“We’ve built compliance systems that look good on paper, but fail to touch the ground. That’s not progress. That’s performance.”
— Joseph Stiglitz
From cobalt to cocoa, governments and corporations now tout traceability and due diligence as the gold standard for cleaning up global supply chains. Labels proliferate. Dashboards light up. Algorithms buzz. Yet beneath this veneer of control, the reality is far more chaotic—and far more unjust.
Smallholder farmers, artisanal miners, and local intermediaries still operate in fragmented systems, often with little understanding of or access to the very platforms that claim to certify their practices. Traceability schemes may satisfy Northern regulators and corporate ESG reports, but on the ground, they often fail to prevent exploitation, ensure sustainability, or build local capacity.
The uncomfortable truth is this: we’ve outsourced governance to spreadsheets, assuming that technological oversight and voluntary disclosure can substitute for real regulatory power. The result is a patchwork of programs that too often deliver the illusion of progress rather than the substance of reform.
What the Research Shows
A 2023 study by Hurt, Schoen, and Liesen (published in Global Policy) uses a network approach to model the potential effectiveness of the EU’s proposed supply chain due diligence directive. The researchers analyze the structural dependencies between firms and suppliers, finding that a small number of actors control a disproportionate share of trade flows—and that most due diligence regulations fail to account for this network centrality.
More troublingly, they argue that many schemes apply a one-size-fits-all model to a highly heterogeneous set of suppliers. This misalignment leads to perverse outcomes: large firms offload compliance to upstream actors who are ill-equipped to meet the standards, while smaller firms are excluded from formal markets altogether.
The takeaway? Without systemic transparency and shared accountability, due diligence becomes little more than a branding exercise. Firms may disclose risks, but few are structurally incentivized—or legally compelled—to correct them.
A Reality Check in the Commodity Sector
Nowhere is this disconnect more apparent than in global commodity markets. Consider the EU Deforestation Regulation (EUDR), which mandates geolocation data for commodity-linked deforestation risk. In theory, this is a breakthrough—linking satellite monitoring with sourcing requirements to prevent illegal forest loss. In practice, it risks excluding millions of smallholders who lack the tools, documentation, or land titles to comply.
In the gold sector, conflict mineral traceability programs like the International Conference on the Great Lakes Region (ICGLR) tagging system have achieved mixed results. While traceable “green” channels exist, large volumes continue to move through parallel informal networks—undocumented, untaxed, and unchecked. Worse, the existence of a certified stream can provide cover for laundering illicit minerals under the guise of compliance.
These programs too often assume that the threat lies in non-compliance, when the real issue is structural: a governance vacuum where weak institutions, market asymmetries, and limited state capacity conspire to make traceability deeply uneven and easily gamed.
Toward an Inclusive, Effective Reform Agenda
If we are serious about improving supply chain governance, we need to move beyond the checkbox mentality of due diligence. Based on the research and real-world case studies, three reforms stand out:
- Regulate Network Centrality: Focus not just on broad sectoral standards, but on the nodes of power within supply chains. Large firms that control trade flows must bear proportionate responsibility—and be subject to binding, enforceable rules with penalties for noncompliance.
- Fund Capacity at the Base: Don’t just mandate data; invest in the infrastructure, training, and technology that small producers need to participate. This means public financing for mobile mapping, farmer registries, and inclusive platforms—not just procurement pressure.
- Mandate Collective Transparency: Traceability must be collective, not siloed. Instead of proprietary, duplicative systems, we need interoperable databases, shared reporting standards, and public oversight. Transparency should serve the public good—not corporate branding.
For due diligence to deliver justice, it must be grounded in equity, enforceability, and transparency. It must be shaped by those most affected—not just the boardrooms or Brussels. Anything less is not just ineffective—it is unethical.
Reference
Hurt, R., Schoen, V., & Liesen, A. (2023). Supply Chain Due Diligence Risk Assessment for the EU: A Network Approach to estimate expected effectiveness of the planned EU directive. Global Policy, 14(3), 435–446. https://doi.org/10.1111/1758-5899.13210