Worldwide industrial facilities are part of complex global value chains. They may occasionally involve illegal subcontracting and unregistered informal labor. It is challenging to obtain precise information about the nature and locations of environmental and socioeconomic impacts due to their complexity and opacity. Consumers and businesses must first be aware of the nature and scope of these risks and have the resources to measure, mitigate, and prevent them if we are to expand our capacity to manage value chains more sustainably and make the transition to a low-carbon and more circular economy. Therefore, it has become crucial to increase the traceability and transparency of value chains' environmental, social, and governance (ESG) factors.
A Team of Specialists (ToS) has been formed by United Nations Economic Commission for Europe (UNECE) to enhance ESG monitoring and reporting in value chains to help satisfy these objectives. It will aid initiatives to encourage radical transformation in important industries to shift to a circular economy. With over 100 participants from UNECE member states, international organizations, the private sector, and academic institutions, the Second Session of the ToS on Environmental, Social, and Governance (ESG) Traceability of Sustainable Value Chains in the Circular Economy was held on October 6, 2022. How can businesses manage their value chains more sustainably in the real world? Through ESG traceability, the ToS seeks to go from strategy to action by assisting in making better and more knowledgeable decisions for sustainable production and consumption.
To hasten the transition to the circular economy, the ToS also aims to inform the creation of enabling frameworks and scale up effective methods and solutions. This Second Session examined the legal frameworks, incentives, business behavior, and the role of modern technology for ESG monitoring and compliance along supply chains, building on the conclusions of its First Session from the previous year. The ToS addressed approaches for advancing ESG performance. They explored vulnerabilities in existing practices while introducing the best strategies to improve product traceability and sustainability globally. The ToS constitutes of experts with various experiences in implementation and collaboration with governments, international organizations, and the private sector.
UNECE Executive Secretary Ms. Olga Algayerova stated that "Transitioning to a circular economy demands the intervention of important actors at different levels." This expert team is uniquely positioned to encourage stakeholder cooperation and close major gaps in ESG indicators, techniques, and standards. For its 70th Commission session in April 2023, the UNECE is finalizing a policy brief on traceability. Through the lens of their interconnectedness across crucial sectors like apparel and footwear, agri-food, transportation and logistics, and essential raw materials, the report provides an overview of traceability and circularity initiatives in the UNECE region.
In the policy brief, UNECE suggests that governments explore enabling policy choices using a three-pillar structure:
Identify the strategic directions for the circular transition by analyzing the chosen industries’ market environment and market forces.
Circular activities and cross-sectoral connectivity: enact targeted policy measures based on a roadmap for the circular economy while also setting up a strong and efficient system of incentives, notably for SMEs.
Enhance the enabling environment for the circular transition through policy alternatives as we go from traceability to circularity.
Furthermore, the ToS chose to focus on the following action points for the next steps:
The completion of the mapping and analysis of frameworks and initiatives for policy and regulation, as well as any remaining gaps for ESG traceability.
The components of a protocol to encourage ESG reporting and monitoring in value chains across many priority industries.
The creation of guidelines and tools designed explicitly for MSMEs.
The ToS will be able to expand on the instruments already created by the UNECE and its affiliated intergovernmental entity, the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT). This extensive collection of useful tools, which includes norms, standards, and policy guidelines, can act as the foundation for action in crucial industries like agri-food, apparel and footwear, fishery, and transportation.