Four Chain of Custody Models Explained

The chain of custody is a process that tracks all steps in a supply chain for a product, including suppliers, transporters, exporters, processors, manufacturers, OEMs, and brands. Its goal is to improve the supply chain traceability of products, and to prove the claims and attributes of sustainable materials. 

Chain of custody models are becoming increasingly important for suppliers and brands looking to comply with the increasing consumer and regulatory demand for more supply chain transparency, and detailed information about product origin and composition. It’s never been more crucial for businesses to be able to back up their product and material claims with trustworthy data. 

In this article, we will discuss the four chain of custody models including identity preservation, segregation, mass balance, and book and claim, and provide real-world examples to demonstrate their advantages and disadvantages. You will learn why identity preservation and segregation are the most trustworthy chain of custody models, while mass balance and book and claim are the easiest, though less reliable ways for companies to begin their transition towards sustainability. 

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What is chain of custody and why is it important?

The chain of custody is the process of following materials through every step of the supply chain as they go through various stages of sourcing, production, processing, shipping, and retail. This is done through a series of procedures, technologies, and documents that track materials from source to end product. 

Supply chain traceability is used to follow the trail along the supply chain by monitoring and tracking the chain of custody from its source to the end product, providing insights into the product’s origin, components, processes, and handlers.

  • Consumers demand sustainability. They have become more aware of the environmental and ethical impacts of their buying decisions. Those willing to pay a premium for more sustainable options expect brands to be able to prove the integrity of their sustainability claims. More companies are also seeking to buy materials and products that are not only more ethical and sustainable, but also compliant with government and industry regulators, certifiers, auditors, and enforcement agencies. 
  • Companies cannot make sustainability claims without real evidence. Chain of custody models are used in most industries around the world to validate claims about a product, collect information on the source of a material, feedstock, or input, and provide visibility into processes across the value chain. Traceability makes supply chains more transparent and thereby holding all supply chain actors more accountable. This is critical in establishing trust and credibility, proving sustainability claims, and staying compliant with regulations.

The four main chain of custody models

These chain of custody models have been designed for industries all around the world. Despite their differing standards and requirements, according to BSR, they all have the common objective “to guarantee solid bookkeeping and to corroborate a link between in-going content (e.g. ‘sustainable’, ‘recycled’ or ‘organic’ by some definition) and the finally out-going product.” Each offers a different approach to tracking and verifying a claim, providing a spectrum of solutions with varying levels of detail and reliability. 

These models are a waypoint to sustainability, but they are not without their flaws. Whenever possible, you should choose the most credible chain of custody model to ensure environmental and ethical integrity. 

  • Identity preservation and segregation models should be employed particularly when sourcing materials that could potentially come from conflict zones or places where human rights abuse is common. 
  • Mass balance and book and claim models can be almost entirely decoupled from real processes in physical material flows, making them a great solution for chemical production and green energy.

Identity preservation chain of custody model

Identity preservation model
Figure 1: Identity preservation

Identity preservation is a chain of custody model that doesn’t allow the certified product from a certified site to mix with other certified sources. It requires tracking the actual molecules of the materials as they move through the supply chain. This can help companies avoid human rights or labour abuses when sourcing. The identity preservation model is commonly used in, but not restricted to, food and agricultural industries.

Advantages of identity preservation:
  • Ensures the most uniqueness and value is captured and maintained 
  • Able to extract a premium due to its added value
  • Less need for additional testing
  • Transparent and inspires the most trust
  • Brands are able to tell customers the stories of all the people involved in the production
Disadvantages of identity preservation:
  • Most logistical effort as it requires strict physical separation from other sources
  • Complex system of standards, records and auditing throughout the entire process
  • More limiting due to stringent requirements and handling processes
  • Most expensive

An example of the identity preservation model 

Although coffee has been around for centuries, the specialty coffee industry is one that has thrived and benefited greatly from adopting the identity preservation chain of custody model. Businesses and consumers in this space are willing to pay a premium for choice beans grown in specific conditions for their distinctive flavour profiles. They also tend to be genuinely interested in learning more about where their coffee beans come from and the people behind them.

Identifying themselves as “the good middleman,” This Side Up Coffees are committed to transparency, and traceability, increasing trust and adding value along the supply chain. In Kenya where an auction system benefits only middlemen, This Side Up partnered up with a women’s permaculture collective, buying directly from them and paying 149% above the fair trade price for their coffee beans. 

Figure 2: Transparent supply chain information; Source: This Side Up Coffees

The personal stories of the lives of Gloria Gummerus and the other women in her collective are available, together with extensive information on prices, tasting profiles, and information on other stakeholders in the This Side Up value chain. This supply chain transparency and traceability allow businesses to share this information with consumers, who can then choose coffees based on their own aromatic and ethical choices.

Segregation chain of custody model 

Segregation model
Figure 3: Segregation

Segregation is a chain of custody model that requires the certified product from a certified site to be kept separately from non-certified sources. The main difference from the identity preservation model is that materials from different certified sources can be mixed if they share the same defined standard. Their specific characteristics are maintained, thus they cannot be mixed with materials with different characteristics and/or grades. 

The segregation model is commonly used in, but not restricted to, food and agricultural industries, most notably in certified organic or fairtrade products, or materials such as organic or fairtrade cotton. Detailed information is also added as it moves along the supply chain, which also helps companies avoid human rights or labour abuses when sourcing. 

Advantages of segregation:
  • Ensures uniqueness and value are captured and maintained 
  • Able to extract premium due to its added value
  • Less need for additional testing
  • Transparent and inspires more trust
Disadvantages of segregation:
  • More logistical effort as it requires strict physical separation from other sources
  • Complex system of standards, records and auditing throughout the entire process
  • Limiting due to stringent requirements and handling processes
  • More expensive

An example of the segregation model

With over 85% of natural rubber being produced by smallholder farmers in Asia, increasing global demand is estimated to have caused more than five million hectares of deforestation in recent years. 

Figure 4: Sustainable tyres; Source: Markus Spiske

In 2021, Pirelli produced the first certified tyre in accordance with the standards of the Forest Stewardship Council (FSC). It implements segregation as a chain of custody model and verifies that FSC-certified materials have been identified and separated from uncertified material along the supply chain, and ensures that plantations are managed in ways that minimise environmental impact and benefit the local farmers and workers.

The EU is one of the biggest importers of natural rubber. A recent report suggests that European rubber imports and financing have exacerbated deforestation and land rights abuse in central and western Africa. Traceability is necessary for companies sourcing sustainable rubber and segregation can be the right model for this.

Mass balance chain of custody model

Mass Balance model
Figure 5: Mass balance

The mass balance approach is designed to track the total amount of sustainable content through the production system while ensuring an appropriate allocation of this content to the finished product. Based on established standards and auditable bookkeeping, it allows for the mixing of sustainable materials with non-sustainable materials.

The exact mass of sustainable material must be certified and tracked along the supply chain, and reconciled to reflect the ratio of sustainable material integrated into the final product. This serves to back up sustainability claims such as, “made with 90% recycled plastic” although customers have no way of knowing if the final product actually contains any molecules of the sustainable materials or not.

This approach is most common for products and commodities where segregation is very difficult or impossible to achieve, such as in the plastics and petrochemical industry, but also utilised in other industries like sustainable forestry and aluminium.

Advantages of mass balance:
  • Low-cost barrier to entry 
  • Fast and easy to get started
  • Can support large-scale production
  • Flexibility in sourcing for materials
  • Helps companies gradually transition to sustainability
Disadvantages of mass balance:
  • No physical traceability involved
  • System can more easily be abused to make false claims
  • Complex system of certification, records, reconciliation and auditing required
  • Sensitive information could be at risk in certain industries
  • Time-consuming to maintain as it scales
  • Easy to make costly mistakes

An example of the mass balance model 

Borealis is one of the world’s leading providers of advanced and circular polyolefin solutions. In Europe, Borealis is a market leader in base chemicals and fertilisers. Bio-based feedstocks are generally derived from sugar cane production, but Borealis mostly obtains bio-based feedstocks derived from waste in vegetable oil production that is mixed with fossil-based feedstocks in production.

Figure 6: Mass balance model; Source: Borealis AG

Because they are able to trace materials from source to end, they are also able to collect products at the end of their use for mechanical and chemical recycling. Using mass balance, they are able to track the amount of bio-based feedstocks in their products and gradually increase their amounts. In this way, Borealis is able to move towards a more sustainable, circular production while retaining carbon in the system. 

Book and claim chain of custody model

Book and claim model
Figure 7: Book & Claim

In the book and claim chain of custody model, companies can obtain sustainability certificates for the volume of certified sustainable materials it generates or creates. Certified and non-certified materials flow freely through the supply chain, with neither traceability nor any physical connection between the final product and the certified supply. Sustainable credits are traded on a separate online marketplace, rewarding producers for their sustainable practices and products, and helping large companies to make sustainability claims. A central authority ensures that the number of credits issued and traded matches the sustainability claims.

Also often referred to as “certificate trading” or “credit trading,” it offers companies the most flexibility and the lowest barrier to entry. There are no transport costs because there is no physical traceability and location dependence. This model is widely used in renewable energy and carbon trading, but also with physical materials and goods. 

While it is a climate accounting feature that could easily help large companies reduce emissions on paper, it should be noted that this model is the most easily manipulated and abused. Sustainability claims can be made even when the final product does not contain any molecules of certified sustainable materials, making companies that use this model vulnerable to greenwashing, and even fraud. The Netherlands Enterprise Agency guidelines specifically warn against double-entry bookkeeping, which is considered fraud.

Advantages of book and claim:
  • Lowest cost barrier to entry 
  • Easiest to get started
  • Can support large corporations and productions
  • Useful for when local demand exceeds local supply
  • No transportation costs involved
Disadvantages of book and claim:
  • Not a truly sustainable solution
  • Sustainability claims can be made without sustainable practices
  • System is easiest to abuse for greenwashing
  • Least credibility and accountability 

An example of the book and claim model

In 2012, Dutch airline KLM established their Corporate BioFuel Programme, in which companies could pay a surcharge for sustainable aviation fuel (SAF) credits or certificates to reduce the carbon emissions of their business travel. 

SAF is sourced from waste and residue feedstocks, certified, and blended with fossil fuel, and is said to have up to 80% smaller carbon emissions than fossil jet fuel. It is blended with fossil fuel at airports but decoupled from the certificates which can be bought and traded. The trading of credits is recorded, with an annual audit to ensure that the claimed CO₂ reduction matches the SAF certificates purchased. KLM cannot be guaranteed that any particular flight contains any molecules of SAF.

Figure 8: KLM Plane Photo by Aron Marinelli on Unsplash

As such, KLM has been accused of greenwashing in a lawsuit from environmental organisations which argue that, “when it comes to offsets claims, the law on misleading marketing needs to be enforced. Trying to reassure customers that a small payment for tree planting or ‘sustainable’ fuel compensates for flight emissions undermines urgent climate action, is gravely misleading, and, the claim argues, is unlawful.”

KLM’s advertising campaign which stated that “up to a maximum of 50%” of SAF was mixed with traditional fossil jet fuel, and that the airline was “the first to fly biofuel on a daily basis,” was also ruled to be inaccurate by the Dutch Advertising Code Committee in 2020. 

Chain of custody model comparison chart

There are advantages and disadvantages to each chain of custody model. Traceability in the chain of custody plays a critical role in our transition towards a more circular value chain. When choosing which model to use, it is important to understand the sustainability standards, the type of certification, and the requirements of any sustainability claims you wish to make about your products. It is critical to assess whether it can support your sustainability strategy and the claims you want to make about your product. 

Understanding what your customer cares about will also give you insights on how to build trust with them and avoid greenwashing, which could result in expensive lawsuits and a damaging loss of credibility and reputation.

Don’t get left behind in the race towards a circular economy. Are you searching for a chain of custody solution in the plastics and petrochemicals sector? Circularise recently launched MassBalancer, an automated way for you to do mass balance bookkeeping at scale. To stay compliant with ISCC PLUS certification reporting and easily back up your sustainability claims, find out how MassBalancer works for your business.

Learn more about MassBalancer
Tian Daphne produces content at Circularise, with a focus on the circular economy and sustainability, blockchain in supply chain traceability, and digital product passports.

About Circularise

Circularise provides cutting edge end-to-end traceability & transparency solution for complex industrial supply chains.

We help companies to verify the origins, certificates, CO2 footprint and other material and product data on blockchain to improve their ESG performance, demonstrate responsible sourcing, and enable a circular economy at scale.