate changes in the environment with the use of the tool. The global survey of tools done in this research found almost half of tools and initiatives offered some level of access free of charge (see Appendix A). Assessing the link between access to data and outcomes for forests and people is a new and unique research challenge that may require new methodologies, which in turn require greater investment. Some projects, such as the Forest Data Partnership,¹¹ are addressing this need for integrated research, from tool inception and development through user application.

While these barriers are not insignificant, the lack of evidence available to support continued investment in data and tool development could limit the potential of the field to tailor and scale its impact.

Lessons

The global mapping—drawing on interviews, case studies, literature, and a survey of tools and initiatives—has shown the enormous diversity in function, funders, and users. It highlights different priorities and barriers to meeting traceability and transparency and the needs of different stakeholders in ensuring that information in the hands of decision-makers leads to reduced forest loss. The following is a compilation of key themes identified through the mapping.

• Funding, ownership, access, and use of data: Alongside the need for more data, there are often issues around ownership and accessibility/use of data for all stakeholders (including smallholders), the question of who is funding the provision of that data, and the sustainability of the funding sources.
• Relevance and quantity versus quality of data: The mapping survey showed a wide range of tools generating or outputting data that, at face value, cover different parts of a supply chain or monitor the forest of certain regions. However, other factors identified during stakeholder interviews and in wider literature that dictate whether those data are useful include the quality of that data source—for example, the granularity and completeness of the data, frequency of publication (i.e., annually, monthly, or daily), or time lag between data generation and publication.
• Providing improved data is not sufficient to impact forest loss: Data must be usable in real-world supply chain management and decision-making, thus enabling stakeholders to implement and act upon information. Data generated, and information disclosed, must provide decision-ready information for those seeking to improve the environmental impact of commodity production and trade. This can mean, for example, that different published datasets are usable together to build a larger picture.
• Scaling up of successful projects: The mapping survey revealed effective traceability systems from many geographies and commodities. However, through stakeholder interviews it was understood that several of these successful projects have not been able to scale up to achieve significant coverage of a supply chain or be translated into systemic changes to provide improved traceability to the whole supply chain or region.
• Most (85 percent) of the tools and initiatives have not conducted, or at least have not publicly shared, rigorous evidence that their work is effective in preventing commodity-driven deforestation or supporting other environmental impacts.
• Motivations for engaging in traceability and transparency and metrics for success: Initiatives to improve transparency and traceability are very diverse in the organizations involved (from trading companies to smallholders to NGOs), in the specific reasons for their formation (e.g., to react to market pressure or to comply with legal requirements), and the metrics that are used to define and measure success.
• The enabling environment can be very influential in providing the motivation to act and determining the likely scale, depth, and durability of any initiative. Enabling conditions are often specific to geographical or sectoral circumstances. Critically, they can determine the likelihood that the intended impacts, such as reduced forest loss, are achieved. Understanding the context within which the tools or initiatives are developed (by whom, for whom, and why) as well as understanding their function (in terms of data inputs and outputs, or transparency level) can be critical in understanding the success of a particular traceability or transparency tool/initiative.

Data requirements

Companies, financial institutions, and governments need data to assess, manage, and mitigate the risks and costs within their operations and investments in commodity supply chains. These risks and costs are directly related to the complexity of the supply chain and ease of access to credible information from the point of origin.

Data requirements vary by user, but there are common requirements summarized in Table 5, including meeting commitments by corporations and financial institutions; supporting civil society monitoring, disclosure, and reporting; and complying with market requirements.

Traceability and transparency systems: Data availability

Table 6 provides examples of traceability and transparency systems that collate, process, and make available data from the point of origin of commodity production. These examples illustrate several key points:

• Many of the data points on commodity production related to forest loss are already covered by these tools to different extents based on the type of commodity.
• Availability of datasets for different commodities and across countries varies; gaps exist in commodity coverage (particularly for cocoa and coffee) and frequency of updates (some are not updated annually, see below examples, noting that there are many commercial platforms that provide similar services or build on these tools and initiatives).
• There are also data points for which data availability is limited (e.g., on land tenure, particularly for smallholders), land use designation, illegality (e.g., illegal forest or other land conversion), and farm/concession boundaries (especially for smallholders but also for other land holdings). In some cases, in the absence of such data, platforms rely on assumptions and/or models to link components of the supply chain.
• Data needs are constantly evolving, including for whom, by when, and for what. The traceability and transparency solutions developed to date will change in response. For example, there is a growing focus in the palm oil sector on social and human rights issues (e.g., migrant labor, living wages).
• Different commodity supply chains come with different levels of complexity for traceability and transparency. Factors to consider include presence of smallholders, number and size of farms, prevalence of indirect suppliers, number of intermediaries, resilience of supply networks and supplier relationships, and whether the type of crop can be easily distinguished using earth observation.
• The cost and resources required to achieve full traceability to the farm level depend on the specific commodity and supply chain, as well as the scale of application (specific volumes within one supply chain, an entire individual supply chain, or volumes of various suppliers). Market and regulatory requirements drive decisions on whether and how to pursue transparency and traceability, including farm-level traceability (see also “Traceability and transparency through the supply chain”) and may require different levels of resources for different commodities.

Data ownership and access

Open data

Collating and processing data can be time and resource intensive. Despite this, a significant amount of the data that are relevant to the commodity supply chain and forest risk is freely provided, by both the public and private sectors, such as the following:

• The United Nations (UN) Comtrade site and the Food and Agriculture Organization’s FAOSTAT offer high-level production and trade statistics for various commodities
• The National Aeronautics and Space Administration (NASA) and the European Space Agency (ESA) grant public access to data drawn from their earth observation programs
• Platforms such as Trase and Global Forest Watch are open access
• The Brazilian government makes PRODES data publicly available through the Brazilian National Institute for Space Research

In fact, the global mapping found that 45 percent of the tools and initiatives surveyed provide some data and/or process insights for free, while 41 percent publish all information they produce (see “Results from a global mapping of traceability and transparency tools and initiatives” and Figure 4).

Growing internet access, digitization of information, and access to computing power and expertise mean that the number of open datasets, and the number of people who can use them, continues to grow. The term open data refers to data that are available for anyone to access and use with minimal practical or legal restrictions. Accessibility does not just mean that the data can be found, but that they are easy to use.¹² This approach is captured by the FAIR principles—findable, accessible, interoperable, reusable.¹³ For example, it may be much easier to input data into a program if they are provided in a spreadsheet format rather than pdf format. Ideally, a dataset should be machine-readable so that a program can interact directly with a dataset rather than requiring manual data input.

Microsoft Planetary Computer and Google Earth Engine are currently drawing from these open data sources for their own platforms, which clean and process data and make them accessible for use. The platforms are made usable by a wide range of stakeholders to maximize accessibility and catalyze innovation. The last decade has seen growth in expertise and access to cloud-based computing capacity to process large volumes of data, especially in computer models using methods such as machine learning. Access to this processing power is now widely available with the growth of cloud-based computing services such as Microsoft Azure, Amazon web services, or Google Cloud.

Publishing data and analysis based on open data builds wider trust and accountability, allowing third parties to both check and build on published data to develop more tools and insights,¹⁴ which feeds into an “open data ecosystem” (ODH 2016; Kazmaier 2022). This in turn can support greater alignment, decreasing duplicative efforts and enabling harmonized use and impact of data at scale.

The exponential and continuing growth in digital infrastructure means the impact of open data will continue to grow across commodity supply chains. Research by McKinsey & Company estimates that jurisdictions that embrace open data principles will see significant gross domestic product growth (White et al. 2021).

“Paid for” data

Access to data may, however, incur costs. The process of validating, interpreting, hosting, and processing data, and providing new insights and actionable information from raw data (even where the raw data are publicly available), requires human expertise, computational power, and financial resources.

The global mapping showed that around 41 percent of the tools and initiatives surveyed provide access to data and/or insights either only for members or for a fee. A growing industry of private service providers offers paid access to processed data drawn from similar input data sources as used by open platforms.

The question of who owns processed data and the insights delivered is increasingly important. The commercialization of data processing and user-friendly interfaces for decision-makers to handle and interpret information has clear benefits: A market of competing service providers drives innovation that can deliver more helpful insights and thus better information to decision-makers. However, if safeguards are not put in place, commercialization of data gathering, processing, and analysis can exacerbate existing inequalities in supply chains and exclude smallholders from accessing or owning data related to their own operations (Henderson 2021).

Ensuring that ability to pay does not restrict data availability is a central factor to consider, especially when prioritizing public and philanthropic funding, along with data verification and credibility.

What data can be made publicly available and how?

The global mapping highlighted several lessons that present both challenges and opportunities for data disclosure:

• Data disclosure must respect the need to protect individuals. For example, although the location of both smallholders and plantations might be important to downstream actors, the implications of publishing this information will have different connotations: The smallholder often lives on or near the production area, providing direct access to information about their home to a wide number of people, which is less likely for plantations. There is not yet a universally accepted protocol for protecting the privacy of individuals in supply chains, but various solutions are being developed.
• Data disclosure must also respect commercial and privacy concerns. More transparency can be achieved by putting in place safeguards to manage privacy while providing data ensuring legal and sustainable production. Regulatory requirements can include such safeguards and still improve information access. Higher levels of trust among supply chain actors facilitate the sharing of more data: What might have been considered sensitive data five years ago is more routinely shared today.
• Not all data need to be made public to make progress. Within commodity supply chains, even if not all data (e.g., on transactions and actors along a supply chain) are available, it is in many cases still possible using publicly available data to identify priority areas for monitoring forest loss at the point of production, enabling stakeholders to take action to avoid and compensate for forest loss.
• Data disclosure can build the credibility of traceability and transparency initiatives by enabling external verification. For example, data layers such as the Universal Mill List (Box 3, also see Appendix C) allow third parties to track commodity flows, along with company reporting. This type of standardization is important for interoperability of data disclosure systems. Transparency of one actor to support the traceability of another is a key interdependency and thereby increases the transparency of the entire supply chain.
• Data disclosure decisions need to consider the trade-offs among the safeguards mentioned above and the benefits that accrue to society when data can be shared.

The role of governments

Data already made available by governments

Governments collect, manage, and in many cases make datasets publicly available to support a range of public and private sector initiatives, including on land use, land cover, production systems, land tenure, and other features. Not all relevant datasets are available to the public, however.

What datasets to make available and according to what definitions can be a matter of contention and a critical dimension of land governance. For example, information on boundaries of concessions (e.g., for timber, palm oil) are available at varying levels of clarity, consistency, and usability in different countries, and disclosure of such information by actors other than government agencies has been challenged. Ensuring consistency in land use maps is difficult, especially where land use is managed by different ministries and where there are overlapping responsibilities among ministries. This is something that many countries are seeking to resolve, for example, through One Map in Indonesia.¹⁵

There are some data that the private sector and civil society could collect but with significant time and cost investment. In these cases, governments may be better placed to collate and share data, especially where there is a risk of duplicating efforts or there is a lack of commercial incentive to cover certain areas or sectors that may be more remote or create higher costs. These costs cannot necessarily be absorbed by government agencies without external funding. For example, in the case of concession boundaries and land use of forest and agricultural commodities—for oversight of commodity production, forest monitoring, encroachment into protected areas, and tracking production without permits—governments can make the information available more efficiently than other actors collecting the same information. Alignment among the government, the private sector, and civil society on roles and best practices for data gathering efforts could help establish more consistency and coordination and help avoid duplication of efforts.

Opportunities to improve data interoperability

Efforts to align definitions and reporting formats when publishing data on forest loss and sustainable commodity production can improve the interoperability of different data disclosures. Such alignment can also help build the credibility of data outputs and analysis derived from them, while noting that different data-gathering protocols and analysis methods among actor groups will continue to produce different results. As such, datasets from official and external sources may contradict each other.

Data formats, definitions, and metadata are essential. According to developers of open data platforms, a lot of the work that goes into generating actionable insights from public datasets lies in cleaning and transposing data to make them usable with computer models, and compatible with datasets from other sources. Ensuring that data are published using agreed formats, definitions, underlying methods, and metadata could reduce the cost of producing insights from open data and greatly increase their impact.

An agreed data framework for managing data would cover dimensions such as metadata, interoperability, quality, and architecture and make it easier to manage data. Such a data governance framework (Earley et al. 2017) presents a mechanism through which entire sectors can decide what data to collect and publish. This requires input from those who hold data, usually in the private and public sectors, and those in civil society or expert consultancies, who tend to know what data are needed and how they can be fully used.

Traceability and transparency: Data usability

Maintaining the information flow across a supply chain is a precondition for establishing a traceability system. One challenge lies in linking products to origins across the supply chain, including navigating discrepancies among organizational systems for data collection and incentives. Another major challenge relates to data usability. Data are useful only when they can be shared in a format that provides users with insights supporting better decision-making. Companies driving market demand, which may be subject to regulatory obligations, are often far removed from the point of production and have limited resources and expertise to make sense of data. Data do not, by themselves, have any impact—how data are used makes the difference.

The global mapping showed that 26 percent of the tools and initiatives that share data do not generate new data but derive their outputs wholly from existing datasets. These tools and initiatives focus on collating, processing, and sharing existing information to make it more accessible and usable. One example from the Brazilian beef sector is Visipec (see Appendix B), which compiles and synthesizes existing data from various public sources to enable monitoring of cattle supply chains to expand to indirect suppliers, and analysis of property-level socio-environmental risks.¹⁶ Another is SPOTT, which takes public information about various companies involved with palm oil and timber to produce sustainability ratings that investors can use to inform their decisions.¹⁷

Role of earth observation technologies to monitor land use change

The capability, accessibility, and use of earth observation to monitor land use change grew exponentially in the last decade, including optical and synthetic aperture radar. The capabilities and ongoing research and development for these technologies are discussed in more detail in “Innovation and direction of travel of technological applications for traceability and transparency.” High-resolution images are publicly accessible with increasing periodicity from public and private sector providers. Some examples of these tools are detailed in Table 6.

Insights from these tools can be used by companies and financial institutions to assess their supply chain risks and impacts, and inform the development of strategies to mitigate those risks and contribute to solutions on the ground. Companies use alerts to target resources and incorporate earth observation methods into their traceability and transparency systems to flag areas of concern for follow up. Civil society actors use tools based on earth observation in combination with other sources of data, such as customs data (e.g., Trase¹⁸) or registered production locations (e.g., the Cocoa Accountability Map¹⁹), to highlight the connection between global supply chains and forest loss to hold companies to account and to call for action.

Some of these tools have systems that provide publicly accessible, near-real-time alerts of tree cover loss such as the integrated deforestation alerts available on Global Forest Watch (Weisse and Pickens 2020). These alerts provide an early indication of where tree cover loss may be occurring so that enforcement officers, local communities, and advocacy organizations can respond. See Table 7 for a list of early warning deforestation alerts offered by Global Forest Watch. In addition to these integrated alerts, complementary sources of information exist with the RADD (RAdar for Detecting Deforestation) alerts, which are based on weekly ESA Copernicus data (see Box 9 in “Innovation and direction of travel of technological applications for traceability and transparency“).

The ability of earth observation to distinguish among land cover types is improving rapidly. Some crop-specific datasets exist (see Appendix H), but some crops are easier to map than others because of limitations of earth observation. For instance, identifying shade-grown crops such as coffee or cocoa in agroforestry systems is much more challenging than identifying oil palm plantations. Appendix H and Figure 5 provide an overview and visual summary, respectively, of the availability of datasets on crop extent and whether the datasets are one-off mapping efforts or updated annually. The public availability and coverage of spatially explicit datasets on crop extent is constantly developing. For example, a new dataset on cocoa in Ghana and Côte d'Ivoire is available in Kalischek et al. (2023); a new dataset on oil palm and pulp and paper plantations is available in Gaveau et al. (2022); and Wang et al. (2022) contains a new dataset on rubber and is currently in pre-print. “Innovation and direction of travel of technological applications for traceability and transparency” includes more information on ongoing research to improve crop mapping based on earth observation.

Figure 5 | Availability of crop data for monitoring supply chains

Source: Goldman 2022.

Limitations of earth observation tools

While use of earth observation has clear benefits, there are technical limitations too:

• Identifying natural forest (Mazur et al. 2023b) and vegetation types (e.g., distinguishing among managed grasslands and pastureland or inter-cropping cocoa or other commodities within forests)
• Monitoring cocoa, coffee, and other shade crops that are not easily visible from space, and so are more difficult to monitor. Technological solutions have been developed that may fill in some of these gaps (again see “Innovation and direction of travel of technological applications for traceability and transparency”).
• Interpreting the causes and intended uses of observed land use change—e.g., distinguishing between legal and illegal forest loss, between human-induced and natural tree cover loss, and between temporary tree cover loss and deforestation through land use change and determining if a commodity was eventually planted on a parcel of cleared land, which can include an expanded time horizon. As discussed above, drawing conclusions on the causes of forest loss is likely to require other information at origin, such as knowledge of land ownership and farm or concession boundaries, to identify whether encroachment into forest area observed though satellite observation complies with local laws. While data on land conflict, human rights violations, and information related to labor and legal compliance are often not geospatial, there is an urgent need to collect these types of data at a global scale.
• There is a need for “ground truthing,” or verifying evidence of tree cover loss, to help interpret earth observation data and to collect sample points for training models. For example, in Guyana, drones have been used to supplement earth observation to provide a baseline mapping and monitoring of forest cover for the government of Guyana’s climate commitment.
• Earth observation data on their own do not provide the information needed to trace products back to origin, which requires research and mapping on suppliers. However, earth observation data can be combined with information about commodity origin to assess sustainability and legality claims through remote sensing data.
• One limitation of commodity datasets and the myriad tools that deploy them is that these data can’t be compared on different platforms, constraining users’ ability to effectively apply these data to their specific needs. Within the Forest Data Partnership, partners are currently working to increase the interoperability of existing public datasets, drawn from satellite data and other sources, and cross-check their validity with pre-competitive ground validation data to verify what the satellites show on the ground. This may be provided from a variety of sources including research establishments, civil society, and others such as the High Conservation Value Resource Network.²⁰

Bringing datasets together to enhance usability for decision-makers

Data triangulation from a variety of sources into a form useful to decision-makers is a major innovation area. Examples of this (identified in Table 6) include Visipec, Selo Verde, and Trase.

Carrying information from origin downstream (through to retailers and brand owners) in a meaningful way requires further innovation to link datasets at origin into supply chain tools, and relates to challenges of traceability and transparency systems within supply chains (see “Traceability and transparency through the supply chain”). Innovation in this space will determine whether it will be possible to meet market demands for full traceability and transparency through supply chains to the point of origin.

Lessons

• Technical advances including the ability to handle large datasets through cloud-based platforms will continue to improve the quality and usability of data and close current gaps (e.g., enabling better distinctions between natural and planted forests, managed grasslands, and pastures). “Innovation and direction of travel of technological applications for traceability and transparency” looks further at current innovations addressing these gaps.
• No one dataset can provide a full picture of the situation at origin. Different datasets need to be used together and be aligned with each other to make sense of the situation and enable better decision-making.
• Many tools and initiatives are available only after paying for access. Cost or resource constraints should not prevent actors/users, particularly smaller and vulnerable actors, from accessing tools and platforms.
• Evolving market and regulatory requirements are driving an increasing need for full traceability and transparency throughout supply chains for downstream companies to the farm level, including all smallholders.
• While there are gaps in data availability at the point of origin and limitations on earth observation data if not complemented by traceability data, another challenge of equal significance lies in carrying data through the supply chain and making them available in a way that can be used by decision-makers.
• Solutions to support making data available in a useful format will require innovations in the way datasets across supply chains can be linked, and the way data can be presented.

Moving one stage onward in the supply chain discussed in “Availability and usability of data at the point of origin and/or production,” this chapter draws on the case studies presented in Appendices B to F to consider how data collated at the point of origin are transferred and used within commodity supply chains to help halt forest loss and shift to sustainable production.

This chapter considers two questions:

• What is required to achieve traceability to origin (e.g., to individual plot, plantation, or ranch) and in which cases is it necessary?
• How easily can decision-makers access and make sense of data on deforestation risk within supply chains?

Commitments to greater traceability and transparency

Most major traders of key commodities and many consumer-facing brands have committed to addressing forest loss (often articulated by private sector actors as commitments to “deforestation and conversion free” supply chains) and developed programs of work to deliver on this. Ambitions on traceability and transparency vary. Table 8 summarizes examples of corporate commodity commitments from key companies and traders.

Table 8 shows that at a high level there are common commitments among some companies to achieve deforestation- and conversion-free supply chains, and that there are common ambitions to traceability and transparency in their individual supply chains.

Traders do make distinctions between their own operations and those of joint ventures, third parties, or indirect suppliers that supply to them, where traceability and transparency are more challenging, as explored below. The Trader Roadmap further distinguishes within the cattle sector between legal and illegal deforestation, and high risk (but not all) biomes.

Traders also have shown varying levels of ambition on traceability scope, for example, traceability to smallholder or plantation (e.g., Musim Mas, see Appendix C),²¹ traceability to mill and over time to plantation (e.g., Wilmar),²² and traceability “granularity” depending on risk (e.g., ADM, soy).²³ Taken together, there is a broad set of corporate commitments reflecting the complexity of global supply chains.

Complex global agricultural and forestry commodity supply chains

Global commodity supply chains are complex and multitiered. This creates challenges for passing on information on commodity characteristics from the point of origin (the data points/indicators discussed in “Availability and usability of data at the point of origin and/or production”) through each tier in the supply chain.

Commodity supply chains vary in their complexity, such as in the degree of vertical integration among tiers and in the prevalence of indirect, third-party, and smallholder suppliers.

Figure 6 shows a generic model of a commodity supply chain, illustrating the common practices of mixing commodities, and changing ownership at different stages in the supply chain. The roles of key parts of the supply chain are also explained.

Figure 6 | Generic supply chain model for palm oil

Traders (or shippers) are key actors in the supply chain. Figure 6 illustrates the common hourglass shape prevalent (to varying degrees) in commodity supply chains (e.g., palm oil, soy) that converge between the initial stages of production & aggregation and transportation & distribution to end use markets. While this shape does vary across commodities, commodity traders or shippers, refiners, and processors are commonly focused on this point of convergence for commodities (a point where a significant share of global commodity trade passes through), which makes their role critical in the commodity supply chain, and in any traceability and transparency system.

Some of the inherent characteristics of commodity trade present challenges for traceability and transparency, in particular the following:

• Traders can typically buy and sell commodities on the spot market, where available commodities are put up for sale for immediate delivery to manage peak demand or buy at the best value to meet customer requirements. Traceability and transparency within spot market purchases can be more difficult than where traders buy directly from suppliers with which they may have a long-term purchasing agreement with greater built-in traceability and transparency.
• Trade in commodities has historically (though not in all cases) been based on price, quality, and physical characteristics (e.g., soy to a specific protein level), not on origin and sustainability characteristics. For example, traders, global processors/refiners, or consumer goods companies may buy to a quality specification that permits pooling of commodities sourced from multiple geographies (e.g., soy meeting a specific protein content from “any origin”) in which case this mixing in the supply chains inherently adds complexity in traceability of individual origins.
• Traders, refiners, and global processors may also buy from cooperatives of farmers or from other third parties (including other traders and intermediaries) that may lack the appropriate incentives (including commercial sensitivities, cost) and resources to disclose their own suppliers.
• Smallholders make up a significant share of commodity suppliers, growers, and producers in most major commodities. The related complexities and issues are discussed further below.
• Commodity trade includes not only the raw commodity (soybeans, crude palm oil) but also products derived from processing, such as dried cocoa beans, cocoa butter, processed rubber, refined coffee, and derivatives of palm oil like oleochemicals, which can include many more steps of processing. Beef products such as corned beef can be produced from trimmings from different cattle and from different farms. These examples illustrate the complexity and traceability challenges in typical commodity and commodity-derived product supply chains.
• Commodities are also embedded within transformed products (e.g., palm oil in baked goods, cocoa in chocolate, rubber in tires, soy in animal feed).

As these points illustrate, commodity supply chains were not designed to meet traceability and transparency requirements for attributes beyond the physical product itself such as legality or safety, but for optimized cost-efficiency. The ability of commodity supply chains to adapt to requirements based either on inherent characteristics or quality or safety specifications does indicate that enhanced protocols for traceability to monitor exposure to forest loss could be pursued.

A retailer wanting to understand its supply chain will therefore need to unpack a long string of documentation about a unit of commodity, produced according to different standards, conventions, and requirements around the world, to map national and subnational origin, and from there identify a pool of potential mills, silos, cooperatives, or other aggregation points, and subsequently farmers or growers.

Changing these supply chains, for example, by physically segregating commodity flows that meet specific criteria from “conventional” flows can make traceability simpler, but can add costs that need to be borne by someone within/or shared across the supply chain. Pursuing segregated flows has also been criticized because at small scale it could undermine efforts to drive a mass market shift in commodity production, while creating “clean” segregated supply chains with potential of leakage to other markets.

However, while traceability is challenging, it is not impossible. Global food safety and quality regulations already require a level of traceability. Also, as explored below, traceability and transparency tools and initiatives are being introduced in commodity supply chains to meet changing market demands, as highlighted in the introduction and below, within these constraints.

Traceability and transparency: Company-led actions and initiatives

Traceability and transparency approaches, as shown in the introduction, are not new but are evolving to incorporate characteristics beyond physical attributes to include data on legality, sustainability, or other criteria to meet changing market requirements (commitments and regulations). Where a commitment or market requirement exists, a solution is usually developed. Evidence for this claim is found in the evolution from paper-based to more advanced tracking systems instituted in many timber supply chains in the 1990s and the introduction of cattle traceability requirements to manage bovine disease outbreaks (see Appendix B). Other examples including high-end technical solutions are explored in “Innovation and direction of travel of technological applications for traceability and transparency.”

Table 9 highlights examples of traceability and transparency systems currently in use in global commodity supply chains and identifies the opportunities, limitations, and impacts of such tools. Key points from Table 9 are presented below.

• Significant progress has been claimed by early movers on traceability and transparency:
  • Traders such as Golden Agri-Resources (GAR) have achieved 95 percent traceability to palm oil mill and to plantation (GAR 2022).
  • Leading brand owners have mapped their supply chains (e.g., Nestlé in partnership with Starling) (Nestlé 2018).
  • Leading meatpackers in Brazil have mapped and assessed the risks of forest loss of direct cattle suppliers (see Appendix A).
  • Traceability in timber supply chains has advanced a great deal and has been incorporated into supply chain management through voluntary approaches (e.g., certification), market access requirements (e.g., EU Timber Regulation), and national systems (e.g., in Brazil, Guatemala, or Peru) (Stäuble et al. 2022).
• However, challenges remain, specifically in relation to traceability and transparency for indirect suppliers and smallholders in supply chains.

Traceability and transparency: Indirect suppliers and smallholders

Where supply chains are vertically integrated, solutions for traceability and transparency are more straightforward and the influence on actors within the supply chain is greater. In contrast, traders or other major purchasers may source through a range of routes including producers they contract with directly (direct suppliers) and through third parties (e.g., other traders, agents or dealers, or cooperatives) that in turn have their own supply chains.

Indirect suppliers and third-party supply chains are one or many tiers removed from the trader or major purchaser, usually limiting influence on them. This challenge can be compounded when there are many smallholders in the supply chain.

These supply chain routes present challenges when implementing traceability and transparency systems, including posing risks associated with companies moving toward simpler supply chains by cutting out smallholders or intermediaries, or by setting up systems that create parallel data gathering structures that don’t enable smallholders to access and use the proprietary information that could support risk assessment and production & quality management processes instituted by cooperatives. Examples of how these challenges have been overcome through practical applications of traceability and transparency systems are explored here, along with lessons, opportunities, and challenges.

Indirect suppliers

Indirect suppliers exist in most commodity supply chains. The Accountability Framework initiative defines suppliers as either direct suppliers (selling directly to the buyer) or indirect suppliers (selling to an intermediary that is one or more steps removed from the buyer). More than 40 percent of key forest-risk commodities are sourced indirectly via intermediaries (zu Ermgassen et al. 2022).

Within the cattle sector in Brazil, for example, an individual animal may pass through several farms over its two-plus-year life cycle before reaching the direct supplier that sells cattle for slaughter to a meat packer. Each of those farms presents a potential risk for links to forest loss.

Major meatpackers Marfrig, JBS, and Minerva have initiated programs to address these challenges with similar commitments to trace and identify their indirect cattle suppliers. Several approaches to this traceability and transparency issue have been tried. A few examples are included here and explored in more detail in Appendix B:

• Top-down approaches by each of the three major meatpackers utilizing a range of in-house systems and third-party tools (e.g., Visipec), combining information from their own direct suppliers and publicly available datasets (e.g., on forest loss, farm boundaries) to trace and verify indirect supplier linkages to legal or illegal forest loss. All companies have set 2030 targets to complete this task in Brazil, with targets for interim progress by 2025. While possible, progress remains slow. One of the reasons for this is because necessary data (such as animal transit data) remain siloed or are not shared across actors. In addition, direct suppliers have concerns about sharing data about their supplying farms.
• Bottom-up approaches such as the Sustainable Production of Calves Program, launched in 2018 in part by Carrefour Brazil Group, which aims to improve small-scale producer inclusion and encourage these cattle farmers to verify legal compliance with laws governing forest loss and land conversion and use ear tagging. In some cases, this information was carried through to point of sale with information available to the consumer via a QR (quick-response) code printed on the product label. This was a successful program and is being scaled up as of 2022 with an aim to enroll a million calves across the Mato Grosso and Pará States, though this still represents only a portion of total heads of cattle in Brazil.
• Collective cross-industry approaches with government support such as the terms of adjustment of conduct in the state of Pará, an agreement not to buy cattle from recently cleared land led by the Federal Prosecution Office. The agreement includes mechanisms to identify and verify compliance of indirect suppliers using existing cattle movement data not generally publicly available in other states. This will be explored more fully in this chapter.

Cooperatives, representing groups of soy farmers, may be concerned about disclosing their upstream suppliers for commercial reasons. They may also be hesitant to share information because they prefer to use their own systems for demonstrating deforestation- and conversion-free production instead of relying on systems from other providers. It could be argued that traceability and transparency are connected to the trading activities of these cooperatives and, therefore, any data generated within internal management systems are data that the cooperatives and their members own and should benefit from, leading to more benefits for all. Institutional support may be needed to share or cover start-up costs but “running” costs should be included in the cost of sustainable production and reflected in price. The challenge for the major trader is to ensure that the commodity it purchases can be verified as meeting its required standard while respecting these commercial confidences (see “Case study: Soft Commodities Forum” in Appendix E for one approach to working with intermediaries in the soy sector).

Within the timber sector, historically third-party traders have acted as intermediaries for hardwood imports into European and other timber markets with very little traceability or transparency of the origin of the timber (acting as “black boxes” within the supply chain). Regulatory controls introduced starting in the late 1990s requiring evidence of legality precipitated a shift away from these intermediaries toward more direct contact with timber suppliers, reducing spot market buying.

Smallholders/small-scale farmers and aggregation

The complexity of commodity supply chains, as described above, is higher where production is predominantly carried out by smallholders and small-scale farmers, as is typical of many of the commodity supply chains assessed in this report: palm oil, cocoa, rubber, and coffee. This is less true for soy, timber, and cattle, although the structure and composition of the sectors vary by country and small producers are important in some geographies.

Smallholders is a broad term but in the palm oil sector, for example, refers to farmers that own up to 50 ha of land, operating either independently or as part of a smallholder scheme or cooperative.²⁴

Gaining access to information about smallholders and farmers is often the first step of data gathering required for traceability and transparency systems. However, this can present numerous challenges.

• Accurate and real-time visibility over the whole supply base is not always possible using existing methods of traceability. Smallholders often sell to collectors or initial aggregators (in the case of palm oil, cocoa beans, coffee, rubber, some timber production), which then sell on to intermediaries and then to the first stage processor. Within the cocoa sector in West Africa, many smallholder farmers operate in cooperatives or sell to intermediaries, and it is often not possible to disaggregate the supply chains of cocoa smallholders to specific traders since in practice smallholders will supply to different traders at different times. Although the connections between cooperatives and traders may be known for each procurement cycle, many smallholders are not registered with a cooperative—60 percent of cocoa smallholders in Côte d'Ivoire are not registered with a cooperative, for example (IDH et al. 2021a). This makes it much harder for downstream actors to trace back to the site of production since cooperatives play a central role in coordinating engagement, sharing information, and gathering data. Where supply bases “overlap” in this way, collaborative action by buyers/processors is often advantageous and more effective, not just in helping to achieve traceability and transparency but also in pursuing other objectives related to livelihoods and productivity, among others (see example of the Cocoa & Forests Initiative in “Collaboration beyond individual supply chains”).
• Smallholder mapping to enable traceability to plantation in palm oil is a static capture of what is actually a dynamic sourcing landscape. The traditional model of tracing supplies to the farm using field staff generates a snapshot of farms and farmer relationships at a particular moment in time. Data can become outdated due to land transfers, and because of the fluidity of selling and buying relationships among independent smallholders and agents or dealers, which are not wedded to selling to a specific mill.
• Even if visibility is achieved, the data required may not be available. For example, not all smallholders have documentation for legal access, rights, and tenure of the land and commodity grown on it. This documentation is, however, often essential to establishing the legality of the operation and the commodity itself.
• Access to technology may be limited. Not all smallholders have access to the internet, telecommunications, or technology to enable them to share information digitally. However, innovations in the use of mobile phone technology are advancing rapidly (as shown in “Innovation and direction of travel of technological applications for traceability and transparency”), which is helping to overcome these challenges.
• Understanding of international or national policy requirements and standards may be limited or lacking, necessitating training support and capacity building.
• Similarly, third-party certification to a commodity standard may be limited.
• Due to the factors above, along with the associated cost of verification and compliance, smallholder producers are often not certified. For a downstream company this will mean that alternative evidence will be required, often using a combination of remote sensing and boots-on-the-ground data gathering.

To address these challenges, individual companies are taking steps to map smallholder farmers, engage with them, and develop practical traceability systems. Two such examples are the Cargill CocoaWise program and the smallholder engagement program that Musim Mas has been undertaking with smallholders in Indonesia (see Appendix C, Box 5, and Table 10).

These examples illustrate that

• it is possible to achieve traceability and transparency to smallholder suppliers in complex supply chains, even if the process can be time consuming and resource intensive; and
• there is likely to be overlap and duplication of efforts by companies where smallholders sell into shared supply chains.

Finally, governments can support company engagement with smallholders through mandatory national-level application of standards and mechanisms of assurance for commodity sectors in countries of origin (e.g., Indonesia Sustainable Palm Oil, Malaysian Sustainable Palm Oil) and in the case of timber through Timber Legality Assurance Systems, such as those developed through VPAs or in comparable government-owned information management systems for timber (see Appendix F).

Assurance systems can be helpful for companies where they are able to link commodity products within their supply chains to these systems in the country of production, enabling them to verify origin and compliance to an independently audited national standard and thereby meet changing market requirements where applicable.

Indirect suppliers and smallholders: Challenges and priorities for action

Companies have been able to work through complexities in their supply chains to increase traceability. For palm oil, traceability to mill and managed plantations and to third-party plantations has become routine. Traceability to smallholder plantation or to farm is possible but can be very time and resource intensive. For companies sourcing from many thousands of smallholders, farm-level traceability is in part a logistical issue, but also creates other challenges, including the following:

• Direct suppliers may be wary of disclosing the identities of their own suppliers for commercial reasons (e.g., reducing their own competitiveness) and because of the perceived risk that they may be excluded from the market if they cannot meet the required standards. These concerns are being addressed by companies with programs to support farmers to achieve full compliance. For example, within the Marfrig Verde+ Plan, Marfrig promotes an approach to supplier inclusion by providing technical and financial assistance.
• Direct suppliers may not have full visibility themselves of the full life cycle of the commodities they are purchasing (e.g., cattle) and may face similar disclosure concerns from their own suppliers.
• Companies with significant but not majority market share can have limited influence over a domestic market. This can complicate the implementation of traceability and transparency systems if there is a large domestic market with less stringent requirements.
• Governments can play several important enabling roles:
  • Mandating national-level application of standards and mechanisms of assurance for commodity sectors in countries of origin (e.g., Indonesia Sustainable Palm Oil, Malaysian Sustainable Palm Oil, and Timber Legality Assurance Systems)
  • Making information available to support traceability and transparency, as in these examples:
    • Timber Legality Assurance Systems were developed to improve forest resource management as part of the VPAs but also in some countries as a way to access markets, including carbon markets
    • The state of Pará has linked public data on animal movements with data for assessing forest loss with Selo Verde
    • Governments have supported collaborative action across a sector (e.g., in cocoa supply chains through the Cocoa & Forests Initiative)
  • Requiring mandatory due diligence in importing markets to drive demand for greater traceability and transparency
• While government roles are important as listed above, there are also limitations to government approaches, including the required coordination among agencies, which can cost time; lack of funding to provide sufficient staff to efforts; and divergent definitions, which can limit the ambition of government-led standard setting
• An aligned and collective approach to traceability and transparency across sectors is very important (see “Collaboration beyond individual supply chains”) to agree on standards, definitions, and protocols for verification

Verification and providing assurance of credible evidence

Accessing and making data available for use is a core component of any traceability and transparency system. However, the usability of data is contingent on quality, including ensuring the data are credible and trustworthy to a level accepted by market or stakeholder requirements.

Verification to provide assurance of credible evidence is predominantly done on three levels:

1. Own verification by individual companies of their own systems and data
2. Third-party verification, often relying on voluntary certification standards
3. Government-level assurance through national (mandatory) certification and in some cases information collected through conventional government oversight (e.g., pre- and post-harvest inspections in forestry, where enabling conditions are in place to collect credible data from oversight activities)

Comparability and consistency in both definitions and what constitutes credible evidence is important. The Accountability Framework initiative (AFi)²⁵ has sought to achieve consensus across civil society (with industry support) on definitions (e.g., for deforestation) and on expectations for monitoring and reporting. In September 2022, AFi released new guidance on aligning corporate targets, accounting, and disclosure in partnership with the Science Based Targets initiative and the Greenhouse Gas Protocol (AFi 2022).

• Alignment on definitions and reporting has been essential for providing a level playing field for companies that publicly report, giving confidence that they report progress in a similar way, and for customers and other stakeholders that use this information. Alignment has also reduced the burden for companies by simplifying the reporting process, requiring less staff time and resources. Persistent differences in approaches to reporting, however, continue to limit comparability and transparency, particularly where reporting initiatives remain voluntary, as discussed further in “The role of public reporting and disclosure.”

Own verification and assurance systems

Many companies have developed their own verification systems. These systems are often developed when there are supply chain complexities and/or when voluntary or mandatory certification standards are either not available, not applicable, or too expensive. In some cases, companies work together to develop and implement such verification systems, aligning where possible on the approach, definitions and standards, and evidence. Table 10 presents examples of such approaches, and associated challenges and opportunities.

Own company verification and assurance: Lessons for traceability and transparency

• These approaches are self-verified by design, which can raise questions about the credibility of assurance they provide. This is important for downstream customers but also governments, financial investors, and civil society in holding companies to account.
• Comparison between commitments and performance remains difficult based on individual company reports where the definitions, scopes, and methods of verification vary. This variation can undermine confidence in individual companies but also entire sectors and lead to decisions to exclude markets. For example, in 2021 several European retailers decided to cease purchasing Brazilian beef (Keating 2021).
• The UK Soy Transparency Coalition²⁶ aims to address this lack of comparable market data on company performance by gathering more detailed information directly from traders on their policy compliance, but this is voluntary and available on a payment basis to members only.
• The Implementation Reporting Framework (IRF)²⁷ for palm oil uses self-reporting. The IRF is often disclosed on company dashboards. Differences in the approaches taken by companies mean that it is not always feasible to collate and use the data provided. Work is underway to strengthen the processes used for monitoring and disclosing information.

Voluntary certification standards

Voluntary third-party certification standards have evolved over the past 25 years to provide market assurance on commodity supply chains, where credibility was seen as lacking. For example, in the 1990s when there was increasing concern about timber production leading to mass deforestation, a broad set of groups created the Forest Stewardship Council (FSC).

Some certification standards, such as the FSC, provide balanced representation across industry, environment, and social concerns. Most standards have common features such as governance bodies, grievance mechanisms, and reporting requirements to provide market assurance.

Certification standards have been developed for most of the commodities that are the subject of this report, with standards in development for rubber through the Global Platform for Sustainable Natural Rubber.²⁸ The market uptake of these standards varies considerably with higher proportions of certified palm—19 percent of total global production of crude palm oil was certified to the Roundtable on Sustainable Palm Oil (RSPO) standard in 2021 (RSPO 2022b) and a lower proportion of certification in the soy sector (1.25 percent of total soybean production globally) was certified against the Round Table on Responsible Soy (RTRS) standard in 2021.²⁹ Between 27 percent and 47 percent of cocoa production in 2019 complied with a voluntary sustainability standard (e.g., Fairtrade, UTZ, Rainforest Alliance) (Bermudez et al. 2022a).

Table G-1 in Appendix G provides a summary of the main certification standards along with the percentage of production that they account for where this information is available.

There are requirements related to the control of certified products along the supply chain, including flows of certified and noncertified products and associated claims. Table G-2 summarizes these models.

A common starting point for companies purchasing certified product is to purchase credits or certificate transactions. These provide evidence that the product has been audited and verified against the standard at the farm level but do not provide a traceable connection to the physical product purchased downstream.

Different levels of traceability of physical flows of certified product are provided by mass balance, segregated, and identity preserved (IP) chain-of-custody models (see Table 11). Only in a segregated or IP system is certified product physically segregated from noncertified material. Within a mass balance chain-of-custody model, certified product is monitored to ensure that only the amount that has been produced is sold, but in the supply chain it is mixed with noncertified material. In practice, this means it is not possible for a purchaser of mass balance certified product to know what proportion of the physical material they are buying is certified.

There are advantages and disadvantages to the different chain-of-custody models for traceability and transparency. Segregated products provide greater traceability within supply chains, but establishing this separation can add cost. Credits and mass balance models offer downstream companies (e.g., retailers, brand owners) a practical mechanism through which they can support more sustainable commodity production and, for example, give smallholders access to benefits, but do not provide assurance on traceability connecting this certified material to their supply chains.

Markets will likely increasingly demand greater levels of traceability both in response to emerging legislative requirements (e.g., the requirement for geolocation within the forthcoming EU Deforestation Regulation³⁰) and market demands (e.g., requirements for traceability of physical soy flows by companies within the UK Soy Manifesto).³¹

Certification bodies are responding to these developments. For example, RSPO is developing proposals for improving the robustness of the mass balance chain-of-custody model, which could include the noncertified proportion meeting a minimum standard of legality and deforestation- and conversion-free (SPOC 2022; RSPO 2022a). RTRS is retrofitting its chain-of-custody standard to accommodate due diligence requirements (EC 2023).

Voluntary certification: Lessons for traceability and transparency

• Certification can help meet market demands for assurance that commodities have been produced to meet specific standards, including legal production and deforestation-free.
• Not all certification standards provide the same level of assurance of traceability to origin. This is increasingly requested by markets and emerging due diligence regulations, which owners of certification standards are beginning to respond to.
• Overall, uptake in global commodity supply chains remains limited both in terms of hectares and volume certified and market demand.
• The cost premiums of certification and how these costs should be shared across the supply chain (shared responsibility), including with farmers (to support living incomes), are active (but unresolved) discussion points for actors within commodity supply chains.

National and regional standards

National-level assurance or certification processes have evolved in recent years in response to the need to comply with national laws such as the FLEGT and related licensing³² and through VPAs between the EU and a number of timber-producing countries (EC 2013).

For example, in 2016, Indonesia started issuing FLEGT licenses, automatically meeting the requirements of the EU Timber Regulation.³³ The EU Timber Regulation prohibits operators in the EU from placing illegally harvested timber and products derived from illegal timber on the EU market and mandates due diligence. Indonesia’s FLEGT licensing scheme is based on a mandatory certification system called the Sistem Verifikasi Legalitas Kayu (Republik Indonesia 2018), a TLAS, which was developed by the government of Indonesia with input from stakeholders as a result of the VPA between Indonesia and the EU.

A number of other timber-producing countries are in the process of developing a TLAS under a VPA with the EU to verify the legality of their timber, and therefore also its traceability. In addition, other countries are pursuing traceability and transparency systems for the forest sector for other reasons including enhancing natural resource management, formalizing economic sectors, and improving tax collection, among others (Stäuble et al. 2022).

Within the palm oil sector, the Indonesian government has developed a national mandatory standard for palm oil, Indonesia Sustainable Palm Oil (ISPO). Approximately 32 percent of oil palm plantations in Indonesia achieved ISPO certification in 2020. Malaysian Sustainable Palm Oil (MSPO) is similarly a mandatory national standard for the Malaysian palm oil sector. Over 97 percent of oil palm planted area in Malaysia had achieved MSPO certification in 2022. Both are certification standards similar to those described above but do not currently provide chain-of-custody assurance for palm oil meeting these standards once exported.

National standards, certification, or reporting schemes such as those described in the timber and palm oil sectors (see Appendices F and C, respectively) can play an important role for domestic and export markets for these commodities:

• They can raise the bar for sustainable production standards at a national level, providing impact at scale. This is important given the size of the domestic markets for these commodities: For example, almost three-quarters of beef produced in Brazil in 2020 was consumed domestically. In 2021, 37 percent of Indonesia’s palm oil production was consumed domestically. They can also ensure that all exports of commodities meet a given standard regardless of the end market requirements (ISTA Mielke GmbH 2022).³⁴
• As indicated in “Own verification and assurance systems,” national standards could be helpful for companies if they are able to link products within their supply chains to assurance systems such as these in the country of production, enabling them to verify origin and compliance to an independently audited standard. This could reduce the need to extend traceability and transparency systems to thousands of individual smallholders.
• National systems could play an important role in supporting voluntary certification standards by, for example, providing a level of assurance on the noncertified products entering into a certified system, as is the practice for mass balance certification.

The development and implementation of national standards can also present challenges such as the following:

• Developing these standards can take time, as does reaching national-level consensus if a standard is developed in a multistakeholder process, such as a TLAS.
• Systems need to ensure that smallholders retain market access and are not excluded by costs.
• Building international market recognition and acceptance is an important enabling condition.
• The chain of custody needs to extend beyond point of export, to link to and pass assurances into international commodity supply chains.
• Market share is limited for all voluntary approaches, and mandatory national standards are mainly limited to country of production although FLEGT licenses have achieved some market acceptance in procurement and existing import regulations.

Lessons

• Traceability and transparency are challenging in complex and multi-tiered global commodity supply chains. Purchasing commodities through a variety of routes, including direct and indirect suppliers, and mixing sources within supply chains at mills, at silos, at points of export, and during transportation create additional issues.
• Challenges for data sharing also include those related to commercial sensitivities (in opening supply bases), data confidentiality (where data exist within public systems but cannot be shared), and technology (linking databases, transitioning from paper-based to electronic systems).
• However, verification of data on commodity characteristics at origin is possible through company systems, third-party voluntary certification schemes, and collective approaches at a jurisdictional or landscape level. Voluntary certification has provided one mechanism for downstream companies to support sustainable commodity production and gain some assurance on traceability, but uptake remains limited.
• Companies increasingly self-report on progress against commitments, but comparability remains difficult because of a lack of consistency and alignment in approaches to monitoring, verification, and reporting. Self-reporting is considered less robust than independent verification. This undermines the role transparency can play as a lever for change (see “The role of public reporting and disclosure”).
• Market and regulatory pressures have been increasing for greater traceability and transparency to provide assurance on legality and risk of forest loss. Increasingly, companies have been looking at ways to work together to achieve this assurance through mass market “pre-competitive” solutions. These are discussed more fully in “Collaboration beyond individual supply chains.”

Enabling conditions and interdependencies

• The costs of the transition to sustainable commodity production need to be absorbed and equitably shared through the supply chain. The cost burden for farmers to reach a living income, achieve sustainable production, and meet the requirements of traceability systems (e.g., mapping supply chains) throughout the supply chain should be shared to ensure that they can meet these goals.
• Data sharing needs to be encouraged and facilitated to reduce duplication of efforts and costs, and enhance transparency. This could be achieved through greater alignment and interoperability of datasets, indicators, and definitions, supported by continued, transparent dialogue focused on solutions.
• Data shared and disclosed must be credible, verified, and audited by third parties. While third-party assurance alone does not guarantee credibility, external assurance bolsters trust in the validity of reported data and verification of deforestation-free claims, which is essential to building and maintaining credibility.
• Companies further downstream need to be able to interpret publicly available data on the performance of their suppliers, often many tiers removed, to set and monitor their own policies on deforestation.
• Governments can set up mandatory national standards and mechanisms of assurance for commodity sectors in countries of origin. These systems exist for timber and palm oil, and may play an increasing role in international and national markets. They can help link smallholders to international supply chains.
• Governments can make information available to support greater traceability and transparency to meet domestic regulatory and market requirements (e.g., compliance with national policies, assurance mechanisms) and regulate mandatory due diligence within major importing markets, both of which seek to drive demand for greater traceability and transparency. However, these market requirements need to be inclusive and designed with the needs of smallholders in mind to avoid market exclusion (Fairtrade 2022).

Collaboration is essential. The previous chapters have shown that as the context and drivers for traceability and transparency evolve, and as companies, financial institutions, governments, and civil society create more initiatives, the need for collaboration increases in two areas:

• The “what”: The need for alignment in market requirements, whether from individual companies, civil society, governments, or consumers. This includes consistent goals, definitions, and means of demonstrating compliance, evidence, and reporting.
• The “how”: Collaborating across industry groups to work with suppliers—including smallholders, indirect suppliers, and suppliers across a landscape or jurisdiction—and across governments is essential for providing the enabling environment to support these actions.

Collaboration on the “what” and the “how” are important in the development and use of traceability and transparency tools and initiatives. Ensuring that there is a consistent approach taken across commodities, countries, and actors minimizes the potential for duplication and inconsistency in efforts undertaken by all. This chapter explores these types of collaboration in more detail, drawing out lessons from examples, including those in the case studies, and identifying the enabling conditions and interdependencies required.

Collaboration on requests for data and information

There is a need for greater consistency in the definitions used, timelines and cutoff dates, and levels of reporting and transparency, and in what will be accepted as credible evidence as a means of assurance. A market-wide movement in both producing and consuming countries is essential for providing the right enabling environment and a level playing field. Working collaboratively supports individual actions while accelerating collective progress and building trust among companies and importantly among multiple types of stakeholders. Greater consistency leads to opportunities for disclosing data in a way that protects commercial sensitivities.

AFi has achieved significant progress in collaboration, helping provide clarity on the aligned “what” from a broad range of civil society stakeholders (see Box 7). Table 12 provides examples of collaborative efforts from supply chain actors around the “what” to support consistency in what is used as commitments, definitions, means of credible evidence, monitoring, and reporting, for example.

There are a growing number of collaborative efforts; while not mutually exclusive, these are grouped as sector-specific, national, and global, some of which are discussed below, with further examples provided in Appendix H.

Global collaboration platforms

Global platforms often include representation from private companies, trade organizations, and national or regional roundtables, alongside farmers and academia. They can consist of industry only or include other stakeholders, including civil society.

Examples of global-level platforms include the following:

• Beef: Global Roundtable for Sustainable Beef; European Roundtable for Beef Sustainability
• Cocoa: International Cocoa Organization; International Cocoa Initiative; World Cocoa Foundation; VOICE Network, a global network of NGOs and trade unions; supported at the European level by the European Cocoa Association
• Coffee: International Coffee Organization; Global Coffee Platform; International Coffee Partners; European Coffee Federation at the European level
• Rubber: Global Platform for Sustainable Natural Rubber; Sustainable Natural Rubber Initiative
• Timber: World Business Council for Sustainable Development Forest Solutions Group
• Cross-commodity: Africa Sustainable Commodities Initiative

National collaboration platforms

National initiatives support coalition building among companies, industry associations, and civil society to work toward sustainable production. These initiatives seek to create a collective request for data and information aligned with individual goals, traceability and transparency, and reporting.

These initiatives are growing both in ambition and in the degree of collaboration. National initiatives—such as the UK Sustainable Commodities Initiative (soy and palm oil) and Danish Ethical Trading Initiative (palm oil, soy, and coffee)—are increasingly taking a cross-commodity approach. They create a common voice across industry and commodities, seek to share lessons, work toward consistency within individual and across markets (e.g., bilaterally in the case of the European National Soya Initiatives), and bring those messages to global dialogue platforms.

Sector-level collaboration platforms

Sector-level platforms represent the interests of different sectors within commodity supply chains (e.g., retail, manufacturer, trader groupings), providing a precompetitive space for companies that may be competitors but have common interests or challenges and are interested in developing shared solutions and providing a platform for advocacy. Greater traceability and transparency can be achieved by working together through these cross-industry commodity platforms where certain enabling conditions are in place, the following in particular:

• Cross-sector agreement on a shared goal and purpose to deliver greater consistency in communication across the supply chain and encourage greater transparency as companies are assured that others (including competitors) are reporting in the same way
• Building and ensuring trust among actors through a precompetitive space to discuss challenges that arise, including cost sharing but excluding price, which is out of scope for a precompetitive discussion
• Recognition of the need for a mass market shift with a suitable transition period to ensure that actors are not excluded, for example, with commitments by companies in a group to cascade their own commitments up the supply chain, strengthening the market signal to traders and producers more directly while putting in place safeguards to ensure that costs are equitably shared along the supply chain
• A clear baseline from which to work that provides clarity on priorities for effective action
• Opportunity to identify common “pinch points” (points of leverage) and shared areas of potential intervention (where commodity footprints overlap)

Joint efforts to collect the production characteristics of commodities reduce costs and duplication, and can lead to sector-wide transformation when a critical mass of actors joins and the majority of the market is represented.

Working collectively with smallholders and indirect suppliers

Working collectively inherently requires an inclusive and consultative process with all parties, considering the specific needs of smallholders and indirect suppliers in particular. In complex supply chains (see “Traceability and transparency through the supply chain”), where multiple farmers are supplying to more than one company (e.g., mill, intermediaries, processor, traders), data collection can be costly and resource intensive, and replicate the efforts of other actors within the same supply chain (e.g., if producers are required to provide data individually to each buyer).

This issue surfaces in supply bases that include many smallholders or indirect suppliers. A wide array of collaborative initiatives has emerged across all actors, as shown in Table 13 (more detail can be found in Appendices B-F). These examples illustrate the following:

• Collaboration can strengthen relationships among all actors, while recognizing potential commercial sensitivities, and ensure consistent information and data requests across the supply chain.
• When dealing with a large or disparate supply base, working collaboratively can reduce the resources required, including time and funding.

Working collectively across the supply base: Jurisdictional approaches

According to the Tropical Forest Alliance, jurisdictional approaches involve “collaboration of stakeholders within a defined natural or social geography, such as a watershed, biome or company sourcing area.” These approaches seek to reconcile competing social, economic, and environmental goals through integrated landscape management, “a multi-stakeholder approach that builds consensus across different sectors with or without government entities” (TFA et al. 2020).

In practice, jurisdictional approaches are a “type of landscape approach operating within sub-national or national administrative boundaries with active government involvement,” but some can also cover multiple jurisdictions within a biome or region. These approaches aim to improve environmental and social sustainability at scale through a multistakeholder process. Objectives include enhancing sustainable production of commodities, reducing forest loss and degradation, and bringing social and economic co-benefits to local communities (TFA et al. 2020).

Collaboration at the jurisdictional and landscape levels is gaining momentum across commodities and geographies, recognizing that to create the impact and change required for an entire sector, working beyond individual supply chains is required. This includes the need to work collaboratively on traceability and transparency tools and initiatives. There are efforts to design verification mechanisms for deforestation-free production. Examples of such approaches are presented in Table 14.

Collaboration at the national and international levels

Collective action at a national level is required to create mass market change, ensuring that there is a level playing field in the application of traceability and transparency tools and initiatives, and that commitments and policies can be met.

Public sector involvement is needed to ensure that potential competition issues among stakeholders and geographical areas (e.g., landscapes, jurisdictions) are mitigated, and that all producers, including smallholders and individual farmers, maintain access to markets, both domestically and internationally. National-level traceability systems, such as TLAS, ISPO, and MSPO (as discussed in “Traceability and transparency through the supply chain”), also play a role in terms of avoiding fragmentation and duplication of private sector efforts, and making sure that more remote areas that are difficult and expensive to access are not left behind.

Moving beyond individual countries, collaboration and dialogue among countries can build on this approach, through international platforms such as the Amsterdam Declarations Partnership, where best practices and information can be more effectively shared, which in turn will support national-level action.

Multistakeholder initiatives such as the Cocoa & Forests Initiative (CFI) serve as umbrella initiatives, helping to create the enabling environment for collaboration among stakeholders that often have competing interests but shared goals within and across countries. In the case of the CFI, sustainable cocoa production is linked to protecting forests and other natural ecosystems as well as providing living incomes for farmers (see Appendix D for further details). A jurisdictional approach to forestry and cocoa in Ghana is described in Box 8.

Lessons

Collaboration can drive improved consistency and alignment both in the requests for data and information related to traceability and transparency and frameworks to deliver on them through collective action. A number of lessons can be drawn from collaboration efforts, and associated enabling conditions, including the following:

• The most effective collaborative approach builds trust and communication across all stakeholders in the supply chain, sector, or landscape, and thereby builds momentum to shift a whole sector or market.
• Effective collaborative approaches on supply chain solutions can create efficiencies in cost, time, and knowledge in traceability and transparency efforts, especially when different companies share the same supply base. Collaboration helps avoid repetition of data provision and data collection, while improving consistency across datasets and reporting frameworks used by companies. However, collaboration can be timely and slow, and needs to be truly outcome orientated.
• When collective action reaches critical mass and the whole sector shifts, it can lead to mass market adoption with greater potential for environmental and social impact on the ground.
• Willingness to share data also depends on the framework created for sharing. Confidentiality and competition rules can often hinder data sharing along or across a supply chain, hence the need to establish precompetitive fora for collaborative discussions.

Publicly sharing data and policies

Public sharing of information through reporting and disclosure is a key aspect of transparency and often an objective of traceability systems. Private sector actors share information through voluntary disclosure to show progress against commitments; through third parties to demonstrate progress across actors or sectors; and to meet requirements be it at a national or company level. This chapter explores action across the transparency space and the potential impact on accountability and conditions on the ground.

Voluntary disclosure and reporting

Public reporting such as corporate social responsibility disclosure has been a common practice for decades. Originally it could have been seen as a way to showcase positive actions taken, often for reputational reasons, but disclosure processes have evolved. Corporate reporting on a wide range of issues and against company targets is now commonplace in annual sustainability reports, for example, with increasing expectations to show impact against commitments made.

Financial institutions are increasingly looking at environmental, social, and governance (ESG) disclosures when assessing clients and portfolios, suggesting that for some sustainability concerns are becoming more integrated within decision-making processes. Governments are requiring companies to disclose ESG-related information, too, with the Task Force on Climate-related Financial Disclosures becoming mandatory in the UK, among other examples. This creates additional incentives for companies to demonstrate and disclose their ESG credentials, in terms of both the financial risk of investments but increasingly also the material and physical risks that climate change (including risks associated with forest loss) might have on companies. For example, BlackRock head Larry Fink’s 2022 letter to chief executive officers stated that a main factor in shaping BlackRock’s portfolio was the sustainability strategies of companies—for purely financial reasons (Fink 2022). In addition, reputational risk and consumer preference related to environmental impacts are also having a growing material effect on companies (Rijk et al. 2019; Forest 500 2022b; Wyers 2019).

Consistent application of reporting standards, definitions, and methodologies will help strengthen the uptake of their use by companies and other actors. Knowing that there is consistency across industry and potential competitors will reduce the risk of being perceived as acting alone, or sharing more information than competitors. The Accountability Framework initiative, with a consortium of expert and civil society organizations, has also developed a common methodology for assessing company progress on forest loss related to commodity supply chains based on company reporting (AFi et al. 2019). Common alignment on both reporting and assessment methodologies makes it easier for third parties to understand and compare the progress of individual companies and sectors, and mitigates the risk of different assessment agencies publishing contradictory company ratings. According to AFi’s 2020–2022 strategy and theory of change, the adoption of reporting frameworks and alignment on definitions lead to the emergence of a common language with which to talk about these sustainability issues (AFi 2020b). From this perspective, using the “right” language facilitates better behavior, leading to more effective policies, and positive impact.

Nevertheless, growing public scrutiny may represent a risk for some companies to report publicly, as good-quality, accessible reporting can open companies up to praise and/or criticism from civil society, consumers, and potentially investors. This is especially true where reporting/disclosure remains voluntary. Collaboration among organizations, including companies in commercial competition, civil society, and the public sector, as discussed in “Collaboration beyond individual supply chains,” can help reduce any such risks that may be posed by public reporting, ensuring that pressure from third parties facilitates continuous improvement.

Third-party disclosure mechanisms and role

Third-party disclosure and reporting on private and financial sector actions plays an important role in transparency and accountability, introducing into the public domain progress against stated commitments.

For some reporting and disclosure platforms, companies are invited to submit their own data, whereas others use publicly available information to assess, and often rate, company performance. There are also initiatives that merge a combination of publicly available data with self-reported information, either by companies or third parties, such as the Open Timber Portal (OTP). Examples of such initiatives include the following:

• Global Canopy’s Forest 500, now in its 10th year, with nine reports completed to date, tracks publicly available policies and performances of the 350 most influential companies and 150 financial institutions linked to deforestation in their supply chains and investments.³⁵
• The OTP, developed by WRI and partners, aims to improve access to country-specific information about forest management and harvesting, and increase the effectiveness of regulations on illegal logging. The OTP compiles information from three sources: concession boundaries and the list of registered timber producers from the government; documents uploaded voluntarily by timber producers to demonstrate compliance; and observations by third-party forest monitors.³⁶
• SPOTT, a free, online platform developed by the Zoological Society of London (ZSL), undertakes annual assessments of companies involved in the production and trade of palm oil, timber, pulp and paper, and natural rubber. ZSL SPOTT assesses commodity producers, processors, and traders on their public disclosures regarding their organizations, policies, and practices related to ESG issues, aiming to support primarily the financial sector and supply chain stakeholders to manage ESG risks through increased and improved transparency, and incentivize the implementation of corporate best practices.³⁷
• WWF commodity scorecards provide global assessments including those on palm oil (Palm Oil Buyers Scorecard from 2009 to 2021)³⁸ and, more recently, soy (first Soy Traders Scorecard in 2021) (WWF 2021), in addition to country-specific assessments, including on timber (e.g., UK Timber Scorecard from 2015 to 2019).³⁹

In the forest sector, companies maintaining Forest Management or Controlled Wood Certification also must comply with a public reporting requirement for audit summaries.

Reporting specific to climate and forests includes the CDP questionnaires on climate, water, and forests; the Task Force on Climate-related Financial Disclosures including recommended reporting on Scope 3 emissions (i.e., those emissions that are not directly generated by a firm’s activities but that result from activities up and down its supply chain); and the early stages of the Taskforce on Nature-related Financial Disclosures. It should also be acknowledged that different reporting frameworks have been designed for different users and audiences, and this has led to a combination of definitions and metrics with overlaps and inconsistencies (GRI 2022). However, reporting and assessment frameworks such as CDP, Forest 500, and ZSL SPOTT have worked to align with the AFi standards on metrics, definitions, and reporting frameworks.

Public sector reporting

Governments and other public sector actors are also facing increasing pressure to report publicly on their own footprints (including on GHG emissions and land use due to their national consumption of commodities and products), as well as on progress achieved to date against their own targets and commitments.

For example, signatories to the Paris Agreement were expected to publish and then update their first nationally determined contributions (NDCs). According to Climate Watch, an online platform designed to empower policymakers, researchers, media, and other stakeholders with open climate data, visualizations, and resources, 170 parties (representing 169 countries and 91.1 percent of global emissions) to date have submitted new or updated NDCs.⁴⁰

Furthermore, to participate in REDD+ (Reducing Emissions from Deforestation and forest Degradation), countries must develop a Forest Reference Emission Level and/or a Forest Reference Level as a benchmark for REDD+ activities.⁴¹

Countries importing agricultural commodities are increasingly concerned about their overseas land footprints. For instance, the French government has adopted a National Strategy to Combat Imported Deforestation (Stratégie Nationale contre la Déforestation Importée; SNDI). One element of this strategy is the development of a public information system to increase transparency for risk analysis and accountability. As part of this, the Ministry of Ecological Transition has worked with Trase, EFI, and Canopée to better understand France’s imported deforestation risk associated with imports of soy from Brazil and develop a new public information platform to support the implementation and monitoring of companies’ zero-deforestation commitments by increasing supply chain transparency (see also “Innovation and direction of travel of technological applications for traceability and transparency”).⁴² This was developed following the 2018 publication of France’s SNDI (MTOS 2018).

WWF has published two reports on the UK’s overseas land footprint—Risky Business in 2017 (WWF-UK and RSPB 2017) and Riskier Business in 2020 (WWF-UK and RSPB 2020)—highlighting the issues associated with the UK’s demand for agricultural and forest commodities, and related risks of forest (and other ecosystem) loss and degradation.⁴³ The UK is developing a due diligence regulation on forest risk commodities (as per Schedule 17 of the 2021 UK Environment Act) recommended by the Global Resource Initiative taskforce in its 2020 Final Recommendations Report (GRI Taskforce 2020), which built on WWF Risky Business data. In addition, in the UK, the Joint Nature Conservation Committee, a public body, has developed an experimental methodology to calculate the UK overseas land footprint. (Data produced with this methodology are available on the CommodityFootprints.earth platform: https://commodityfootprints.earth; further information can be found in “Innovation and direction of travel of technological applications for traceability and transparency.”)

Public reporting: Company commitments and actions

Public reporting shows that commitments to act on forest loss have not yet reached the necessary critical mass to create a market shift in behavior.

According to the 2022 Forest 500 report (Forest 500 2022a) and a joint report by CDP and AFi (AFi and CDP 2022), an insufficient number of market actors have set commitments required to deliver the changes needed to halt and reverse forest loss. The data disclosed through CDP’s forests questionnaire in 2021 for companies⁴⁴ that produce or source at least one of the seven commodities responsible for most commodity-driven forest loss (namely, palm oil, forest products, cattle products, soy, natural rubber, cocoa, and coffee) show that “only 36% of companies (245/675) have public company-wide no-deforestation or no-conversion policies and only 13% of companies have commitments to no-deforestation/no-conversion that are well-aligned with good practice” (AFi and CDP 2022).

Furthermore, “only 14% of companies (95) have a traceability target related to their no-deforestation/no-conversion commitments,” (AFi and CDP 2022) and while 76 percent of companies (512) report having a traceability system for at least one commodity, most companies have significant gaps in supply chain traceability:

• Only 23 percent of reporting companies (157) can trace more than 90 percent of the volumes they produce or source back to the municipality level or equivalent for at least one commodity.
• Thirty-eight percent of companies (257) report having no information about origins for at least half of their commodity volumes, and 28 percent (191) report having no traceability system for at least one commodity that they source.
• Only 26 percent of reporting companies (177) have monitoring systems in place to assess compliance with rigorous no-deforestation/no-conversion policies or commitments (AFi and CDP 2022).

These findings show that companies often prioritize certain commodities, geographies, and/or sectors, likely following a risk-based approach to identify areas of highest risk to their businesses but recognizing that the complexity of commodity supply chains (see “Collaboration beyond individual supply chains”) has led to only partial progress being achieved.

Joining efforts with climate disclosures

A more coordinated approach between carbon disclosures on Scope 3 emissions and disclosures on the risk of forest loss within commodity supply chains could incentivize the uptake of transparency and public reporting and disclosure.

The recently launched Science Based Targets initiative (SBTi) Forest, Land and AGriculture (FLAG) sector pathway and criteria explicitly include land use change emissions and a deforestation policy requirement. This will require companies within the food, agriculture, and forest sectors to have a no-deforestation commitment, as well as enable them to set science-based targets that include land-related emissions and removals. These no-deforestation commitments also need to be aligned with the AFi, with a target date of no later than 2025 and a recommended cutoff date of 2020 (SBTi 2022c).

Additionally, all forms of land use change are included in the FLAG sector pathway model so that emissions from the conversion of other natural ecosystems and habitats (in addition to forests) must also be included and addressed as part of FLAG. Therefore, the SBTi and AFi have collaborated to ensure that the FLAG guidance builds on and is consistent with existing expectations for no deforestation and no conversion. In this way, climate and forest commitments are aligned and co-supported (SBTi 2022b).

The number of companies committing to set SBTs continues to grow (over 4,000 in December 2022), along with those that have approved SBTs (over 2,000 in December 2022).⁴⁵ The SBTi has illustrated an increased rate of emission reductions among companies that are committed within the SBTi compared with those that are not, showing the potential influence this new FLAG sector pathway model could soon have (SBTi 2022a).⁴⁶,⁴⁷

Lessons

• Transparency, both in terms of policies and progress, is growing across the private and public sectors. This is not only a trend in the context of forest loss, but also a broader global trend across diverse sectors, in particular climate change mitigation. There are several factors that can contribute to continued improvements in transparency and the emergence of a productive open data ecosystem.
• A central enabling condition is the setting of reporting standards. Standard-setting and disclosure bodies, such as the AFi and CDP, have taken efforts to align their frameworks and are working to improve alignment with other bodies such as SBTi and the Sustainability Accounting Standards Board. This eases the process of disclosure by reducing the burden on private sector actors to meet different requirements and allows greater comparability across reports, enabling actors, such as financial institutions or civil society, to make better informed decisions about where to apply their pressure to improve the sustainability of supply chains. However, these standards are limited in their impact by the number of actors that are reporting.
• Government-mandated disclosure is a powerful tool to increase levels of reporting. Learning from and being consistent with those used by the civil society, private, and financial sectors would support the standardization of approaches. The inclusion of Scope 3 emissions into mandatory climate disclosure obligations presents another opportunity with which to encourage data collection and reporting of actors on the impact of their value chains on forest loss.