Food security and consumer pressure over ethics now mean every single element in a supply chain must be traceable. But is this really achievable, asks Jon Severs

We've all seen the trick. Three upturned cups and, under one of them, a small object. Successfully track the cup with the object underneath it as the 'magician' moves the three cups in complex patterns and you win double your money back. You never win, of course, you just stare and wonder at what stage of the process you missed something.

It's this feeling of bewilderment that is currently spreading across the food industry, manifesting itself most recently in the issue of sustainable palm oil. Nestlé incurred the wrath of Greenpeace for using oil sourced via a third party from Sinar Mas after supposedly severing ties with the latter in December.

That it was caught out so spectacularly by the 'Have a break. Have an orang-utan's finger' campaign illustrates how difficult it is for major manufacturers to police the full supply chain and raises questions about where their responsibility ends and that of others begins (notably, in the Kit Kat case, Nestlé has made it clear that it expects the third party, Cargill, to take action or risk delisting).

Wherever that line is drawn, however, short shrift is likely to be given to companies that can't demonstrate full traceability (directly or indirectly) of their supply chain and they can take it as read that the smallest abberations will be exposed before the biggest possible audience.

These days, the stakes are higher than ever, with ethical sourcing as important to consumers as the health fears that fuelled the Sudan 1 scare five years ago (research by IGD last year found that 54% of consumers wanted to know about pay and worker conditions for people producing grocery items in poorer countries).

Back then, a complex multi-point supply chain spread across continents was considered a valid explanation if not excuse for poor traceability. Not any longer.

Advances in technology mean that highly intelligent tracing systems can now monitor a product's progress through the supply chain. Marcel Kars, senior VP of technology at supply train traceability solutions firm Zetes, says a mix of three core technologies are being deployed by companies such as Premier Foods, Coca-Cola and Cadbury to improve their supply chain visibility.

"Firstly, you can use scanners," he explains. "Premier has implemented a system whereby barcodes on loaves of Hovis bread are tracked throughout the supply chain at fixed points. You can also use sensors to monitor that fresh produce stored in temperature-controlled boxes was kept at a continuous temperature.

"Lastly, you can use vision technologies. For instance, Seachill, a fish processor, uses image capture technology Visidot, which can scan hundreds of barcodes in seconds to check pallets have everything on them that they are supposed to, logging each item."

Processed meat company Campofrio has also utilised Visidot for the inspection of pallets, while beverage wholesaler Getränke Essmann GmbH has installed an SAP Logistics Execution System, whereby all products are scanned wirelessly before shipment from its warehouses for real-time inventory updates.

So sophisticated is the technology now available that a company can trace every single ingredient at multiple points at a cost. Current EU law requires each company in the supply chain to know where a product comes from and is shipped to the 'one step up one step down' strategy. This is as much as most companies can afford, says Mark Line, executive chairman of CSR consultancy Two Tomorrows.

And cost is not the only issue. There's also the plethora of different traceability systems to contend with. If suppliers use different systems for each of their clients, who in turn have different systems for theirs, tracing a product can be complicated.

That's why not-for-profit organisation GS1 is trying to introduce common standards.

"Having set standards eradicates any confusion experienced when people used different systems and it was very hard to work out what any of it meant in combination," says Tim Brown, solution manager at GS1 UK.

Last February, the organisation published a GS1 Traceability brochure and in August, it released a guide for traceability of fresh fruit and vegetables. Standardisation is, says Brown, just as important as technology in improving traceability.

The Sudan 1 crisis in 2005 demonstrates just how important. More than 400 products had to be pulled off shelf after a Worcestershire sauce made by Premier Foods and used in hundreds of different products was found to contain adulterated chilli powder.

"It proves the need to have every single element in a supply chain uniquely identifiable," says Brown. "If this had been the case here, recall would have been a lot quicker and a lot more accurate, and so a lot less damaging to the brands."

These days, of course, brands don't just have to worry about health and safety issues. In an age of increased environmental responsibility, companies are being judged on their environmental and ethical credentials. This takes traceability to another level, where there's a need not just to be sure of where something came from but also how it was made and whether it was made in an ethical way.

A prime example is the sourcing of palm oil. The ingredient, which is found in countless products, is supplied in many different formulations and can be sourced from multiple plantations, making it difficult to be sure it's of sustainable origin.

"A lot of the palm oil we use is blended, it is not pure palm oil, and to try and get traceability beyond that stage is almost impossible," admits Ian Bowles, Premier Foods group CSR manager.

What Premier and countless other food manufacturers including Nestlé are focusing on instead is working towards a solution through membership of the Roundtable on Sustainable Palm Oil. Set up in 2004, the roundtable is a multi-stakeholder initiative to make production of the world's primary source of vegetable oil more sustainable. It sets standards; selects certifiers to audit and certify plantations and mills; and establishes rules to ensure companies inform consumers on their use of RSPO-certified sustainable palm oil.

This spring, New Britain Palm Oils (NBPOL) is due to open an £18m refinery in Liverpool that will process palm oil from certified plantations in Papua New Guinea. It has already signed multi-million-pound supply deals with the likes of United Biscuits and Ferrero and this month forged a partnership with Nortech Foods, the UK's leading suppier of cooking products for fish and chip shops and restaurants.

"We believe our dedicated supply chain should ensure NBPOL will be able to supply palm oil that is traceable from palm to plate, giving manufacturers and consumers total confidence in their product," says NBPOL CEO, Nick Thomson.

The key word here is consumers. If a company is found to be using an unsustainable source of, say, palm oil, the likes of Greenpeace will waste no time alerting the consumer. And the more ethically engaged could well vote with their wallets.

The Grocer will reveal soon what impact Greenpeace's viral Kit Kat campaign has had if any on UK sales. Even if it has been negligible, experts warn that manufacturers will need to be ever more conscious of the consumer aspect of the traceability equation.

At the moment, Line feels that while some consumers want the complete back story of a product, most "simply want to know that the product they are buying is pukka, that they won't get poisoned and that it is not destroying the earth".

Their expectations are likely to rise, however, the more engaged they become in ethical issues, and the more information they have access to which is where QR codes come in. QR codes aren't just useful when it comes to commercial tracking, they can also be used to connect the consumer via their smart phone (and a camera-scanned barcode) to a web page, where the full history of a product could be stored.

You'd hope that with greater transparency would come greater consumer confidence. But even with the most sophisticated technology, a company can never offer consumers a 100% guarantee. As Line says, if an "evil person" wants to sabotage a supply chain, or lie about the provenance of an item, "it is very hard to track that".

Without DNA testing or tasting every single item shipped to retailers complicated from both a practical and cost point of view it is extremely difficult to establish if someone has fiddled the paperwork, as E&J Gallo discovered. This February, French winemakers were convicted in a French court of fraud, having claimed wine sold to Gallo was pinot noir, when it was actually a mix of merlot and shiraz grapes.

Unfortunately, no amount of audits nor money can ensure a manufacturer won't get caught out. And even a fully visible supply chain is fallible there'll always be suppliers who only let you see what they want you to see. But at least those who strive for full visibility of their supply chains aren't letting the prospect of full accountability disappear without a trace.

Tricky to trace
Kit Kats: Nestlé came under fire in March in a Greenpeace viral advert, in which a Kit Kat was opened to reveal the cut-off fingers of orang-utans, whose habitats have been ruined by palm oil production-fuelled deforestation.

Fake pinot noir: This February, French winemakers were found guilty of supplying fake pinot noir to E&J Gallo. In an audit of the wine merchant, Ducasse, investigators noticed it was buying pinot noir for half the going rate and in higher volumes than the region produced.

Halal meat: In March, Eblex Halal Steering Group member Naved Syed claimed up to three quarters of halal meat in the UK was slaughtered by machine and that as the slaughter method was not usually mentioned on labels, consumers were being misled.

Sudan 1: In February 2005, the carcinogenic dye was found in Premier's Worcestershire sauce. More than 400 products were recalled.

Para Red: Just months after the Sudan 1 scare, the FSA announced that some batches of Old El Paso dinner kits had been contaminated with the carcinogenic dye. Some 35 products were recalled.