Unlocking transparency: The promise of the UN Transparency Protocol for global trade

Written by Steve Capell, UN/CEFACT Vice Chair, Article No. 116, [UNCTAD Transport and Trade Facilitation Newsletter N°101 - First Quarter 2024]

Global trade is a complex tapestry of supply chains weaving through nations and continents. The concept of a single, centralized source supporting digital product credentials or a ubiquitous platform that all organizations adopt is idealistic and rather impossible. However, it is possible to establish standards and protocols for global trade transparency that will work regardless of platform, technology maturity, and technology stack. Furthermore, it is possible to make this approach scalable and cost-effective, by leveraging investments and systems already in place.

This is the promise and potential of the UN Economic Commission for Europe (UNECE) Policy Recommendation No. 49, slated for discussion at the UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT) Plenary in July 2024. UNECE Recommendation No.49 “Transparency at Scale” will serve as a framework for globally scalable supply chain transparency that supports any Environmental, Social, and Governance (ESG) criteria required for a product by either an ESG standard or a regulation.

This Policy Recommendation is aimed to contribute to accelerating progress on the UN 2030 Agenda, particularly Sustainable Development Goals 8 on inclusive and sustainable economic growth, 12 on responsible consumption and production, and 17 on partnership for the goals. 

Why transparency at scale?

Simply put, both for the good of the planet and society at large, as well as to support and reward ESG-focused trade practices, unsustainable practices should be phased out. There must be commercial value alongside societal value to effectively incentivize sustainable manufacturing, product development, and supply chain practices.

The alternative is a world where greenwashing[1] becomes ubiquitous and virtually undetectable. It is too easy to fake claims as it is, and consumer confidence is already too low. In this scenario, even well intentioned businesses will be incentivized to fake ESG claims to survive. This lack of consumer confidence means that the market does not support price differentials.

Consumers expect organizations to do better

Consumer, investor, employee, regulatory and market expectations are evolving rapidly, with an increasing emphasis on ESG practices. Ultimately, commercial value relies on consumer trust and behaviour.

According to recent Nielsen research, 81% of global respondents strongly believe that companies should contribute to environmental improvement. This sentiment is particularly pronounced in emerging markets, where environmental challenges are often more pressing.

Consumer trust is closely tied to sustainable practices. One-third of consumers are already willing to switch from their preferred brands if they lose trust in them, with a similar proportion having already abandoned long time favourites due to trust issues (IBM). Consumers are actively seeking transparent, sustainable brands aligned with their values, even if it means paying a premium or changing their purchasing habits.

This demand could support price premiums for sustainable practices, but an obstacle to that is a growing concern about greenwashing. Over 50% of consumers across 33 markets believe that brands are guilty of greenwashing (Kantar).

To thrive in today's consumer-centric landscape, organizations must prioritize transparency, authenticity, and genuine commitment to environmental stewardship. But how do they prove it with consistency, across markets, in different regulatory environments and despite differences in technology maturity, solutions, language and more?

UN Transparency Protocol designed to make transparency scalable

The UN Transparency Protocol (UNTP) - introduced through UNECE Recommendation No. 49 - is designed to foster transparency and trust in global trade. Developed in response to the pressing need for standardized data exchange mechanisms, the UNTP promises to establish a means by which to share critical information across supply chains.

The Protocol leverages digital product passports, product identifiers, industry body documentation and accreditation information. It provides a decentralized architecture approach with no requirement for a centralized data repository.

Though it leverages modern standards (verifiable credential and distributed identifiers), the UNTP provides a way to effectively share that data in a manner that is understandable and consumable irrespective of the technical maturity of the recipient. Whether the checking of such credentials involves a manual process of simply scanning the barcode, a human experience of clicking through evidence, or a machine following the same evidence, all will work equally well.

By providing standardized protocols and guidelines, the UNTP aims to combat greenwashing and ensure that businesses that adhere to rigorous ESG standards can effectively communicate these credentials. In doing so, it seeks to restore consumer confidence and foster a race to the top, where businesses are rewarded for their genuine commitment to sustainability. In this scenario, claims are difficult to fake, and businesses can compete on the quality of their claims, justifying higher prices where warranted.

Overcoming obstacles to transparency at scale

The UNTP also aims to address challenges such as:

• Myriad Software Options – The UNTP is a standard protocol with a decentralized, open-source and tech-agnostic approach, not a platform. It assumes that supply chain data remains with each natural owner and allows them to use their existing natural business systems without any dependency on the software choices of their customers or suppliers.
• Mountain of ESG Standards and Regulations – It is particularly challenging for supply chain actors that sell to multiple export markets to know which criteria matter and how to demonstrate compliance. There is a risk that too much of the available ESG incentive is spent on demonstrating compliance and too little is left for implementing more sustainable practices. The UNTP does not add to the complexity by defining more ESG standards. It seeks to minimize cost of compliance by making it simpler to test on-site ESG processes and data against multiple ESG criteria. It is about implementing a sustainable practice once and then re-using it to satisfy multiple overlapping criteria.
• Expectation of Data Privacy and Protection - Verifiable transparency is the best greenwashing countermeasure. However, increased supply chain transparency for ESG purposes also risks exposure of commercially sensitive information, which disincentivizes organizations to focus on data privacy and protection. Rather than dictate what must be shared and what should not, the UNTP includes a suite of confidentiality measures that allow every supply chain actor to choose their own balance between confidentiality and transparency. The basic principle is that actors should be empowered to share only what delivers value.
   

The viability of UNECE Recommendation No. 49 on transparency of scale using UNTP

The UNTP provides detailed implementation guidance to be embodied in the UNECE Recommendation No. 49. It comprises of a UN standard digital product passport as a carrier of sustainability claims, a digital conformity credential to improve trust on the claims, and a traceability event structure that allows end to end value chain traceability.

The UNTP represents a bold step forward in the journey towards a more transparent, equitable, and sustainable global economy. To do so, it must address the above challenges and more – and it does.

There are other compelling reasons why it will work, such as:

• Builds on Existing Standards and Investments - Rather than reinventing the wheel, the protocol builds upon existing standards and frameworks. The World Wide Web consortium (W3C) has developed standards called Verifiable Credentials and Decentralized Identifiers, which are the technologies underpinning the necessary Digital Passport, conformity credentials and traceability events leveraged by the UNTP. Other technologies leveraged by the UNTP, such as link resolvers, are also open-source and based on existing ISO standards.

GS1 is the company behind most barcodes on every product on the supermarket shelves and has defined digital link protocols to discover information, given a product identifier. UNTP is designed to be compatible with organizations’ existing GS1 infrastructure including the use of barcodes and other means of product identification based on GS1 standards, the most widely used system of standards for product identification in the world. UNTP, however, is not confined only to GS1 standards and is extendable to other product identifier infrastructures. The UNTP will provide the cross-border upstream data to support existing regulatory passports and those in development. It will also provide the interoperable cross-industry core to support industry-specific digital passports.

• Accessibility and Scalability - The most ground-breaking aspect of the UNTP is its scalability. Unlike traditional approaches to transparency, which often require complex and costly IT systems, the UNTP is designed to be accessible to businesses of all sizes and technical capabilities. Whether it is a small scale farmer or a multinational corporation, the UNTP provides a framework that can be implemented with minimal barriers to entry. This democratization of transparency levels the playing field for businesses to participate in the global economy.
   

UNTP test pilots underway

Introducing the UNTP, the UNECE Recommendation No. 49 is scheduled for release in 2025. In the meantime, UNTP test pilots are being implemented around the world. You are invited to monitor the progress of this Recommendation and Protocol and to identify additional pilot projects. There is a team ready to provide support, guidance, and tools.

Here are some ways you can connect, monitor progress, learn more about the UNTP and how to get involved:

• UN Recommendation 49 Overview (Watch via YouTube)
• UN Transparency Protocol (UNTP)
   

[1] https://en.wikipedia.org/wiki/Greenwashing