See and Be Seen: Is There a Business Case for Supply Chain Transparency?

WORKING PAPER

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Executive Summary

Companies’ desires to achieve greater supervision and control over their supply chains are heightened in the post-pandemic business environment, and are understandable when one considers the business disruptions that have occurred. Whether driven by internal needs for increased control, by customer directives, or by the need to become compliant with emerging regulations, companies are aggressively seeking ways to achieve higher levels of visibility, traceability, and transparency for materials and finished goods, as well as the actors that facilitate their movement through supply chains.

Though they together form a hierarchy, the concepts of visibility, traceability, and transparency are often misunderstood or juxtaposed. The academic literature provides foundations for their differentiation, as follows:

Supply Chain Visibility refers to the ability of a manufacturer or retailer to see order status and product flows upstream from immediate (tier 1) suppliers to the focal company as well as downstream from the focal company to immediate (tier 1) customers, from the moment of order placement to final delivery.

Supply Chain Traceability reflects the ability of a company to identify all the actors or entities that make up its supply-chain ecosystem, i.e., the network of networks that includes bundles of source, producer, conversion agent, storage, and carrier firms that extend from the raw materials stage all the way to the end-users of products and services. Like supply chain visibility, traceability can focus on the network of suppliers upstream and/or the network of customers downstream of the focal company.

Supply Chain Transparency is the ability to recognize who makes up the supply chain network (i.e., traceability), and also to understand and acknowledge the policies and practices that those outside actors (suppliers, customers, service providers and other third parties) employ. True transparency, then, requires that the focal company openly disclose the identify of the outside parties that compose the supply chain network and verify that they are abiding by accepted business norms, rules, and practices.

In this paper, we seek to further distinguish these concepts, their key premises, merits, and limitations in light of increasingly pervasive regulation. A primary focus is to assess retail firms’ perceptions of readiness for prospective compliance with transparency legislation currently taking shape in various states in the USA. We report survey results from 131 retail industry executives on their firms’ current traceability and transparency capabilities as well as the anticipated impacts of the impending regulations.

Our preliminary results foreshadow monumental challenges if the proposed bills pass. Retail supply chains are long, with many tiers of supply, and are also very complex due to the potential for multiple consumer channels and thousands of SKUs being moved, stocked, and sold. Most of the retailers in our sample report that their visibility is largely limited to immediate suppliers — when even that is achievable. Visibility drops off sharply beyond tier-1 suppliers, and retailers exert minimal influence toward achieving it beyond immediate upstream partners.

Regarding traceability and transparency, our survey respondents reported having developed only moderate traceability capabilities and finding the achievement of traceability (and transparency) “back to source” to be idealistic/very challenging given current knowledge and resource positions. Viewed in this light, the draft legislation moving forward in states such as Massachusetts and New York, which seeks to mandate traceability and/or transparency in US retail supply chains, is overambitious in its current form. If enacted, these and other similar bills would exceed most if not all firms’ current capabilities due to the complexity and expenses such efforts would present.

While the size of a retail company appears to exert little influence on this assessment, leaders in certain industry segments conveyed that they would be more challenged than others if forced to comply. Department stores and multi-fashion retailers are particularly concerned about costs of compliance and supplier monitoring. Tracing and monitoring costs in these two segments in particular, and across the board in general, would almost certainly be passed along to consumers in the form of higher prices. Given the inherent complexity of supply chain mapping activities, such price increases may dampen competitiveness for some firm-product combinations.

Finally, though our initial findings are indeed preliminary, our sampled managers and executives indicate that efforts to achieve traceability through supply network provenance merely represent a static snapshot of a dynamic situation. Pertinent information collected via a cross-sectional time study remains relevant for just a few weeks given that supply chains are open systems: i.e., a given product’s supply network is both constantly changing and, for practical purposes, unobservable beyond the short term. The mapping and remapping activities that would allow firms to achieve even minimally trustable currency would be nearly impossible for many firms given current technical capabilities.

Until businesses see more top-line implications for traceability and transparency, the return on such investment is strained for most organizations. Technology developments designed to enhance and economize mapping capabilities could alter this ROI calculation in the future.

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Let’s start off with a simple scenario. Imagine Betty’s Boutique has ten suppliers that provide the inputs needed to support the retailer’s business operations and satisfy customers. Now, imagine each of those ten suppliers has ten suppliers. And each of those ten suppliers has ten suppliers. Before you know it, the supply network for Betty’s involves not just the ten immediate (tier 1) suppliers she has direct relationships with, but rather includes the collection of 1,110 suppliers operating within just three tiers of the retail business – each of which is critical to Betty’s ability to keep the doors open and satisfy customer demand. And Betty’s must consider that each supplier in the network presents some potential vulnerability. What if even just a few of the boutique’s 1,000+ tier-3 suppliers change, struggle, or cease operations each month? Would product quality, delivery timing, or received volume be impacted? Would the boutique have to approve a change in suppliers every time a switch was made by a sub-tier supplier that was several degrees removed from Betty’s purview? Now, consider one final reality – the supply network for virtually all businesses is far more voluminous and complex than the simple example of Betty’s Boutique. Major retailers’ supply networks are often vastly greater in scope and scale, with more tiers and many more suppliers in each tier.

The business disruptions of the past three years, coinciding with the global pandemic, have ushered in a newfound appreciation for a firm’s capability to achieve end-to-end supply chain visibility (Agarwal et al. 2022; Handfield et al. 2022; Hohenstein 2022). Supply chain visibility refers to the ability of a manufacturer or retailer to see order status and product flows far upstream from immediate (tier 1) suppliers to the focal company as well as downstream from the focal company to immediate (tier 1) and more distant customers, from the moment of order placement to final delivery. Supply chain visibility has always been important – it both advantaged and led to the defeat of the Roman armies – but it reemerged at the forefront of business leaders’ consciousness early during the COVID-19 pandemic, when customers demanded unprecedented volumes of certain products at a time when their supply was increasingly scarce (Handfield et al. 2022; Spieske et al. 2022). In 2020-21, lead times from order to delivery for many products and components were long and highly variable, and customers wanted answers. As a result, investments in supply chain visibility tools, such as those offered by Project44 and FourKites among others, soared. With the aid of these tools and others like them, companies are increasingly able to track the status of an order to the extent that they can “see” precisely where an inbound (or outbound) shipment resides at any given moment and thus better anticipate estimated times of arrival. Across industries this has led to improved supply chain planning, and most major pandemic-driven bullwhips have subsided (Douglis 2023; Weisenthal and Alloway 2023).

Yet, because of problems companies faced during the pandemic, interest in observing supply chain activity from afar remains piqued. And there are even higher orders of visibility that companies wish to achieve. At a “next level,” supply chain traceabilityrefers to the ability of a company to identify all the entities that make up its supply-chain ecosystem, i.e., the network of networks that includes bundles of source, producer, conversion agent, storage, and carrier firms that extend from the raw materials stage all the way to the end-users of products and services. Like supply chain visibility, traceability can focus on the network of suppliers upstream and/or the network of customers downstream of the focal company.

There are multiple reasons why an organization might be interested in knowing the full membership of its supply-chain ecosystem. For example, manufacturers or retailers might be interested in identifying potential points of opportunity or vulnerability upstream; identifying them could help the company gain competitive advantages or mitigate supply chain risks. Given the length and complexity of today’s supply chains, there are many gaps and potential dark corners in companies’ supply chain networks, and achieving traceability helps them to guard against the potential adverse impacts of those uncertainties (Saak 2016; Wowak et al. 2016; Kamann et al. 2019). Sometimes traceability is sought more involuntarily; companies might be required by law to verify that they are not doing business with unsavory actors or in countries that are off-limits, as has been increasingly the case with western firms dealing with Russian suppliers since that country’s invasion of Ukraine in early 2022.

At a level even beyond traceability, an increased desire for yet a higher order of visibility is emerging. Some companies are seeking to achieve full supply chain transparency, which reflects the ability to recognize not just who makes up the supply chain network (i.e., traceability), but also to understand and acknowledge the policies and practices that those outside actors (suppliers, customers, service providers, and other third parties) employ. True transparency requires that a company openly disclose the identities of all parties that comprise its supply chain network and to verify that they are abiding by accepted business norms, rules, and practices.

While achieving traceability is a substantial challenge – if it is in fact achievable at all for more than a brief time period – getting to full supply chain transparency is perhaps even more so, whether in the case of short supply chains consisting of only two or three tiers (as seen most commonly with natural foods retailers) or the longer, more convoluted supply chain networks that stretch around the world and back again through several more layers of relationships (e.g., in automotive or electronic products industries). As a case in point, one automotive supplier counted just over 650 immediate suppliers at tier 1. This number ballooned to an estimated 24,000 suppliers at tier 2 – prior to accounting at all for any suppliers further upstream in the series of relationships leading all the way back to raw materials. A focal company is likely to have very little insight into or influence on its suppliers at distances beyond tier 1 – assuming it can identify them in the first place (Heckmann et al. 2015; Dogui et al. 2020). To wit, one global aerospace company sought to write language into its contracts requiring suppliers to identify and monitor their suppliers. Virtually every tier 1 supplier balked at this proposition, greatly limiting its impact.

A key point of differentiation between traceability and transparency efforts is noteworthy: transparency data are typically not held by a company for its own purposes, but are also disclosed to its stakeholders, which include employees, investors, customers, governments, NGOs, or any other interested party as a means of signaling an emergent form of customer value. And, as we will discuss, a social and increasingly legislative movement is emerging that would require such disclosures of US companies. This possibility bears both potential benefits and drawbacks for companies and consumers, which served as inspiration for the current research.

Specifically, we initially sought to know, why would a company wish to disclose critical information about its supply chain’s inner workings to outside parties? Is there currently perceived business value to be gained from such an initiative, and what are the challenges associated with it? Previous academic research asserts, but insufficiently substantiates, that supply chain transparency is costly and may not provide intended benefits (Sodhi and Tang 2019; van Hoek 2019). As our thoughts have progressed, a second research question has also emerged. Additionally, we wondered, how will the enactment of legislation that seeks to mandate certain forms of traceability and/or transparency impact firms’ quest to reach greater levels of sustainability? Or, are such goals even realistic anymore?

To better understand the potential costs and benefits of pursuing supply chain transparency, and to explore the perceived pros and cons of the impending legislation, we surveyed a population of US-based retail managers and executives. In doing so, we assessed their firms’ current levels of company traceability- and transparency-related capabilities, as well as a set of concerns that we believed a priori these managers would face if compelled by regulators to achieve (greater levels of) supply chain traceability and transparency. In the pilot study described herein we focused on businesses at the retail level of the supply chain, because retailers are situated at the business-consumer interface, though it is possible that manufacturers or others in the supply chain would probably have similar concerns and perspectives. Based on our reading of some existing transparency-related legislation, as well as drafts of state-level bills currently under consideration, we infer the feeling of lawmakers to be that if retailers can be compelled to map, scrutinize, administer, and otherwise “control” their supply chains all the way back to the original source tier, then the activities and interests of any upstream entities would become aligned such that sustainability failures would become rarefied. Though this perspective is probably unrealistic, as we will explain below, legislation might impact supplier selection processes to such a degree that some limited improvements in overall sustainability are achievable. But, whether those incremental gains would support the costs and risks they would exert on industry is a key question we seek to answer here.

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Survey Method and Results

Methods Summary

We asked a population of retail managers and executives drawn from a US trade association to participate voluntarily in our survey. Our final sample consisted of 131 retail executives who replied in full to our questions. The sample represents eight industry segments and an array of retail store formats, including footwear and apparel retailers (27% of sample), grocery (19%), mega-grocery (11%), multi-fashion (10%), department stores (9%), electronics and appliances (7%), as well as minor representation from a few others. Despite efforts to include retailers of all sizes, the sample is somewhat skewed toward large and very large retail firms (i.e., annual revenues in excess of $100 million). However, given that these are the firms targeted by most of the proposed transparency legislation (e.g., a recent New York state bill targets retailers with revenues more than $100 million), the sample frame was believed to yield findings of interest; 100 of the 131 respondents are employed in organizations with annual revenues of $100M or more. Additionally, because most of the current and pending legislation is directed toward businesses that have a physical presence in particular states, we constrained our study to retailers that have at least one brick-and-mortar location and not pure-play online retailers.

Supply Chain Dimensions and Visibility

We began by asking about simple visibility in the retail supply chain. The respondents appraised their product visibility from the shelf back to raw materials sources for their best-selling product as only very modest, scoring 3.30 out of 6 in terms of perceived capability. Note that this response is based on a single product, and it’s their best-selling one at that. The ability to track a multitude of products, perhaps the hundreds of thousands of stockkeeping units (SKUs) that a large retailer carries, would clearly present much greater complexity (and the problem would be even more immense for e-tailers, who might sell several times more products through their omni- and online channels).  Additionally, there is modest agreement that their companies are trying to increase visibility of risks (4.06 of 6 in terms of effort) but that supply chain opaqueness remains a challenge.

Moving to the next level, traceability, the respondents indicated less capability to trace their best-selling product back to their raw materials sources (average score: 3.09 out of 6 on the extent of ability). It is noteworthy that several respondents suggest that they have 50% or greater traceability of their best-selling product. Thirty respondents indicate that they have 75% or greater traceability while just six indicated more than 90% traceability. It is, however, the spectrum of hundreds, thousands, or millions of additional products that presents a challenge. Anecdotally, we also note that very small firms struggle more than larger firms with tracing their focal product back to source.

There is wide disparity on the lengths (number of tiers) in the supply network, with only three respondents suggesting that suppliers for the best-selling product were one tier upstream. The most common response was “Not sure,” with 24.4% of responses. Right behind was a 3-tier supply network (23.7%) and then 4-tiers (17%). Sixteen respondents (12%) indicated that the supply network for their best-selling product extended six or more tiers. As one would expect, the longer the supply network (i.e., the more tiers), the lower the level of perceived visibility and traceability. What’s fascinating to see, though, is the disparity in lengths perceived even within any given retail sector. Take the footwear and apparel sector as an example. While no one indicated that the supply network consisted of a single upstream tier and seven (19%) were not sure how many tiers were involved, three respondents indicated two tiers, seven indicated three and four tiers respectively, eight indicated five tiers, and four indicated six or more tiers. Similar patterns can be found in the other retail formats we surveyed. This finding suggests that the traceability and transparency challenges can vary greatly from item to item.

Retailer Outcomes

The respondents in our sample were more confident in their ability to understand economic matters than their ability to track their environmental or social impacts. For instance, respondents indicated better ability to understand supply chain cost (3.76) and to trace quality problems (3.45) than to understand environmental footprint (3.23) and to address supplier workplace safety/compliance issues (3.08). Respondents also indicated low scores on systems capabilities to track environmental sustainability problems (2.92) and social sustainability problems (2.91). These latter four issues comprise the very areas on which proposed supply chain laws would focus. The economic-focused items (supply chain costs and quality problems) have established metrics available and have been under managerial scrutiny for decades (Beamon 1999; Gunasekaran 2001; Lambert & Knemeyer 2007). Yet, environmental footprint and supplier workplace issues can be more nebulous (Ahi & Searcy 2015; Bai & Sarkis 2020).

Voluntary proactive disclosure is a precursor of sorts to regulation. Notably, respondents indicated low to modest activity in terms of proactively disclosing information on their supply chain to their stakeholders:

• General public (2.53 out of 6 on extent of disclosure)
• Investors (2.82)
• Employees (3.15)

There are exceptions to this general observation, but the sample demonstrates low proclivity at the present time – though very small firms (those with annual revenues of less than $10 million) were more likely to disclose information to stakeholders, namely the general public. Some retailers might be seeking differentiation by virtue of providing such disclosures, but the inability to trace provenance in long, convoluted supply chains makes it difficult to report disclosures confidently.

While several tools can be found in the software marketplace that can monitor media sources for news on specific companies and locales (e.g., LexisNexis, Resilinc), populating the supply network map itself remains the more fundamental problem. In other words, as we seek to ascend to higher orders of supply chain supervision – from visibility to traceability to transparency – the respondents suggest that they are lacking the tools to competently and confidently achieve traceability and report on transparency in their supply chains.

Anticipated Regulatory Impacts

Driving to a main point of our study, respondentsexpressed varied concerns around the expected impacts of supply chain transparency legislation/regulation. A ranked order of the sampled managers’ concerns is (on a scale of 0 to 6, lower to higher expected impacts): 

• Regulatory compliance costs (4.63)
• Supplier monitoring cost (4.55)
• Supply chain costs (4.30)
• Retail prices (4.16)
• Supply chain disruptions (4.11)
• Material risks (4.09)
• Public relations risks (4.05)
• Overall financial position of the company (3.51)

We note that these concerns all scored above the midpoint threshold (3.0), with several well above it. We would expect that if costs were to increase (first three items), then retail prices would also have to increase as the cost of doing business/compliance would likely be passed along to consumers in some measure, thus adding to current global inflation. Multi-fashion and department stores were particularly concerned, with their mean responses to regulatory compliance costs above 5.0 on the 6-point scale.

One expected counterbalance versus costs and risks is positive marketing/public relations impacts. However, the retail managers and executives surveyed expect only modest benefits to accrue if they were to seek transparency:

• Brand image (3.78)
• Reputation with customers (3.66)
• Strength of supply relationships (3.63)
• Customer loyalty/lifetime value (3.65)

All (mean) values are above 3.0, indicating that a meaningful impact is expected, but these effects are not as pronounced as costs and other risks above. Further, the effects could be positive or negative, depending on the nature of the disclosure.

There are other potential counterbalances versus the costs and risks associated with going “fully transparent”: the possibility that the supply chain will perform more efficiently; the firm could gain new customers; that new employees would become interested in working for the company; and/or new investors would be attracted to the business (Durand et al. 2019). However, the respondents, on average, were lukewarm to these possibilities (scored on a 0 to 6 scale, reflecting a bimodal scale with 3 as the midpoint, and “decreased” to “increased” at the poles):

• Product availability/timeliness to shelf (3.47)
• New customers trying our products (3.55)
• New talent working for us (3.55)
• New investors attracted to our business (3.42)

It is possible that the observed, modest values for anticipated impacts – namely for marketing, operational and talent/investment impacts – might be interpreted as “naysaying,” i.e., that the respondents are inherently biased against sustainability initiatives, or more simply, that the respondents do not know or understand what could be in store for them. It is also possible that they feel that they would not be singled out or more vulnerable than peers (comfort in numbers) should they not have favorable, compelling stories to tell, diminishing impact potential. 

Supply Chain Geography and Firm Size Differences

In addition to the above noted capabilities and general tendencies of surveyed retailers, it is important to examine the geographic scope over which the businesses operate. The supply networks of most retailers span many nations, each with its own nuance and challenge. China is by far the most challenging source location cited by respondents, with 90 (of the 131 firms) indicating that it was among the (top 5) most difficult locales to which to trace suppliers – with several listing it as the sole challenge. This is largely attributed to the propensity to source there. Southeast Asia (Vietnam, Cambodia, Laos) is a distant second with 30 responses, and India is third with 22 responses. Notably, Mexico received only six votes despite several supply chains running through there. All seventeen global regions listed in the survey received three or more votes, indicating that no region was free from the challenge of tracing and receiving trustworthy information.

The tariff wars of the past five years have illuminated the dependence on China as a chief supply location, yet the tariffs have proven ineffective as a reshoring initiative (Chatzky and Siripurapu 2021; Economist Intelligence Unit 2021). The U.S. trade deficit with China has only grown during this time, contributing to the inflated prices that American consumers have witnessed on so many goods. U.S. companies are not alone in terms of this dependence on China, with the United Nations Statistics Division (2022) estimating that nearly 29% of the world’s manufacturing output comes from this one nation, with the United States a distant second at 17%. Many retailers entertained a “China-Plus-One” strategy to diversify their dependence on this one locale and avoid some tariffs leveled on Chinese imports. Many companies have gone to Southeast Asia (namely, Vietnam), but the survey indicates that achieving visibility in this source market can be challenging, too.  

One might think that firm size and available resources would predict the ease or difficulty associated with visibility capabilities, but firm size is not a very significant influence on sustainability posture or perceived challenge associated with supply chain traceability regulations. Very small firms (< $10 million in annual revenue) claim to have better visibility of their supply chains overall, offer greater disclosure about their supply chain to various stakeholders, better trace products back to source, and understand environmental footprint, on average, compared to their larger peers. Of course, these are perceived relative strengths and not vetted strengths.

Distinct Sector and Format Challenges

Retail sector presents many more distinctions. Department stores and multi-fashion stores (those that sell apparel, footwear, and personal care/cosmetics) demonstrate particularly greater challenges. This is likely related to the very broad assortment and number of SKUs carried, a great many of which would be sourced internationally. These retailers admit to having considerably less supply chain visibility than their peers, disclose less about their supply chain to stakeholders, are less able to trace products back to source, and rarely measure environmental footprint. Multi-fashion retailers are decidedly challenged by the prospects of supply chain traceability regulations. They indicate that supply chain cost, ability to trace quality problems, monitoring supplier workplace safety issues, and environmental sustainability problems are perplexing. They are also well above average on every aspect of supply chain traceability law impacts (materials risk, retail prices, public relations risk, regulatory compliance costs, supplier monitoring costs, supply chain disruptions). They also feel that their overall financial position and inventory availability would be stressed by impending legislation.

Interestingly, apparel and footwear retailers, which are less diversified than multi-fashion retailers, are remarkably on par with the overall sample means on virtually all qualities. They do not demonstrate particular strengths or weaknesses associated with current or prospective traceability efforts.

Grocery stores rate better than average in most aspects of supply chain visibility and monitoring. This is probably attributed to the shorter and more domestic supply chains, as well as the intense focus directed to foodborne illnesses and the need to trace food products for recall purposes (Roth et al. 2008; Ringsberg 2014). Mega-grocery stores that sell grocery items as well as a multitude of other household goods demonstrate similar tendencies despite a larger assortment of managed SKUs. Non-grocery household goods would be largely sourced from international locations. These mega-groceries tend to be large retailers (revenues of greater than $250 million) and convey somewhat higher capabilities in supply chain visibility and managing costs, but they anticipate a somewhat lower impact of the supply chain traceability laws. This suggests that they believe that these are sound business practices and not merely compliance issues.

Electronics and appliance stores indicate better-than-average supply chain visibility and monitoring. This could be attributed to considerable scrutiny directed toward the industry over the years related to 3TG minerals (tin, tantalum, tungsten, and gold) and e-waste in the U.S. and EU (Kim & Davis 2016; Castillo et al. 2018). The high value of the merchandise also accounts for closer monitoring and proficient management of the supply chain. That said, these retailers express particular concern with impending regulations on supply chain traceability as it could imperil company reputation with customers and strain supplier relationships.

Summary of Observations

Retailers, on average, express moderate capabilities around supply chain traceability and even more modest transparency abilities. This proved true across the spectrum of retail types and sizes. Sourcing visibility was most limited with China, but there was not a region of the world that was not challenged with achieving visibility. So, even as supply chain executives entertain new locales (besides China) for sourcing, the ability to supervise immediate suppliers –and beyond — remains demanding.

Electronic and appliance retailers convey stronger capabilities, though they express considerable concerns about being held accountable for traceability and transparency requirements. Department stores and multi-fashion stores report particular challenges. This is likely related to the very broad assortment and number of SKUs, a great many of which would be sourced internationally. They admit to having considerably less supply chain visibility than their peers, disclose less about their supply chain to stakeholders, are less able to trace products back to source, and rarely measure environmental footprint.

Multi-fashion retailers are decidedly challenged by the prospects of supply chain traceability regulations. They indicated that supply chain cost, ability to trace quality problems, monitoring supplier workplace safety issues, and environmental sustainability problems are challenging. They are well above average on every aspect of supply chain traceability law impacts. They also feel that their overall financial position and inventory availability would be challenged by virtue of impending legislation.

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So, Where’s the Business Case?

Companies all along the supply chain have upped their games recently to achieve greater operational visibility in their supply chains – to see inventory and order statuses, and to support higher levels of customer service (Kalaiarasan et al. 2022). The ROI has become very favorable for these investments, especially in contexts where customers demand real-time order status information (Sharma et al. 2022). Fortunately, the cost, difficulty, and time of implementation for supply chain visibility tools are becoming more reasonable. The advent of cloud-based systems coupled with application programming interface (API) technology has proven game-changing for making the case for these investments. Whereas it once took suppliers several months to fully join an electronic data interchange (EDI) network, APIs can avail many of the same benefits in minutes. When coupled with cloud-based systems, visibility can be achieved and shared readily, and at relatively low costs for small and large companies, alike (Ivanov et al. 2022). This helps to explain the rampant adoption of supply chain visibility tools in recent years (Goldsby et al. 2023).

Unfortunately, though, the capability to link operationally with immediate suppliers, carriers, and customers does not lend itself directly to higher levels of visibility in the broader supply chain, and traceability and transparency render even more strained ROI values than visibility. In the case of traceability, the benefits are primarily found in terms of responding to the worst-case scenario of product recalls and identifying where particular vulnerabilities leading to them reside in the supply chain (Wowak & Boone 2015). Though recall instances are quite rare, the cost and reputational risks of slow/inadequate response to a recall can be enormous – even, insurmountable – for the ill prepared (Zhang et al. 2019).

Creating traceability “back to source” is perhaps the most challenging endeavor. A change in a single supplier or service provider at the third tier, for example, may happen abruptly and without notice, and is virtually invisible to the focal company. Such a move is almost certain to instantaneously bring with it an entirely new supplier network, while dropping another branch of the tree. For these reasons, supply chains are thought of by researchers as “open systems,” much like those found in the natural sciences, with members constantly arriving, moving, changing, and departing (Hosseini 2020; Ivanov & Dolgui 2020). Due to both social and physical distances, this makes any snapshot of the firm’s end-to-end supply chain dubious to rely on for strategic decision making by organizational leaders and a strenuous “sell” for business advancement. That said, running an expectancy-value calculation on costs and benefits can still warrant considering traceability efforts for goods that carry high recall potential and severity, despite the fact that basic supply chain configurations are anything but static.

Going the final extra mile to transparency can further strain the ROI calculation. While an exclusive subset of the global consumer population places supply chain integrity as a key factor in the choice of the products and services they buy, this segment resides mostly in Europe and remains only a small subset of the U.S. consumer market. Consumers in Scandinavia, for instance, are more renowned for exercising pro-social and -environmental preferences, having pushed companies and governments there to enact transparency provisions. In the USA, this phenomenon has been much more limited to date, with only limited provisions found in legislation such as the California Transparency in Supply Chains Act of 2012 and the conflict minerals disclosure provision in the 2010 Dodd-Frank Act. While these provisions have resulted in a few high-profile disclosures (e.g., that of Apple in 2017 related to its recognition of Congolese cobalt purchased through a Chinese intermediary), the choice of regulated supervision over voluntary programs and NGO oversight efforts is hard yet to justify from either financial or sustainability perspectives.

It is for these reasons that the recent movement toward the legislation of supply chain transparency by several US states raises our eyebrows. Pending and proposed legislation in states such as California, Massachusetts, New York, and Washington, as well as incremental proposals from a few EU nations, seeks to hold manufacturers and retailers operating there liable for sustainability failures at distant supply chain tiers, where no direct ownership, control, or formal relationships even exist. In theory, the idea of mandating supply chain sustainability is a noble one – ostensibly, the best way to curb environmental or social concerns or violations in the production and logistics process is to hold accountable those actors nearest the end of the supply chain. This notion is well intentioned. Yet, in practice, due to the complexities described above and our survey results of current capabilities, our perspective on such approaches ranges from merely ambitious to being somewhat tone-deaf to nearly impossible to achieve. How, after all, can a retailer in Tacoma or Poughkeepsie really know what’s going on at a one-person, tier-5 supplier to a Chinese silk factory? Or to a Vietnamese wafer plant? Even if the retailer could know that violations are occurring there, would the data reflecting this be relevant for more than just a few weeks, at most? The membership of a given product’s supply chain is both constantly changing and, for all practical purposes, unobservable. These questions and many related to them seemed important enough to us as to warrant further study. Waves of looming legislation have been publicized in the business press anecdotally, but when we have held discussions with retail managers and executives, only a fuzzy awareness of the details or potential impacts was articulated.

Retailers should not discount the idea that a more self-enforcement focused approach to supply chain transparency may be preferable for all involved (Wiengarten et al. 2013; Distelhorstj et al. 2017; Um & Kim 2019). Such methods have proven quite effective in the recent past, especially considering that NGOs are keeping their eyes on business practices near and far (Chen et al. 2019). As a case in point, Nike was taken to task both prior to and during the pandemic due to concerns related to child labor within their contract manufacturing network. In response, the company initiated a social responsibility reporting system that openly lists their 498 contract manufacturing sites across 38 countries – right down to the street address for each location – alongside the number of employees on-site, and their representation by gender and migration status. While the company itself has committed to stepping up enforcement of unacceptable business practices, outsiders are not discouraged from conducting their own due diligence.

In addition to these sorts of risk mitigation within the supply chain network, some companies continue to gain market advantages through their transparency efforts. Patagonia, the manufacturer and retailer of outdoor adventure gear, is renowned for integrating its sustainability posture with its products and business practices. Through efforts to achieve 100% responsible sourcing and disclosing the percentage of apparel assembly workers who are paid a living wage (39%, at present), Patagonia has carefully crafted an image that blends these integrity efforts directly into their brand. The opportunity to enhance a business reputation through positive imagery remains a target for many (Wolf 2014; Govindan et al. 2020; Vesal et al. 2021). However, the tenuous business case for transparency remains elusive.

As we have witnessed with operational visibility, technology has changed the cost-benefit equation considerably, and the same could be true for traceability and transparency over time. Supply chain networks are anything but static, but blockchain technology presents an opportunity to provide a dynamic ledger of the parties involved in business-to-business commerce (Gaur & Gaiha 2020). This technology is garnering considerable interest for its potential to enhance and assure traceability throughout a chain of companies (Hastig & Sodhi 2020; Kamble et al. 2020; Centobelli et al. 2022). Yet the blockchain proposition is challenged for transparency when firms seek to know not only the who and the where of supply chain activity, but also what policies and procedures are employed (Amling et al. 2021). Transparency would call for more active monitoring than blockchain can currently provide. Higher-order technologies would be called for to address this need. Until then, there is no substitute for boots-on-the-ground supervision, but simply knowing whom to monitor is gets companies off to a running start.

The survey we have undertaken gives businesses and those of us who study them much food for thought in terms of what steps to take next. The managers and executives we interacted with see value in achieving greater insights into real-time supply chain activities and decision making, given the distant nature of the global chain. Though some governmental actors may soon seek to mandate traceability and transparency, industry reports underscore that manufacturers and retailers are ill equipped to meet impending mandates (Chua 2021; Paton 2022; Kent 2023). Another approach to be taken in advanced economies may be some combination of NGO-based “soft enforcement” and technological solutions that at least approximate visibility in real-time. By leveraging these ideas, modern retailers can achieve the goals of being excellent corporate and global citizens, providing sound economic value to customers as well as other stakeholders, and ensuring greater sustainability of their products, services, and partners.

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