The need for greater traceability within the timber trade has put a spotlight on how digital traceability solutions not only ensures that businesses remains compliant, but also enables positive business growth and makes the whole process easier.
This is supported by 43% of surveyed Importers who say they feel positive about the benefits of full traceability solutions. Some 67% of respondents in the UK and 64% in Italy also felt that sourcing timber would be an easier process with a traceability solution.
When it comes to traceability solutions, Italian Importers are the most optimistic, with 52% agreeing that it will have a positive impact on the industry. Some of these positive benefits include helping the industry curtail illegal deforestation, meet the Sustainable Development Goals (SDGs) and make it harder for bad actors to operate.
“Alongside transparency, traceability is an increasingly critical way of helping manage ESG risks. Whilst future regulation will act as a trigger for organisations to build more due diligence and traceability activities into their everyday operations, the financial sector has started to pay attention to this already, using supply chain due diligence to help with portfolio management and risk analysis. This is something we foresee becoming even more common place in the near term.”
A major advantage of digital traceability systems is that businesses can store and find evidence of their timber transactions a lot more efficiently. This helps them demonstrate they have conducted due diligence. With the right type of digital traceability, security and privacy can be enhanced.
The timber industry’s growing awareness of traceability systems – coupled with stricter due diligence regulations – has prompted businesses to consider what the consequences of not having traceability systems in place will be. 42% believe a lack of these systems is currently having a negative impact on timber supply across the entire network. That’s because Importers are simply unable to source enough supply with the level and standard of documentation required to perform the necessary due diligence.
Importers beliefs around the benefits of implementing a traceability system beyond immediate suppliers and back to source are evenly spread:
Helping combat disrupted supply chains / fraud
Driving greater social impact
Listening to consumer pressure
Combatting regulatory pressure
Improvements to remain competitive
Limiting environmental impact
Meanwhile, 30% have yet reached a conclusion or have neutral views on traceability systems.
The ability to trace timber right back to the forest of origin is also an appealing prospect outside of only regulatory compliance. For instance, 49% of UK businesses believe it’s important to respond to growing consumer pressures to make a positive social impact.
In France, in addition to the positive social impact tracing timber products to their forest source may have (34%), timber businesses also feel that it may help them combat fraud and mitigate supply chain delays (36%).
In Belgium, the number one driver to trace timber back to its source is to comply with upcoming regulatory changes (35%). France and Austria appear to be the most apprehensive when it comes to using traceability solutions – more than a third (34%) of Importers operating in each country currently aren’t willing to use these systems. While the UK and Italy are at the other end of the spectrum, with more than half of Importers from each country (51% and 52% respectively) eager to implement traceability solutions.
So, despite a growing appetite for traceability, regions are moving at drastically different paces. And overall, across Europe, 24% of Importers say that their organisation isn’t keen to deploy a traceability solution.
Although better traceability solutions are well positioned to help participants in the timber supply network meet due diligence regulations, some businesses still appear reluctant to introduce the technology.
The yet-to-be-confirmed finer details of EUDR are one such barrier to adoption. Currently, 40% of businesses are worried about implementing traceability solutions because they don’t yet fully understand the incoming requirements. This is despite the fact that over 40% feel the timber supply chain is being held back due to a lack of traceability.
However, aside from this, there’s also a perception that organisations will have to handle ever increasing volumes of data - something nearly half of all Importers (48%) feel overwhelmed by.
In the UK, which, like many, is facing a turbulent economic future, cost combined with a lack of time and resources are unsurprisingly the biggest concerns (49% and 45% respectively). Meanwhile, in France, Austria, and Italy, the fears of timber companies largely revolve around the lack of in-house digital expertise (30%, 18% and 30% say so respectively).
The unfamiliarity with emerging technologies may be contributing towards respondents’ muted confidence in implementing traceability solutions. But in reality, these systems often don’t require much technical expertise to integrate them within a business’ existing operations.
A concern for 56% respondents is traceability solutions potentially giving away confidential information (or trade secrets) that could see timber businesses undercut or jumped over in the supply chain by downstream stakeholders.
At the country level, Italian timber companies are the most worried (72%), while Austrian timber companies are the least concerned (34%).
Whilst most traceability technologies operate on public networks, including public blockchains, there are some technologies that are ideally suited to solve these concerns because they use a permissioned approach. This means no one in the supply chain network is allowed to see a business’ commercial information unless they have permission to do so. They also reduce the risk of single points of failure.
Numerous concerns need to be addressed before timber organisations make their final decision of implementing traceability systems to improve due diligence and decrease risk.
However, a key adoption factor for traceability solutions seems to be the desire to not be left behind by more digitally adept organisations – something more than half (53%) of all companies surveyed agreed with.
