The B2B Sustainability Startup Landscape — Supply Chain Transparency
Sustainability is one of the most talked about topics in tech right now. A general acceleration in awareness, powered also by the generational shift, has brought ESG issues at the core of every strategic choice both in businesses and in end-consumers’ lives. But how can we make sure that these efforts are widely disseminated in the whole economy? Which should be the right transmission channel?
Based on our initial B2B Sustainability Landscape, which we have shared with our friends from Unternehmertum Venture Capital and TechFounders, we have been developing deep dives on selected sub-categories which we will each be sharing over the coming weeks, including this initial one on supply chain transparency below.
Supply chain embraces each step of the value creation process. Having a clear visibility over the entire supply chain will derive an increased level of consciousness around sustainability issues for every stakeholder, together with a superior level of service delivered. Only with granular traceability it is possible to single out each factor, together with its contribution to climate change and concern for sustainable and responsible operations.
Key trends
Governance, Regulation and Security
An increase in public awareness relating to sustainable sourcing and climate change has resulted in changes implemented within the European and global regulatory landscape, including several initiatives which have recently come into effect or will do so in the near future. Some examples are the Conflict Minerals Regulation, the Carbon Border Adjustment Mechanism and the new Batteries Regulation.
Consumer Awareness & Demand
Consumers require full, real-time visibility over their purchasing journey. Their sentiment is increasingly revolving around the environmental and social considerations of their spending choices. As a consequence, the demand for live data, at every step of the value chain, is now at an all-time high, which means logistics and supply chain market players are urged to focus on implementing cutting-edge solutions to foster the customer’s trust.
Improved Profitability & Investor Awareness
An efficient traceability management acts as a strong “confidence booster” for companies, entailing positive and profitable effects on customer relationships, as well as optimized operations and significant savings. This has also been recognized by investors, who are increasing their pressure on companies to address sustainability and environmental efforts, which includes traceability management. For example, BlackRock voted against the management of 53 portfolio companies like Daimler, Deutsche Lufthansa, and Volvo, which failed in advancing better climate-related disclosure policies.
Technology enablers
In the past year, numerous companies have created and advanced their solutions to address the trends and issues mentioned above, whereas the majority of them are leveraging at least one of the technologies mentioned below.
IoT sensor technology
IoT-enabled sensors can provide Logistics Service Providers with a clear tracking overview, from manufacturing site to container and shipping management. Moreover, sensors have now reached an unprecedented level of accessibility, with micro electromechanical systems advancements driving a decrease in prices. Combining sensors with efficient software platforms, like Nexxiot does, enhances the release of strategic intelligence to clients and stakeholders to reduce CO2 emissions from transportations and improve performance at the same time.
Blockchain
The supply chain represents one of the most “natural” blockchain use cases. Transparency and traceability can be immediately boosted through blockchain, together with a significant reduction of administrative costs. This can be achieved by a secure, resilient, and dependable record of every transaction or digital interaction occurring in a process. In this context, companies like Circulor or Circularise have developed applications to trace materials from the point of origin. The systems allow core stakeholders to follow raw materials through the entire production process and receive signals of potential ESG-related issues (e.g., enabling suppliers and buyers to follow materials like cobalt or tantalum, which are exposed to issues such as theft of natural resources, environmental damage or any human rights abuses).
RFID Technology
The increased level of RFID technology adoption in the supply chain environment has led to a deepened affordability of the solution. However, this technology still holds significant potential to deliver great results in terms of full process automation capabilities. Within the sustainability framework, a good use case is represented by the fashion industry. After the rise and (ethical) fall of fast fashion, businesses and end consumers have become more interested in tracking the origin of the product and the social conditions in which it was produced.
Geospatial Data
The possibility to leverage geospatial data for increased supply chain visibility represents a great opportunity. Based on a single map view, logistics professionals can quickly explore real-time operational data extracted from different critical infrastructures (e.g., roads, bridges, railways, airports) and actively manage risks along the way. Companies like Satelligence help in providing insights on environmental impact through satellite images e.g., through a live feed of all deforestation events in the respective sourcing and investment areas.
Satellite geospatial data is currently accessible mostly through public sources, like NASA and USGS. In the long run however, a pivotal differentiator in leveraging geospatial data can include the possibility for companies to directly obtain and “own” this data from proprietary satellites.
Key challenges
Further digitization of supply chain processes enables every organization to have better control over the impact of their actions and respond to any sustainability-related issues, which would have previously remained uncovered. However, Gartner reports that 50% of organizations still have to embark on their supply chain digitization (and visibility enablement) journey. The knots that still need to be entangled for the deployment of a fully visible supply chain are several, even though a number of them are already addressed by newly founded and purpose-driven startups:
1. Lack of infrastructural technological readiness
As the majority of corporates are still nascent in their approach to sustainable sourcing and tech-enabled transparency, many companies addressing those issues have chosen to provide significant consulting and professional services helping them advance their technological readiness & leverage the insights for increased quality and applicability of their product.
2. Incomplete data and analytics operations supporting the transformation
Tracing of materials and products throughout their journey can remain superfluous if the data at the source is not collected adequately, whereas this still remains a mostly non-digitized activity (e.g., under what conditions materials are sourced at the place of origin) and is dependent on human input.
3. Inadequate planning of supply chain operations with a lack of cohesion among the different links
Collecting and incentivizing various supply chain stakeholders to contribute data can have a significant impact on the level of insight and implementation of actions. Both classic supply chain visibility solutions as well as those focusing on ESG related issues like Sustainabill are addressing this through interactive platforms connecting the different supply chain stakeholders together with relevant information extracted at each step.
Outlook
Even though there is significant attention targeted at setting measures to increase sustainability efforts within the supply chain, there are still challenges to be addressed. However, it does also come as an opportunity for both corporates and company builders to help co-create new solutions and define how sustainability should look like for companies and consumers in the future. We see this less as a trend and more of a fundamental change in perspective, benefiting mostly those who are eager and bold enough to address them ahead of time, thereby creating a first mover advantage and securing the benefits of being a pioneer driving both customer value and cost savings for themselves and the entire value chain.
Questions, comments, feedback? Or just would like to talk? Find me on LinkedIn or shoot me a message at vanessa.pinter@dplus.partners
