The EU’s deforestation regulation, effective December 2024, will significantly impact global trade, requiring exporters to prove their products are not linked to deforestation, presenting both challenges and opportunities.
Deforestation is a major environmental concern, and consumers are increasingly demanding sustainable products. Supply chain visibility was a barrier to implementing strong ESG practices.
This aligns with the growing focus on environmental, social, and governance (ESG) factors, which puts pressure on businesses to ensure their supply chains are sustainable. However, traditional supply chains are opaque, making it difficult to trace raw materials from farms to supermarkets. This lack of transparency makes it difficult to guarantee deforestation is not part of the production process.
AI-enabled technologies are being developed to address these ESG issues. Geospatial AI with satellite monitoring, AI-driven blockchain for credibility and transparency, and AI-powered remote sensing insights. These solutions not only adhere to EU regulations but also enhance customer trust, and supply chain effectiveness, and encourage sustainable production.
The platforms assist businesses by monitoring and evaluating massive volumes of data to map intricate supply chains and spot possible deforestation risks. They can constantly monitor progress against deforestation goals and alert companies of any potential breach of the new law.
By analyzing high-resolution satellite imagery, the ESG AI tools can analyze vast data to identify deforestation hotspots and tree cover changes. Blockchain technology provides a permanent transaction record, allowing for audit trails. Farm sensors and logistical network sensors collect location, soil moisture content, and biodiversity data, enabling the tools to confirm sustainable practices and identify development areas.
Get a better understanding of ESG terms here.
ESG AI-powered solutions enhance supply chain transparency, boost customer confidence, promote stronger governance, reduce costs, and encourage positive social impact. They help businesses identify bottlenecks and inefficiencies, improve logistics, and showcase sustainable practices, empowering producers to access exclusive markets and showcase their practices.
These AI tools can enhance supply chain and procurement processes by improving ESG practices, including ethical sourcing, supplier selection, relationship management, inventory optimization, simplified supply chain management, and proactive risk management.
For example, it might be nearly impossible to follow the path of a raw ingredient, such as soy, from a Brazilian farm to a completed product on a European supermarket shelf. It is challenging to ensure that forests aren’t cleared to produce the goods because of the lack of visibility. Integrating AI tools into ESG practices can significantly improve supply chain and procurement processes, enabling efficient tracking, evaluation, and enhancement of sustainability initiatives.
Supplier portal developers are also utilizing ESG AI tools to automate maintenance checks and alarms at operational sites, enhancing safety and efficiency in business operations.
Integrating AI tools into the supply chain and procurement processes can enhance ESG practices, enabling efficient tracking, evaluation, and enhancement of sustainability initiatives, thereby enhancing decision-making through data analysis and interpretation.
The new regulation aims to create a product free of deforestation, despite challenges like technology deployment costs and stakeholder data silos. However, it promises an era of ESG-guided trading.
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