How can traceability improve sustainability in the global coffee supply chain?

Food supply chains garner public attention for sustainability; traceability is one of the possible solutions, but is it always the case?

Verónica León-Bravo, Assistant Professor, School of Management, Politecnico di Milano


Sustainability in the food industry has recently gained a great deal of attention, as this sector faces several challenges regarding scarce natural resources to be preserved, attention to consumer’s health and safety, communities’ economic development around the world, food and packaging waste, land and water consumption, and unfair trade relationships. Moreover, consumers today opt for food that is not only tasty and nutritious, but also of high quality, grown responsibly and with specific characteristics or origin, which in turn calls for better and more efficient traceability. Consequently, food companies are developing varied initiatives, assessment policies, standards, traceability systems and reporting tools with sustainability purposes.

During the current health world emergency, food chains are also struggling with menaces on their products’ health and safety. As is the case of a few Brazilian poultry exporters who were suspended by China in July 2020 due to concerns about possible Covid-19 contamination in the containers. China established certain restrictions and newer or different certification requirements for food products coming from several countries, with the aim of avoiding a new outbreak, although no evidence that Covid-19 could be transmitted though food existed. Another case was related to Ecuadorian shrimp exports to China, which were suspended in July 2020 because of similar concerns relating to the containers, though the shrimp and inner packaging tested negative. How can companies in producing countries ensure buyers the quality and, even more critically, the health and safety of their products? Around the world, improved traceability could be the key for supply chain continuity under risky or unexpected situations.

Through its Food Sustainability Lab, the School of Management at the Politecnico di Milano is dedicated to studying the elements shaping and determining the food supply chain efforts to become sustainable, and improve its sustainability; thus, a broad multidisciplinary team is running several research initiatives in this area, given the interest and relevance for the academic community, companies and society at large.

One of the research lines is focused on the traceability systems implemented along the supply chain, in particular for food commodities, such as coffee, that involve actors dispersed around the world. Commodity chains are highly fragmented and long, with many very small producers in low-income countries, and several intermediaries are needed to ensure the product flow from origin to consumption. According to the International Coffee Organization, coffee consumption is steadily growing globally, reaching up to more than 169 million bags in 2019-2020. Producers (exporters) are mainly located in South America, Africa and South-East Asia, with Brazil being responsible for 43% of production. Global consumption registered close 119 million bags in 2019-2020, with the largest importers being the European Union and the United States [1]. Consumers in these markets increasingly demand coffee that is not only safe but also ethical, organic, generates a low carbon footprint, etc., requiring the supply chain to demonstrate traceability throughout the chain.

Traceability systems available in the market are said to help actors in the chain not only to track the product from origin to final consumption, but also to respond to the need for mandatory and voluntary quality standards, certifications of origin, and to create the basis for reporting sustainability-related practices and performance. The benefits of traceability could be spread along food supply chains: for managing risks, maintaining consistency and specific product features, and keeping a chain of custody. In addition, traceability helps to achieve operational efficiencies, increased productivity and reputational benefits.
Nonetheless, traceability requires substantial investments in technology and processes aimed at tracking goods along the supply chain. Cost is still proving to be a difficult barrier to overcome, especially in the initial production phases. Current debate in the literature also questions whether traceability systems are driven only by quality assurance expectations, or are also somehow related to sustainability needs and goals.

The research team at our School involved in this project is composed by Prof. Federico Caniato, Federica Ciccullo, Verónica León-Bravo and Giulia Bartezzaghi. Currently, we investigate the traceability systems implemented in the coffee supply chain, providing a taxonomy of solutions and characterizing how these systems are applied, in terms of technological display, information width and depth, as well as considering their relationship with sustainable value creation. The analysis of the case studies (including different stages in the chain, located in different geographical regions) revealed how the implementation of traceability systems along the coffee supply chain could be influenced by the targeted information width and depth, along with the supply chain tier, country of origin or company technological capabilities. On the other hand, it is observed that the link between traceability and sustainability, especially for coffee roasters, might be influenced by two main contingencies: volumes purchased and product type. Indeed, one of the companies being studied explained that dealing with large volumes makes it impossible to trace all the details up to the producer, especially for non-certified products. On the other hand, another company, using advanced technology for traceability, highlighted the precise information they are able to register and communicate while buying smaller lots from certified coffee producers. Besides, we found traceability and sustainability to be disconnected when they are both implemented but managed separately and not aligned. Whereas, traceability and sustainability can be synergistic when both followed a common strategy and are consistent with each other, i.e., the level of detail in the traceability system corresponds to the scope of sustainability practices.

Maintaining consistency and keeping a chain of evidence (e.g., benefits of traceability) are efforts incurred during the current health crisis as companies worked hard to apply newer and stricter safety measures that needed to be shown to international buyers. For instance, the Brazilian Ministry of Health and the slaughterhouses affected by the Chinese restrictions are working to reverse the bans and started testing the cargoes with the aim of demonstrating to buyers that the food is not only sanitized in the plants, but also before transportation. Similarly, Ecuador improved shipping protocols and applied the required quality standards, allowing shrimp exports to China to be resumed in August 2020. These two examples also show that different actors in the supply chain need to work together to apply health and safety measures, that in turn need to be demonstrated to the downstream actors, thereby ensuring traceability and transparency along the supply chain.

There is no doubt that adopting traceability could bring varied benefits to companies in the food supply chain, but for improving sustainability, it might not be enough. Sustainability in food supply chains needs attention from varied angles. Traceability implementation in a commodity supply chain is one of the projects currently being developed at our School. Other research projects in place are observing different food supply chain configurations, such as short supply chains, and their implications for sustainability; or analyzing the added value of information obtained in the assessment for sustainability with a supply chain-wide perspective.

Managing sustainability along food supply chains is still a work in progress that requires multi-tier involvement for reducing ‘distances’, reaching common understandings and better performances; and thus, achieving food security, improved nutrition and sustainable agriculture as called for by the United Nations Sustainable Development Goals.




JSCM’s Best Paper Award to Claudia Colicchia

Journal of Supply Chain Management awards our Professor’s study amongst all publications of 2019.


The paper “The Impact of Supplier Sustainability Risk on Shareholder Value“, authored by Claudia Colicchia, School of Management Politecnico di Milano, Seongtae Kim, Aalto University School of Business, Stephan M. Wagner ETH Zurich, received the Best Paper Award of the Journal of Supply Chain Management (JSCM) during the annual Conference of the Academy of Management. The paper was chosen by JSCM among all those published in the year 2019.

Claudia Colicchia is Associate Professor of Logistics and Supply Chain Management at Politecnico di Milano. Her research interests include Supply Chain Sustainability, Supply Chain Risk Management, Industry 4.0 and Logistics 4.0, and Citation Network Analysis.

The paper examines the magnitude of the consequences of what are termed as supplier sustainability risks (SSRs). Business scandals like sweatshop labour have received growing attention in the field of supply management. Yet little is known about how detrimental such scandals are to buying firms. To this end, an event study analysis was conducted, followed by regression modelling based on a sample of 196 U.S. publicly traded firms’ SSRs.

The results reveal that SSRs are associated with a 1.00 percent reduction in shareholder wealth. The market reacts negatively but not differently to the two types of SSR: process-related risks and product-related risks. Finally, a firm’s moral capital does play a mitigating role for SSRs and process-related risks; however, it does not provide insurance-like protection for product-related risks.

The Journal of Supply Chain Management is in its 55th year of publication. The Journal has made rapid advances in recent years, as evidenced by a quadrupling of submissions since 2007, and an ever-increasing number of high quality, unsolicited submissions. More tangibly, JSCM has been ranked either first or second for the past seven years among supply chain and operations management journals, based on its Thomson-Reuters ISI Impact Factor and received multiple Emerald Citations of Excellence Awards, which are given to the 50 most outstanding and highest impact articles out of the 15,000 articles published in the top 300 management journals.

For more information:
Kim, S., Wagner, S.M. and Colicchia, C.
The Impact of Supplier Sustainability Risk on Shareholder Value
J Supply Chain Manag, 55: 71-87 (2020)
The study online

It is never too late to pick ourselves up. It is never too early to prepare.

Although it is not possible to predict the duration of the Covid-19 pandemic, it is essential not to be totally absorbed by the emergency and to start thinking about the most effective strategy to face the recovery phase.


Paolo Trucco, PhD, Centre for Risk and Resilience Management of Complex Systems
School of Management – Politecnico di Milano

The embers beneath the ash

With the pandemic still in full swing, and the numbers of new infections and deaths still rising, both in Italy and in other parts of Europe and the world, it seems inappropriate to think about what comes next, especially in terms of production. However, in order to live, a society, a community needs to be taken care of, it needs goods and services, which unfortunately cannot be guaranteed outside the market-economy model.
After two weeks of the government-decreed production block involving most industrial sectors, many companies have had to suspend every business activity or find temporary solutions to ensure minimal operational continuity. Even companies in the so-called essential or strategic industries are operating in emergency conditions and therefore with greatly reduced levels of performance. If we look at the typical profile of an operational disruption (Figure 1), we are currently all, for one reason or another, in the period of maximum impact. We do not know exactly how long it will last, nor how long we will be able to sustain it. However, if industry and Italian society as a whole wish to look to the future, it is important not to let ourselves be overcome by the gravity of this emergency and to start thinking about the most effective strategy for dealing with the recovery phase, so as to ensure it comes quickly and fully. The embers beneath the ash must be kept alive. We need to be prepared to seize the early signals of recovery and to turn every opportunity that may arise into value.


Figure 1. Time profile of an operational disruption with different recovery capacities.

What should we expect?

At the moment, no one is truly able to trace out how economic recovery will unfold. However, some fundamental elements seem to be clearly outlined:

  • The recovery of supply and demand will take place at significantly different times in different parts of the world. Speed will also be different: for structural reasons, due to the severity and breadth of the pandemic, or due to the decisions made by local governments. In short, it will be a geographically asynchronous recovery.
  • In every corner of the globe, national and supranational institutions will make a massive effort to stimulate the economy, but such measures may not be fully coordinated or consistent with each other. We will see a period of sub-optimal allocation of resources and not everyone will benefit in the same way.
  • Due to its magnitude and degree of interdependence, crucial energy and transport infrastructure will most likely suffer most from the turbulence created by the two previous factors. As a result, global supply chains and energy-intensive industries may rebound with greater difficulty.
  • The specific nature of the event has created both a supply shock (production stops) and a demand shock (rapid contraction in consumption and investments). The recovery phase, within the supply chain, will also be marked by the need to manage two opposing disturbances: a ripple effect, downstream, as a result of prolonged limited supplies, and a bullwhip effect, upstream, as a result of a recovering yet still highly uncertain and volatile demand.
Be ready at the (re)starting blocks

In a previous article on the impact of COVID-19 on global supply chains (Coronavirus is the acid test of global supply chains’ resilience), we already described the fundamental characteristics of resilient supply chains: the ability to sense weak signals of emerging pressures or shocks, to prepare for the unexpected and to respond rapidly and in an adaptive manner to crisis situations, by reconfiguring processes and operating models. Looking now more in depth at how to manage the recovery phase in specific contexts, we can identify three elements of resilience that we believe will play a key role:

  • Visibility. The recovery phase can only hope to be successful by achieving end-to-end supply chain visibility, both as regards the operational capacity of suppliers and sub-suppliers and the dynamics of demand, in terms of geographical redistribution and sales channels. Unlike in normal conditions, the magnitude and mode of response to emerging demand will have to be planned according to the actual capacity of the supply chain, until a new state of structural equilibrium is reached.
  • Collaboration. During a turbulent emergency, transparent, stable relations are far more important than tactical behaviour. Those who have been able to build collaborative relationships with their suppliers and distributors will find themselves in a position of greater advantage. The need to replace suppliers who have been unable to overcome the crisis can turn into an opportunity to strengthen relations with more dynamic, crucial suppliers.
  • Multichannel distribution. With volatile, rapidly changing demand, the opportunity to use multiple sales and supply channels will allow companies to recover faster in the short term and, in all likelihood, gain new market shares in the medium term.


Actions and tools to implement a resilient strategy

Below is a list of practical, albeit incomplete, actions that may help to manage rationally both the present situation, for those first companies allowed to resume operations, and the time when production resumes universally:

  • Continuously monitor the evolution of the pandemic and of the measures implemented by governments in the most relevant markets (Figure 2);
  • Segment acquired orders by degree of completion and customer reachability (status of pandemic control measures in the target country) and prioritise billable orders;
  • Search for possible alternative configurations to execute high priority orders waiting to be processed;
  • Reassess the priority of orders on a daily basis with a 1-2 week (rolling) visibility;
  • Map the status of crucial suppliers (i.e. those having the greatest impact on priority orders) by drawing up a questionnaire to verify business continuity conditions (include questions requesting information on the business continuity of crucial sub-suppliers).
  • Cross-check the business continuity assessment of suppliers (Figure 3) against the markets-orders table to identify feasible orders;
  • Agree operational continuity plans and production capacity allocation priorities with crucial suppliers and re-schedule delivery times based on new order priorities;
  • Evaluate alternative options for crucial vendors on complete lockdown;


Figure 2. Example of a market-order segmentation table based on the stages of evolution of the COVID-19 pandemic


Figure 3. Example of a table to manage the risk of supplier Business Interruption (BI)


It is no wonder that the speed with which we have been hit by the pandemic and the continuing uncertainty about how and when it will be managed by the authorities has left many feeling confused and disconcerted. However, now is the time to strengthen our evaluations and actions, leveraging on in-house skills and capabilities. It is never too late to pick ourselves up. It is never too early to prepare for what lies ahead.

Coronavirus is the acid test of global supply chains’ resilience

The Covid-19 pandemic is the harbinger of unpredictable and unprecedented scenarios. But the adaptability of industrial supply chains and a proactive approach can make the difference.

Paolo Trucco, Professor of Industrial Risk Management


In its Global Risk Report 2018, the World Economic Forum had already given a clear warning sign. “Humanity has become remarkably adept at understanding how to mitigate conventional risks that can be relatively easily isolated and managed with standard risk management approaches. But we are much less competent when it comes to dealing with complex risks in the interconnected systems that underpin our world, such as organizations, economies, societies and the environment. There are signs of strain in many of these systems: our accelerating pace of change is testing the absorptive capacities of institutions, communities and individuals. When risk cascades through a complex system, the danger is not of incremental damage but of “runaway collapse” or an abrupt transition to a new, suboptimal status quo.”
The picture that has been emerging in recent weeks as a result of the coronavirus pandemic has all the characteristics of being a systemic risk, which will have long-lasting effects over time and from which we must expect radical and structural transformations of society as well as the global economic system. From an industrial standpoint, much will depend on the ability of businesses to understand how the global scenario is evolving and to adopt a proactive and adaptive approach, both in the short run, to respond effectively to the impact on operations, and in the long term, to adjust their business models to the new context.

High-Tech and Automotive: the global supply chains most affected to date

In the province of Hubei alone, where activities are still broadly at a standstill, around two million cars are produced every year, second by volume only to the area of Guangdong. In January and February 2020, over 60% of Chinese assembly plants were shut down or in some way affected by the spread of the crisis. Global brands such as General Motors, PSA, Renault and Honda have their own plants or joint ventures in the region to serve the entire Asian market. All these plants have suffered production shutdowns for at least 12 days and still operate under limited capacity.
China is also a major exporter of motor vehicle components (USD 33.5 billion in 2019), especially to the US, EU and Japan. Producers in the province of Hubei are typically Tier 2 suppliers, which supply Tier 1 suppliers located in other parts of China; the latter, in turn, ship their products through the east coast ports to reach the western markets.
The entire global car industry, which adopts very aggressive JIT models and thus keeps very low inventories, has suffered, or will suffer, production shutdowns due to the lack of critical components: FCA has had to shut down some of its European plants; and under current conditions, GM will only be able to operate in the US until the end of March.
Lastly, a third element is of paramount importance in understanding the impact that the Chinese coronavirus epidemic will have on the automotive sector, namely the significance of that market for the financial stability and profitability of many American and European brands. In 2019, GM sold more vehicles in China than in the United States and the Volkswagen’s joint ventures in China accounted for over 26% of the Group’s EBIT in 2018.

The global electronics industry is also heavily dependent on Chinese production in many segments of the whole supply chain. Critical materials such as rare-earth elements (REEs) are extracted in great quantities in Guangxi and the whole sector has already experienced, in 2010, the devastating effects on production volumes and costs of a drastic contraction in Chinese exports of these materials. There are also important producers of chips and printed circuit boards in the province of Hubei, but in this case the highly-automated processes have mitigated the impact, leading to a rapid recovery to normal operations. Final assembly companies, such as Foxconn, are predominantly located in the areas of Guangdong and Shanghai, or in other neighbouring towns. Assembly phases are typically labour-intensive and, for this reason, these companies have suffered the greatest constraints. This has had a significant impact on market leaders such as Apple or Hewlett Packard, which in recent years, have concentrated a large part of their supply base in China.

Black Swan and industrial Darwinism: those who change win, not those who resist

The global crisis that we are starting to tackle will make it even more obvious that in a rapidly- changing and highly uncertain world, the adaptability of organisations and industrial supply chains is an key factor for success. Resilient supply chains are characterised by their ability to sense weak signals of emerging pressures or shocks, to prepare for the unexpected and to respond rapidly and in an adaptive manner to crisis situations, by reconfiguring their processes and operating models. It is by adopting a similar proactive, rather than reactive, approach that resilient organisations can also turn threats into opportunities, performing better than their direct competitors, or adopting innovative solutions that structurally change the competitive landscape in the aftermath of a crisis.

In the last decade, both the automotive and the high-tech industries have faced big disruptions that are very similar to the current one and have learned important lessons. Undoubtedly, the most significant event is the triple disaster that hit Japan in March 2011, which saw a combination of the biggest earthquake in the last 140 years of the country’s history, a devastating tsunami and the resulting nuclear accident. DELL was one of the most exposed high-tech giants at that time, as it had a large number of its components sub-suppliers located in the most affected area, which, in turn, supplied the assembly plants in Korea and Thailand. Thanks to its MTO (make-to-order) operating model, fed purely by on-line sales channels and supported by very strong relationships with suppliers, DELL was able to successfully manage the crisis via three broad actions: dynamic management of supply and shift of demand to feasible product configurations based on available parts; on-site coordination of the emergency thanks to technicians and procurement managers physically located in Korea and Thailand; and technical and operational support to suppliers, thus ensuring maximum visibility and coordination at all levels of the supply chain. Its direct competitors were not able to do the same, suffering losses both in turnover in the short term and in major market shares once the crisis was over.
The automotive sector was also substantially affected by the so-called “triple disaster”, which brought the Japanese economy to its knees. When, some months later, the rainy season brought huge flooding and devastation in Thailand, lasting from July 2011 to January 2012, Nissan Motors also found itself facing a second severe emergency just few months later. While the three major Japanese manufacturers recorded losses of over EUR 300 million in operating profit, Nissan’s sales hit an all-time high in fiscal year 2011, while profit grew year-on-year.

How can we explain such a difference in results in the same operating and market conditions? At that juncture, Nissan certainly proved the value of its corporate motto: “The power comes from inside”. In the few months from March to July, Nissan was able to put into action lessons learned from the disaster in Japan and exploited them fully to tackle the new disaster: extensive and consistent implementation of a business community management (BCM) system, coordinated by a Global Disaster Control Headquarters; review of sourcing strategies and redesign of the supply base, based on a multi-level risk analysis; intensive exchange of information and coordination with suppliers and sub-suppliers; and review of production plans to take advantage of the production windows of suppliers granted by “rolling blackout” policies implemented by the Thai electricity operator.

While, on the one hand, the Chinese coronavirus epidemic cannot be categorised as a black swan, it is equally plausible that its transition into a global pandemic, as declared by the WHO in the first week of March, is the harbinger of unpredictable and unprecedented scenarios. For example, the extension of production shutdowns in north Italy in the wake of what has happened so far in the Lodi area would represent a hard blow to the entire European automotive sector.

What awaits us once the emergency is over: threats and opportunities

The Chinese government’s initial response to the spread of the virus, at both central and local level, was drastic: the complete closure of factories and companies and a substantial ban on movement by people. Now, when major progress is being made in containing the virus in various areas of the country, the central government has launched an aggressive “return to work” campaign. This includes financial support and medical supplies to companies that are resuming activity, as well as huge efforts to re-establish essential services. The local authorities are also acting synergistically, implementing differentiated actions specific to the conditions of different cities and provinces. Only the province of Hubei is still subject to major containment actions.

However, the recovering Chinese economy is significantly different from the pre-coronavirus economy: not only because many companies have not weathered the impact and have gone bankrupt, e.g. in the construction sector, but also, and most importantly, because in many sectors the coronavirus has led to drastic operational restructuring and business models innovations. One example that stands out is the substantial increase in capacity of the medical sector, which, from now on, will take the role of a global player in all respects. In the clothing and personal care sector, the mix of sales channels has changed dramatically. The shift on e-commerce B2C and B2B channels during the emergency period has permanently changed the structure of entire supply chains, with long-term effects that are only for the moment limited to China.
This is all happening while the rest of the advanced countries are preparing to face the peaks of contagion, which will strike Europe and the USA synchronously. Here the key question comes: what will happen when, in late spring, China will be the only industrialised country with a fully recovered and transformed industrial capacity, and with a rapidly recovering domestic demand?

It is difficult to make predictions either on a global or local scale. What is very likely, though, is that in the West, as in China, the only supply chains that will survive and find new growth opportunities will be those that, after abandoning the “last Japanese” syndrome (i.e. resisting), will have been able to adapt to the changes, by innovating processes and business models.