In all industries, customers seek more information about the supply chain, and the reputational risk of not meeting these demands can be high.

In the food sector, for example, customers seek information on ingredients, food fraud, and animal welfare, while in the fashion sector they are more careful about the treatment of workers and the company’s efforts to improve working conditions.

According to a study by MIT, customers may be willing to pay 2% to 10% more for products from companies that provide greater transparency in the supply chain.

However, it is not easy to make a supply chain more transparent, because often supply chains are designed to protect information, and information asymmetry is considered fundamental to maintaining a competitive advantage in the supply chain.

In fact, many companies consider that divulging too much information could undermine this advantage, and investing in making the supply chain more transparent could not be aligned with their short-term goals.

Currently, most companies have proper oversight over their own internal operations and audit and monitor direct suppliers for compliance. Less frequently, companies also engage with suppliers beyond their direct suppliers (indirect suppliers) and trace individual transactions.

Only a very small number of outstanding companies are ready to share information on raw materials suppliers.

To improve the level of transparency of your supply chain, you should consider these 5 steps:

First, focus on the inquiries you are trying to answer through the sharing of information with customers.

Second, assess the potential risks coming from different sources, including internal and external stakeholders. Once the risks are better understood, identify your goals.

Third, visualise your supply chain to gain a deeper understanding of goods flows, map processes, collect information on practices, levels of performance, and suppliers, and bring to light the opportunities for improvement and existing information gaps. You may need to track and profile units, batches, or lots of goods that are moving through the supply chain to ensure the sources of origin and chain of custody.

Fourth, choose how to participate in the supply chain, designing a programme that considers critical KPIs. The purpose is to address specific issues such as labour-related risks, environmental impacts at supplier sites, or unclear sources of origin. Engagement includes supplier contact and collaboration, monitoring, and support. It may also require third-party partnerships to gain expertise that is not available internally.

Finally, set the level of disclosure you want to establish about meeting customer expectations and other relevant stakeholder demands or regulatory requirements. The level of disclosure can range from sharing a code of conduct to disclosing traceability from the raw materials stage of the supply chain.

Several technologies are available to support supply chain transparency, among them blockchain, but technologies cannot solve this issue alone. A transformation program of this kind requires the right mix of people, information, processes and technologies.

Particularly, internal and external stakeholders should be involved in the program, processes and tools need to be implemented to capture, translate, and disseminate useful information, and also to support appropriate decision making.