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Pandemic highlights need for new supply chain technologies

Aug 4, 2020 | FLEGT Market News

The Covid-19 pandemic has highlighted the value of new supply chain sustainability auditing technologies and could trigger their accelerated uptake for commodities including timber. That’s the conclusion of journal articles from academics Cory Searcy of Ryerson University in Canada and Pavel Castka of the University of Canterbury in New Zealand. They say the pandemic has prompted a global rethink of supply chain business models. That includes in respect of sustainability certification and verification auditing. And the latter, they told IMM, potentially includes auditing under FLEGT VPA countries’ timber legality assurance systems.

“Most audits have traditionally been on-site and heavily reliant on direct inspections and observations by auditors,” said the academics in a London School of Economics blog on their reports. “COVID-19, however, has severely limited completion of on-site audits.” Their previous research, they added, has focused on how ‘technology enhanced auditing’ (TEA) can fill the ‘cracks in the foundation of supply chain risk management’. TEA, they explain, can include such technologies as chemical fingerprinting, blockchain transaction tracking and advanced machine learning. These are already in use in the forest and timber sector, with Global Forest Watch, for instance, using satellite imaging, cloud computing and social media to monitor deforestation. Mr Searcy and Mr Castka maintain they can also be used to support auditing for certification to ‘voluntary sustainability standards (VSS)’, such as those of the FSC and PEFC.

“In fact, FSC has been exploring use of satellite analysis and blockchain,” they write, pointing out that the FSC has also published a report on its website on its aims to develop ‘digital options’ in its certification system to ‘increase the credibility and lower the cost’ . The report authors’ belief that the pandemic had potential to increase VSS certification bodies’ use of auditing technology long term was reinforced by a study of 21 of them during the crisis.  

“We found substantial uptake of remote auditing practices among them. This included use of information and communication technologies (ICTs) to gather data, interview auditees and so on when face-to-face methods are not possible or desired,” they said. “

There were caveats to certification bodies’ use of remote auditing, however. It tended to be restricted to certain audit types, and users demanded enhanced provisions for data security. Most bodies consulted also assumed its exclusive use would be temporary.

This caution, say Mr Searcy and Mr Castka, underlines a need for suppliers and users of TEA systems to answer remaining questions about their use. These include finding the right balance of traditional auditing and TEA techniques, how to develop the necessary auditor competencies and meet the cost of new technologies. 

But TEA, maintain the authors, can increase audit veracity and timeliness of data collection and analysis. “More use of blockchain, for example, could improve product provenance tracking, while big data applications could assist in identifying patterns and making predictions,” they state.

Talking to IMM, Mr Castka said there were ‘a lot of parallels between FLEGT VPAs timber legality assurance systems and other voluntary systems’ discussed in his and Mr Cearcy’s    papers.  “Looking for instance at VPAs focus on good [forest and supply chain] governance, matters around transparency and accountability can all be improved with the uptake of technology enhanced auditing technologies, such as block chain, satellite imaging or DNA testing,” he said. “The overlap and applicability of the arguments from our work is clearly there for the FLEGT VPA initiative.” 

The pandemic, Mr Castka and Mr Searcy maintain , has clearly highlighted vulnerabilities in existing global supply chain systems and controls and that heavy reliance on on-site supplier auditing is ‘untenable’ in the event of such a crisis. 

“Technology can be used to mitigate risks of limited or no on-site auditing – and remote auditing is just a start,” they say. “There’s also a need to embrace TEA to ensure continuity and credibility of supplier certifications. More broadly, technological advances need to be embedded in quality infrastructure and conformity assessment across the globe.”

 Mr Castka and Mr Searcy’s full reports are titled Technology-enhanced auditing in voluntary sustainability standards: The impact of COVID-19 and Technology-enhanced auditing: Improving veracity and timeliness in social and environmental audits of supply chains.