Ensure Supply Chain Transparency & IP Safety

When it comes to supply chain transparency – true transparency throughout your supply chain – there is one component that you always need to have for success. That component is communication: the business practice of sharing information openly about how products are made, what chemicals are in them, and where the material components come from. Communication is a “team sport” because it encompasses information about your products at large and the chemicals within them in a sufficient amount of detail.

In many ways, product transparency throughout the supply chain includes chemical transparency. This may include factors such as what chemicals go into products-from the raw material sourcing to the plethora of chemicals introduced up and down the supply chain. This data is important to maintain not only for purposes of regulatory compliance and retaining consumer goodwill, but also for risk mitigation and intellectual property protection.

Understanding Supply Chain Transparency

Chemical transparency involves keeping track of changes – within a product composition, when new regulations emerge, or when existing regulations are updated. Any time that a regulation covers one or more chemical in a product, companies must check requirements and see if their products have been impacted.

One example is the relatively recent reporting requirements that cover Per- and polyfluoroalkyl substances (PFAS). Given both reporting requirements and bans in different jurisdictions, companies must now strip their products of certain PFAS in order to be compliant with PFAS regulations and find suitable and safer alternatives as they adapt to changing regulatory landscapes while maintaining transparency.

Hint: When it comes to PFAS, it is important to stay abreast of regulatory news. Horizon scanning is a proactive way to get ahead of the “next big thing” and companies can receive both regulatory news and expert insights with 3E).

The Role of Communication in Supply Chain Management

As mentioned above, communication is the biggest asset to transparency. In this context, communication means collaboration with suppliers in a way that requires all parties to be open about what chemical formulations are in use and how they are being used.

This generally brings up a concern regarding intellectual property (IP). A company and its suppliers may be torn between being open because of the fear of giving away trade secrets and empowering competitors. However, there are ways to overcome these concerns.

Chemical Transparency: Essential for Compliance

First, if a company is looking to receive information from suppliers, then it should explain why the information is important, how data will be used, and how data points will be obscured.

Hint: Instead of using exact numbers, suppliers can provide “ranges” or “percents of formulation.” The important facts to pinpoint relate to whether a chemical amount falls under the reporting threshold or over it.

Safety Data Sheets (SDS) are also part of this puzzle. Having the inventory of SDS pertaining to each chemical in your product is not only required in some jurisdictions; it is valuable for communication purposes and helps to boost transparency as part of the industry standard.

Best Practices for Transparency and IP Protection

There are a few best practices that can assist in creating a culture of transparency. Using the format “who,” “what,” “where,” “when,” and “why” is helpful.

• The “why” – identify why information is important. This may include staying compliant with regulatory requirements, meeting supplier requests, and/or contributing to the circular economy (particularly in jurisdictions like the European Union where new Directives embrace this concept). Utilize a compliance management software to streamline regulatory news updates.
• The “who” – Map the supply chain so that all parties are identified, including subcontractors and their practices.
• The “what” – Identify a baseline of materials used in a product and go from there.
• The “where” – Develop a system for collecting data from suppliers. Leverage a supply chain risk management software to automate your system.
• The “when” – Report and disclose (Conflict Minerals, California Prop. 65, Sustainability Reporting, Digital Product Passports (DPPs), TSCA 8(a)(7))

Make this an iterative process. These best practices are neither the start, nor the end. Answering the individual 5 “W” questions may arise continually or periodically.

Overcoming Transparency Challenges

There are a number of ways to protect your IP while also being transparent. One way is to use a technology platform with top notch security settings. Instead of Excel spreadsheets, which can be easily breached and have limited security settings, a technology platform (like 3E Exchange), can help in the following ways:

• A platform should allow companies to control data sharing settings for users, ensuring data is shared with trusted parties.
• A platform should encrypt data at rest and in transit. This is an important distinction from encryption in a single stage, which can result in security vulnerabilities as data is leveraged across platforms and formats.
• A platform should include multi-factor authentication and offer SSO functionality. This prevents unauthorized access to information.
• CAS numbers should be able to be hidden when necessary. Companies may not want to identify chemicals by CAS number. There are ways to provide information that simply allows users to assess whether the chemicals are regulated and what thresholds apply.
• A platform should have SOC 2 Certification, proving third-party verification of adherence with data security principles
• A platform should offer a flexible, expandable vehicle for product data sharing, like 3E Digital Product Passports, which are easily shareable, saving time in responding to data requests, from consumers and regulatory agencies alike.
• Product data, like that shown in Digital Product Passports, should be updated automatically upon an accepted response from a supplier, and should allow for flexible permissions (restricted to specific parties, unlisted but recorded for internal use only, or fully public for reporting and transparency purposes)

Leveraging Technology for Data Security

Transparency in supply chains and the protection of IP are not incompatible. Ensuring that companies are sustainable across an entire supply chain requires open communication, coordination, as well as peace of mind. Transparency, when paired with best practices can allow for a more compliant and sustainable process when creating or adjusting products and, when implemented effectively, risk averse companies can maintain IP protection and achieve transparency goals at the same time.

To find out how our customers use 3E Exchange for transparency, see our recent webinar: Product Transparency & Intellectual Property Protection

Ready to see 3E Exchange in action? Request a consultation with our team of experts.