Are Your Suppliers Practicing Data Transparency—or Leaving You in the Dark?

Article Highlights:

• In the context of part-level declarations, data transparency refers to the accessibility of information necessary to achieve compliance. Put simply, is it easy or difficult to access necessary compliance data from a given company, and how long does it take to collect that information?
• The issue for many companies isn’t just the process—it’s the volume. Because many compliance regulations require documentation to be analyzed for each part in a final product, the scale of information that needs to be collected can be massive. 
• As a part of its Supplier Scorecard, Z2 evaluates “data transparency” for all parts-producing companies and generates an overall score. Z2 considers the availability of a variety of common compliance documents and data for this score, including information around chemical compliance, conflict minerals, supply chain information, website support, and obsolescence management. 

As governments around the world increase the legal requirements for corporate disclosures, data transparency from suppliers has become increasingly critical. Regulations like CBAM and EUDR in Europe, as well as other environmentally focused regulations like REACH, RoHS, and PFAS-specific directives, require part-level declarations to be collected for each component incorporated into a finished good. For products with hundreds or thousands of individual components, this can create a compliance hassle that requires significant time and human resources to address. When it comes to part-level compliance, saving time is everything, which is why transparency and accessibility around the compliance status of parts are now vital to strong, sustainable operations. 

Without this compliance information, teams that are responsible for their companies’ disclosures will be hard-pressed to do their jobs. Further, compliance issues and potential violations mean that the release of new products or the certification of existing ones could be delayed. With constant pressure to meet deadlines and regulatory burdens only set to increase in the years to come, acquiring compliance data from suppliers cannot be overlooked. Given this reality, it’s now of the highest importance for businesses to evaluate the data transparency of their suppliers.  

What Does Data Transparency Actually Mean?

In the context of part-level declarations, data transparency refers to the accessibility of information necessary to achieve compliance. Put simply, is it easy or difficult to access necessary compliance data from a given company, and how long does it take to collect that information?

In practice, data transparency can vary greatly from company to company. At a minimum, all companies will generally make compliance information available upon request to their customers. The issue with this process is that needing to initiate an outreach campaign to collect standard compliance information can turn what could be a simple exercise into a slow, complicated endeavor. The gold standard for sharing compliance information is to make it available on a website or portal. This way, information can be accessed and downloaded in seconds once the correct information is identified. Contrast this instantaneous solution with the burden of running a contacting campaign that requires email correspondence, phone calls, follow-ups, and the preparation of data sheets and other data repositories, and it becomes clear how wide the gap is between the gold standard and the supplier campaigning process.

The issue for many companies isn’t just the process, either—it’s the volume. Because many compliance regulations require documentation to be analyzed for each part in a final product, the scale of information that needs to be collected can be massive. Further, the amount of time needed to follow up can drain precious bandwidth and resources that could be focused on the actual task of preparing conformance statements.

Given the challenges often associated with collecting compliance documents for their parts, it’s no wonder many companies turn to data and software providers like Z2 to collect documents on their behalf and store compliance information on millions of parts.

The gold standard for sharing compliance information is to make it available on a website or portal.

How Does Z2 Measure Data Transparency?

As a part of its Supplier Scorecard, Z2 evaluates “data transparency” for all parts-producing companies and generates an overall score. Z2 considers the availability of a variety of common compliance documents and data for this score, including information around chemical compliance, conflict minerals, supply chain information, website support, and obsolescence management. The data transparency score evaluates whether each type of document/service is available online or if businesses need to reach out to suppliers. Higher scores are given to companies that make their compliance documents and related information immediately accessible online. Additionally, Z2 provides a “Contacting Experience” benchmark that is not scored but serves as a reference point for how quickly companies have responded to Z2’s contacting requests.

The ultimate goal of Z2’s data transparency score is to create a common framework to evaluate parts-producing companies on the transparency around their data and thus provide insight into what getting compliance information out of a company could look like. While it’s common in many industries for companies to struggle with publishing compliance and obsolescence information, this score highlights companies that are exceptional and do well at making information publicly available. Companies can utilize this score in their ongoing evaluations of current suppliers or in their initial evaluation of prospective suppliers.

What Are the Key Takeaways Across Z2’s Data Transparency Scores?

Z2 has evaluated data transparency on over 11,000 parts-producing companies using the scoring methodology described in the previous section. These companies are mainly concentrated in the electronics, automotive, and medical-device sectors, but over 10 industries are represented in the full dataset. Z2 continuously evaluates new companies for data transparency. Below are five key takeaways from the Z2 Data Transparency Score dataset:

1. In Z2’s dataset, 74% of companies were found to be not transparent; 21% were found to be transparent; and 5% were found to be very transparent. This means that only about 25% of evaluated companies can be considered “transparent” based on how publicly available their compliance information is. 
2. Across all evaluated subcategories within the Data Transparency score, the average percentage of companies with the gold standard of publicly available information for that category was 26%.
3. The Data Transparency subcategories for which companies scored the highest were Sustainability (ESG and CSR reports), with 73% of evaluated companies making this information publicly available; and Supply Chain Information (lead time information, FMDs, etc.), with 30% of companies making information in this category publicly available for their parts.
4. The Data Transparency subcategories for which suppliers scored the lowest include Obsolescence Data, with only 7% of companies making this information publicly available; and Material Declarations, for which only 17% of companies made this information publicly available.
5.  For the Contacting Experience portion of data transparency, which measures how quickly a company responded to Z2Data’s 3^rd party data request (but for which there is no quantitative score), 75% of companies assessed responded to the data request within 2 weeks.

If there’s one clear, overarching insight from these takeaways, it’s that most companies have a long way to go with respect to making compliance information readily available to their customers. Making data publicly accessible would not only help customers but also make operations more seamless for suppliers, who would have significantly fewer data requests to field.

As new compliance regulations come into effect and expand in scope—particularly in the EU—companies are only going to have to exchange more data and compliance information. But with the state of data transparency right now in many supply chains, the expansion of these disclosure requirements is poised to make life very difficult for in-scope businesses.

If there’s one clear, overarching insight from these takeaways, it’s that most companies have a long way to go with respect to making compliance information readily available to their customers.

Z2’s Data and Contacting Solutions Can Streamline the Compliance Process

The data speaks for itself: manufacturers that produce parts aren’t very effective when it comes to making compliance information easily accessible. Z2’s parts database and compliance solution have all the data and intelligence businesses need to adhere to regulations around chemicals, obsolescence, FMD data, and more. Z2 also has the tools to generate conformance statements and can help customers make sense of exactly what to do with all the data they obtain from their supply chain. 

In addition to out-of-the-box parts and supplier compliance data, Z2 offers a white glove contacting service to help businesses get as close as possible to 100% coverage on their parts. While Z2’s experienced contacting team collects regulatory data, sourcing and compliance teams can focus on more important tasks. The ultimate end result is turning what might otherwise be a time-consuming and even painful data collection process into a casual, consistent weekly check-in call with Z2’s compliance professionals.