Why Supply Chain Mapping Has Become a Strategic Imperative for Forced Labor Due Diligence

Mapping end-to-end supplier networks has become much more than an occasional tactical exercise. The need to comply with punitive environmental, social, and governance (ESG) regulations and to frequently retune supply chains in a volatile business environment has elevated supply chain mapping to a strategic level. 

Many leading companies recognize this and have embedded the technology in their supply chain strategies. Companies that fail to move in this direction will fall further behind as the number of applications grows and advances in mapping technology make the process more accessible. 

Mapping a route to compliance

Supply chain mapping, or supplier discovery, is a business process pioneered by companies like Sourcemap. The process comprehensively maps a company’s direct and indirect suppliers, primary sites, shipping lanes, and transactions. 

This detailed view of a business’s connective tissue can be used in various ways to increase operational efficiency and profitability. It also provides data companies need to meet their ESG commitments – obligations growing in strategic importance as corporate leadership teams pay more attention to ESG demands. 

For example, in 2020, watch manufacturer Breitling launched a project “to invest in understanding and recreating our value chains,” says the company’s Global Head of Sustainability, Aurelia Figueroa. Areas of focus include Breitling’s social and environmental impacts, the traceability of its supply chain, product quality, “and being able to attest to the providence of materials in our products,” she explains. 

Supply chain mapping is a vital source of the data Breitling uses to achieve these goals. 

Making its supply chain more visible is another objective the manufacturer is pursuing. Over the last two years, it has worked with Sourcemap to create and implement two public transparency maps. Today, anyone can access a map “where all suppliers of the raw materials and processors along the value chain are declared for all products within the origins label,” she says.

Forced labor regs a harbinger

Breitling is an example of a company that proactively uses supply chain mapping to address ESG challenges. More companies must adopt a similar strategy to remain competitive in an increasingly stringent regulatory environment. Non-compliance costs and associated reputational risks are increasing as ESG regulations increase in number and scope. 

Consider, for example, the US Forced Labor law implemented in 2022 to combat the use of forced labor in products imported into the United States. Professional services firm BDO estimates that up to September 2023, some $2 billion worth of goods were withheld by US customs under the law. Polysilicon, cotton, and earth minerals used in various products are subject to strict enforcement now and in the future, according to BDO. 

Significantly, the US Forced Labor legislation has upped the compliance stakes for companies. If the US Customs & Border Protection agency believes a company has used forced labor in its supply chain, the enterprise must prove otherwise. In other words, there is a legal presumption that the enterprise is out of compliance. This is a significant change in emphasis. 

But the enforcement challenge does not stop there. The law applies to lower-tier as well as tier-one suppliers and not only to finished goods. Moreover, if targeted supply chains encompass suppliers in countries other than China, these fall within the compliance net. For instance, some U.S. importers have suffered US Forced Labor-related penalties for goods shipped from Vietnam because the supply chain included Vietnamese suppliers. 

“This whole idea that you need to know everything and have control over everything from dirt to shirt can be overwhelming,” says Nate Herman, SVP Policy at the American Apparel and Footwear Association. The challenge can be daunting in his industry because companies invariably rely on external contractors to manufacture and supply products. Sometimes, an importing company in the U.S. might not even know its tier-one supplier because it conducts business through agents. 

Another consideration is that the US Forced Labor law is relatively new, so government agencies and importers still find their feet in this regulatory environment. This has led to anomalies and contradictions that complicate the compliance task. 

Regulatory challenges like these have moved the status of supply chain mapping from an optional tactical tool to an essential one. Leonardo Bonanni, Founder and CEO of Sourcemap, points out that when navigating ESG regulations like the US Forced Labor law, “everybody now needs to map their supply chain – that is a done deal.”

Other regulatory challenges

The US Forced Labor law’s requirements indicate a general shift towards ESG regulations that are stricter and wider in scope. 

In April 2023, the European Union parliament adopted the Deforestation Regulation (EUDR), which requires precise geolocation of producing farms and imposes non-compliance penalties that can include 4% of a company’s annual turnover in an EU member state. The EUDR’s mandates cover various products, including cocoa, coffee, palm oil, soya, cattle, rubber, timber, and products derived from these materials. 

More ESG-related regulations are expected over the next few years – and not only from national governments. For example, new climate disclosure laws recently passed in California come into force in 2026 and aim to make companies accountable for climate reporting. 

This proliferation of codes creates many different regulatory frameworks, “and the biggest problem with that is the rules are all different,” says Herman. “There is a lack of harmonization between the various frameworks.”

The efficiency premium

However, the need to overcome regulatory hurdles is not the only reason mapping is fast becoming a key component of supply chain strategy. Supply chain mapping improves risk management and can boost the efficiency of business operations.

The management and mitigation of risk have become a leading priority for many companies as market uncertainty has increased. Precise maps of operational footprints help companies pinpoint high-risk areas, such as suppliers vulnerable to specific failures, and develop strategies for dealing with disruptions. Such information also helps enterprises analyze supply chain performance and make necessary changes. 

For example, supply chain network redesign is gaining importance as companies are forced to adjust their supply chains more frequently in response to disruptive forces. These can be large-scale changes, such as military conflicts and geopolitical tensions, or shifts in the competitive landscape caused by an acquisition or shifting consumer demand.

Developments like these often require a company to revisit and reconfigure its supply chain network structure, and various advanced modeling techniques are available to help them do this. Supply chain mapping data can be a valuable input to these models.

Mapping also yields opportunities to improve operational efficiency on a day-to-day basis. A detailed knowledge of supply networks enables companies to eliminate inefficiencies, enhance product quality, and evaluate suppliers' performance. 

Vendors benefit as well. An example is when a large corporate buyer of food crops provides specific information on individual plot yields related to factors such as weather patterns and fertilizer usage. The information helps smallholders streamline their growing operations, increase profitability, and negotiate better crop prices. 

No time to waste

While mapping complex supply chains with sub-tier granularity may seem intimidating, the good news is that the task is becoming more manageable.

Collecting data from multiple suppliers is easing as companies like Sourcemap automate the process. Keeping tabs on supplier networks is less burdensome, too. Sourcemap offers real-time, AI-powered Supplier Watchlist Monitoring and newsfeed services to ensure suppliers comply. 

Also, companies can now focus their mapping resources on high-priority areas. “In the last year-and-a-half, we have come up with ways to significantly streamline the amount of data that companies have to collect in a way that they can find where the gaps might be,” says Bonanni. Boiling the ocean is neither advisable nor necessary. 

However, the need to start mapping is urgent, and the urgency will only increase in the face of increasing regulatory and market pressures. Laggard organizations will remain in catch-up mode, and the gap between them and mapping adopters will widen. 

For a growing number of businesses, mapping supplier networks in fine detail is now a competitive necessity – not just a tactical option.