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TRACE – Tracking Regulatory Assurance and Compliance for Ecosystems

Project Idea Metadata

Project Idea Description

What problem would you like to solve?​

The fashion and lifestyle industries are facing increasing pressure to ensure that their supply chains are sustainable, transparent, and compliant with various regional, national and international regulations. However, navigating the complex, ever-evolving legal landscape around sustainability claims, environmental standards, and labor laws is a significant challenge for companies. Issues such as greenwashing—where businesses make false or misleading environmental claims—can be incredibly costly, especially in regions like the European Union. For example, companies can face fines of at least 4% of their annual turnover, lose public procurement opportunities, and suffer severe reputational damage according to the approved EU ban on greenwashing.

HUGO BOSS, but in general brands and retailers, need a comprehensive solution to monitor, detect, and mitigate these risks across its supply chain.

How do we intend to solve the problem?

TRACE will be developed as an intelligent compliance platform, leveraging a large language model (LLM) with retrieval-augmented generation (RAG) to provide precise, context-specific regulatory insights. The primary objective of this preliminary six-month project is to conduct a feasibility study and deliver a proof of concept (PoC) for TRACE, which will include a comprehensive review of the current state of the art in compliance technology.

The LLM, enhanced by RAG, will retrieve regulatory information relevant to the fashion and lifestyle industry, quickly scanning and identifying potential risks across standards like the EU Green Claims directive, REACH, and organic material certifications. By utilizing RAG, TRACE can offer real-time, accurate responses tailored to HUGO BOSS’s compliance needs while minimizing setup time and resource requirements. RAG achieves this by dynamically pulling the latest, relevant data from external regulatory databases, providing contextually appropriate answers without the need for extensive model retraining. This approach not only ensures TRACE’s insights remain up-to-date with evolving standards but also significantly reduces operational overhead, making it an ideal solution for rapid implementation within a short PoC development timeline.

To further support usability, TRACE will conceptualize an interactive, dual-function user interface. Ideally, a dedicated prompting area allows users to pose compliance-related inquiries, such as questions about specific supplier risks or certification requirements. Additionally, a multimodal display presents compliance data visually, incorporating charts, maps, and timelines. This design allows compliance specialists to obtain relevant answers efficiently and helps them navigate complex information, streamlining compliance checks and reducing response times.

TRACE’s multimodal display provides HUGO BOSS compliance specialists with clear, contextual insights via interactive charts, maps, and process flows. Tailored to user workflows, the display shows visuals such as flow charts of product lifecycles, maps pinpointing supply chain touchpoints, and timelines of critical certifications. A “Global Compliance Cases” map further enhances functionality, offering a world view of historical compliance cases and legal outcomes by region, covering issues like greenwashing, labor violations, and environmental harm. This global map helps specialists anticipate risks based on regional trends and regulatory actions, allowing adjustments to sustainability practices as needed. Users can customize views, filtering cases by category or time range to better analyze compliance patterns.

In short, TRACE provides HUGO BOSS with a comprehensive, adaptable compliance solution that not only solves immediate challenges but supports ongoing, sustainable growth. Thanks to the funding of the feasibility study, through intelligent automation, predictive insights, up-to-data information, and clear data visualization, TRACE will have the potential to transform regulatory compliance from a reactive process into a proactive, integral part of HUGO BOSS’s operations and values.

How does the proposed solution solve the problem?

The proposed solution, TRACE, is an AI-powered compliance platform designed to ensure that HUGO BOSS’s supply chain aligns with global regulatory standards, covering sustainability and ethical guidelines. By leveraging a carefully structured architecture that combines a large language model (LLM) with retrieval-augmented generation (RAG) and real-time data processing, TRACE can monitor, evaluate, and report on each stage of HUGO BOSS’s supply chain. This setup ensures compliance with key standards, such as organic certifications, REACH, and the EU Green Claims directive, and effectively addresses complex regulatory challenges.

Architecture Overview:

TRACE’s architecture is centered around the integration of an LLM with RAG, allowing for the dynamic retrieval of compliance data as queries are made. This architecture enables TRACE to deliver fast, accurate insights without the need for extensive pre-training or fine-tuning. When a compliance specialist enters a query, TRACE’s RAG-enhanced LLM searches up-to-date and indexed databases of regulatory information, certifications, and sustainability standards, providing contextual, updated, and interactive responses specific to HUGO BOSS’s unique compliance needs.

Key Features:

By embedding TRACE into its operations, HUGO BOSS will potentially gain a robust, data-driven compliance tool that identifies and mitigates risks, fostering sustainable growth while supporting greater transparency and trust throughout the supply chain.

Who are the customers / users and what are the benefits?​

The primary customer for TRACE is HUGO BOSS, but its benefits also extend to retail partners, suppliers, and potentially other brands:

Overall, TRACE benefits the entire ecosystem, supporting ethical fashion for consumers and providing suppliers with a reliable compliance framework.

How does your challenge and proposed solution address the needs of Fashion & Lifestyle industry (incl. research, society and end users)?

As a leader in the global fashion industry, HUGO BOSS is committed to sustainable and ethical practices, which are increasingly demanded by both consumers and regulators. This AI system will help HUGO BOSS ensure that its products meet the highest sustainability standards, preventing greenwashing risks and promoting more sustainable products. This solution supports the company's mission to offer high-quality, sustainable fashion while maintaining trust with customers and meeting stringent regulatory requirements.

Alignment with Sustainable Development Goals (SDGs) - How does the idea contribute to or align with specific Sustainable Development Goals?

This project supports the following SDGs:

What is your Innovation Idea workplan and milestones?

What are the risks?

Workplan and Milestones (6-Month Feasibility Study and PoC)

    1. Data Collection & SoA Analysis (Months 0-2)
    • Objective: Collect regulatory data for HUGO BOSS’s supply chain, focusing on key certifications, environmental, and labor standards, while conducting a state-of-the-art (SoA) review of existing compliance solutions.
    • Tasks: Gather up-to-date data and evaluate industry tools to identify areas for innovation.
    • Outcome: A structured dataset and SoA report to guide TRACE’s unique compliance approach.
    1. LLM and RAG Integration (Months 1-4)
    • Objective: Configure a large language model (LLM) with retrieval-augmented generation (RAG) for efficient, dynamic compliance data access.
    • Tasks: Set up the LLM with RAG to retrieve relevant compliance data tailored for fashion standards and sustainability monitoring.
    • Outcome: A functional AI prototype that provides compliance insights based on real-time data.
    1. User Interface Development (Months 0-4)
    • Objective: Create a user-friendly interface that includes an interactive querying area and multimodal display for visual insights.
    • Tasks: Develop a responsive UI prototype with sections for tailored inquiries and visual data presentation (charts, maps, timelines).
    • Outcome: An intuitive interface for efficient data access and analysis, optimized for the PoC.
    1. Pilot Testing & Evaluation (Months 5-6)
    • Objective: Validate TRACE’s PoC by testing compliance functions with selected supply chain cases.
    • Tasks: Conduct pilot tests and collect feedback to refine system capabilities.
    • Outcome: A validated PoC demonstrating TRACE’s feasibility for future scaling.

This streamlined approach ensures that TRACE achieves a functional Proof of Concept within six months, demonstrating feasibility and setting the foundation for future development and potential scalability.

Risks:

    1. Evolving Regulatory Landscape
    • Risk: Global regulations around sustainability and compliance are continuously evolving. TRACE must remain current with these changes to stay effective.
    • Mitigation: By leveraging RAG, TRACE can dynamically retrieve the latest regulatory information, eliminating the need for frequent model fine-tuning and reducing dependency on static data sources. This approach ensures that TRACE always references up-to-date standards and regulations, enabling ongoing compliance with minimal manual intervention. Regular updates to the external data sources will further enhance TRACE’s ability to provide real-time, relevant compliance insights.
    1. Data Quality and Source Reliability
    • Risk: Inaccurate or outdated data could lead TRACE to produce flawed compliance insights or miss regulatory violations.
    • Mitigation: Prioritize data validation steps, vetting sources for reliability, and implementing quality checks. Integrate feedback loops with supply chain partners to identify and address any discrepancies in real time.
    1. Privacy and Data Security
    • Risk: Compliance data, especially when they will be eventually shared with external suppliers, must be handled securely to prevent data breaches.
    • Mitigation: Regularly review and update security measures to protect sensitive data and comply with global privacy regulations.

What is your estimation considering needed resources and work packages?

How are you planning to spend the innovation booster awarded amount in case you will win the application?

The Innovation Booster funds will be distributed across the core work packages to optimize development:

This allocation ensures that TRACE’s PoC is developed effectively within the six-month timeline, meeting both feasibility and proof-of-concept requirements for future scalability.

Generally speaking, how can the Innovation Booster – Fashion & Lifestyle help you?

The Innovation Booster – Fashion & Lifestyle can support TRACE in key ways:

    1. Feasibility Study Funding: Innovation Booster funding will provide essential financial support for TRACE’s PoC, covering data acquisition, integration, and visualization needs. This ensures TRACE is tailored to HUGO BOSS’s global compliance requirements.
    2. Access to Industry Experts: Connecting HUGO BOSS with sustainability and regulatory experts will strengthen TRACE’s alignment with the latest industry practices and regulatory updates, ensuring relevance and adaptability.
    3. Networking and Partnerships: The Innovation Booster will facilitate connections with other companies, regulatory bodies, and sustainability initiatives, enabling real-world insights and testing through HUGO BOSS’s supplier network.
    4. Research and Knowledge Support: Access to research and best practices within fashion and lifestyle sectors will guide the continued refinement of TRACE, enhancing its effectiveness for compliance and sustainability needs.
    5. Accelerated Innovation: Through both financial and expert support, the Innovation Booster will help bring TRACE from PoC to full development, giving HUGO BOSS a market edge in compliance and sustainability.

These resources are crucial to TRACE’s successful PoC and timely deployment, establishing HUGO BOSS as a leader in sustainable, compliant fashion.

The overall objective of the project, TRACE, is to design an advanced AI-driven compliance system that ensures global adherence across diverse material supply chains, including textiles, metals, plastics, and more. This system aims to reduce greenwashing and foster transparency by providing companies with precise and real-time insights into their supply chains' environmental and social impacts.

TRACE will monitor compliance risks related to organic certifications, environmental regulations like the EU ‘Green Claims’ directive, and standards such as REACH, using AI to identify inconsistencies between marketing claims and actual production practices. By analyzing supply chain data, TRACE will alert companies of potential legal risks associated with non-compliance and highlight areas for improvement.

The AI system will integrate with existing sustainability indices and third-party certifications, but it will go beyond generalizations by ensuring that each product claim is supported by verifiable, product-specific data. TRACE aims to empower businesses to maintain genuine sustainability practices, ensuring transparency and accountability in marketing. By helping companies avoid misleading claims, TRACE not only protects consumers but also fosters a more sustainable market landscape. Ultimately, the project seeks to make compliance a manageable, integrated part of operations, guiding industries towards long-term sustainability goals while minimizing legal and reputational risks.