Traceability and supply chain due diligence compliance is becoming increasingly commonplace, and the burden on organisations across supply chains is increasing.
With this comes obligations to collect, analyse, store and share ever growing volumes of information. In fact, our recent deforestation regulation readiness report found 56% of European timber operators are concerned about the volumes of data they will have to handle to prove compliance.
One of the challenges and risks of such regulatory burdens is that operators may have to use multiple different systems to conduct due diligence - for instance, a typical user might manage product inflows through a stock management system, invoicing through an ERP (Enterprise Resource Planning) system, their own forms/questionnaires for risk assessment and various internal procedures (including spreadsheets, emails, shared drives) for supplier traceability.
When the same data is evaluated by multiple different systems for different reasons, it brings security risks, duplicate work effort, and lack of clarity of where to go for any one piece of information.
This is where integration between different systems becomes useful for users, minimising manual efforts, increasing data quality and minimising risk.
1. What is system integration?
Integration between systems refers to the ability of different systems, organisations, or applications to work together seamlessly.
In the context of technology, it means enabling different software and hardware to exchange and use information efficiently. When applied to industries like timber, coffee, cocoa or rubber, it involves ensuring that various systems, databases, and standards can communicate and operate in harmony.
Integration is useful when two (or more) different systems with different purposes and functions need to talk with each other. In this case, it is usual that one system defines the protocol and the definition(s) of the data that the other system must use to communicate with it. Usually this interaction happens via an Application Programming Interface (API) which defines both the language and the protocol.
We’re also hearing interoperability being talked about increasingly in sustainability and traceability conversations, and it should not be confused with integration. Interoperability is when two systems doing the same thing are able to talk to each other and exchange information. For this to happen, there needs to be an agreed shared data definition and protocol. We will be diving deeper into interoperability in a later blog series.
2. Why is integration important?
For both users and businesses, system integrations can be really helpful. Here are some key reasons:
- Scale of data: Having integration between systems helps users deal with the scale of data whilst minimising the risk of discrepancies and errors.
- Minimising manual efforts and data entry: Integration can reduce the need for repetitive manual data entry, saving time and reducing the likelihood of human error.
- Investment cost efficiencies: Instead of implementing new systems from scratch, integration between systems allow businesses to integrate new business processes and functionality to extend their existing ones. This not only saves costs but also makes the transition smoother and less disruptive.
Examples of integration to assist due diligence and traceability:
- EU Information System: The European Union's information system is designed to be used by EU operators to submit due diligence statements for EUDR compliance. This will involve providing the Information System with Article.9 required information such as geolocation of points of harvest, product types, volumes, etc. Without integration this could be a manual process for users and with that the associated issues of scale and accuracy. With integration, users will be able to submit the required information to the EU Due Diligence Statement system from within their own due diligence systems, saving time and reducing the risk of error.
- FSC Blockchain Project: The Forest Stewardship Council (FSC) has been exploring blockchain technology to create a more transparent and secure certification process. Recent discussions between iov42 and FSC have demonstrated a commitment by them to enable integration between other technology solutions, like Interu, giving users flexibility, especially those sourcing non-FSC certified products.
- Standards Certificate Databases (PEFC & FSC): These databases allow businesses to check the validity of certification, ensuring that their sources meet specific standards. The iov42 team has tested integration with the PEFC database and Interu, which was straightforward, and discussions with FSC are ongoing to achieve similar integrations. Again, we think this will be hugely beneficial for users in terms of time saving and data quality.
- Third-Party Verification: Companies like WFID (World Forest ID) , Preferred by Nature and Orbify offer third-party verification services for participants in forest risk supply chains. In some cases they are able to offer integration, e.g. between Orbify’s EUDR module, and potentially with PBN’s Sourcing Hub. These types of integrations with Interu, serve to add another layer of credibility and ensure that data is accurate, understood and trustworthy.
- ERPs: Enterprise Resource Planning (ERP) systems, of which there are many providers, are used by businesses to manage their entire operations. Whilst some efforts have been made to use ERPs for product traceability and due diligence, this is not the main purpose of ERPs so there can be limited success. Therefore integration between traceability systems and ERPs can facilitate real time and historical exchange of information, providing a comprehensive view of operations and streamlining processes.
3. Why iov42 is uniquely positioned to facilitate seamless integration
The combining of best of breed solutions is vital to create strong ecosystems of trusted partners that will help combat deforestation and improve due diligence.
Interu is a traceability system built on iov42’s groundbreaking Distributed Ledger Technology (DLT), that can help users securely collect, store and share trusted data and can be integrated with numerous supporting technologies.
From the outset, the iov42 team knew that they wanted to create an enterprise and government grade technology. To achieve this, supporting integration has been at the heart of our design principles since day 1 - for iov42’s underlying DLT platform, as well as the Interu traceability application which sits on top.
The majority of our team are software engineers and most of them have worked in various government departments and large corporations previously, including leading API-First projects and other initiatives which required integration at their core. As such, we have a depth of technical experience which puts us in a very strong position to design systems that facilitate integration as well as embracing the integrations that other systems offer.
Considerations and risks of systems integration
While integrations offer numerous benefits, it's essential to be aware of the potential challenges and risks:
- User workload: What level of effort will users need to invest, and which parts of the business will need to be involved? Understanding this can help in designing user-friendly systems that minimise additional work.
- Retro fitting APIs: Older systems designed and built for internal use can sometimes be a challenge to expose to external parties. Any new system should be designed with integration in mind from the outset.
- Complexity of integration: Some systems are inherently more challenging to integrate due to their complexity or the specificity of their functions. Identifying these hurdles early can help in developing effective solutions.
- Security risks: Integrated systems need to be secure to prevent data breaches and ensure the privacy of sensitive information.
- Consistency and compatibility: Ensuring that all integrated systems remain compatible over time can be challenging, especially as technology evolves.
Ultimately, integration is a critical approach for organisations who need to scale up their processes, particularly when it comes to compliance. By fostering seamless communication and integration between various systems, businesses can achieve greater efficiency, accuracy and flexibility.
With a strong technological foundation and a clear focus on frictionless integration, iov42 is well-positioned to lead this transformation, helping users and businesses alike to navigate the complexities and reap the benefits of interconnected systems.
Get in touch to learn more and look out for our next blog which will introduce and explain interoperability.
