The role of digitization and enterprise software in corporate climate action doesn’t snag the same headlines as other climate tech, but it’s vitally important in operationalizing sustainable business measures. Carbon accounting and management software really came into its own last year, spurred by corporate net-zero commitments, and it looks as if 2022 could represent a tipping point for supply chain software that empowers sourcing decisions point to net zero.
Last week, one of the best-known companies working on the supply chain visibility challenge, San Francisco-based Higg, disclosed a $50 million Series B round that was co-led by Silversmith Capital Partners and Galvanize Climate Solutions, the firm managed by billionaire activist and former presidential candidate Tom Steyer and investor Katie Hall. Originally developed for the apparel industry as a tool to support the widely used Higg Index, the platform connects more than 50,000 brands and manufacturers in 100-plus countries; it covers consumer products categories including toys, outdoor items and home goods.
This statement by Higg CEO Jason Kibbey underscores the motivation for the infusion, which will be used to fund its industry expansion: "In this new era of expectations, more businesses will be required to have credible impact data about their supply chains. The truth is that measuring owned operations is easy. For consumer products companies, the challenge is obtaining accurate data on the non-owned factories that make the goods — and on the materials and products themselves."
I’ve opined quite a bit about supply chain software in the past three years, mostly focused on one subsegment within — traceability mechanisms, often enabled by the blockchain distributed ledger technology that underlies cryptocurrencies. Three other primary focuses for these applications: ratings (such as those provided by the likes of EcoVadis), supply chain emissions tracking (like Vaayu, which disclosed $11.5 million in seed funding last month) and sourcing controls (which has my attention this week). The latest edition of the always excellent Climate Tech VC discusses the categories in more depth.
When it comes to managing relationships between companies and their suppliers for sustainability metrics, rising players include Supplyshift of Santa Cruz, California, which disclosed $10 million in funding late last year; and Minneapolis-based Inspectorio, which announced a $50 million Series B round in January. Both focus on relationship management that embeds ESG factors into the KPIs. Another startup, Smarter Sorting of Boulder, Colorado, is taking a different approach to the problem: The firm, which announced $25 million in funding from G2 Venture Partners in March, has created a granular database of information with more than 456 billion data points about the environmental attributes and chemical makeup of products from cosmetics to paints.
Another company I’m watching is Sourceful, a U.K. startup based in Manchester, England that announced a $20 million Series A round in late March, led by Index Ventures. (The firm previously backed Dropbox, Deliveroo and Just Eat.)
Sourceful’s specific focus is on helping businesses choose packaging suppliers — it’s starting with boxes, bags and protective materials related to e-commerce — that have been vetted for emissions along metrics such as material extraction impact, manufacturing processes and transportation policies.
When I spoke with the co-founder and CEO, Wing Chan, about the venture, he said companies using the platforms to source packaging can currently choose from among about 100 suppliers. Right now, customers can compare the impact of vendors in the same category (such as cardboard box suppliers); eventually, they will be able to compare materials. There’s no fee for customers or to be listed on the site; Sourceful takes a commission on the orders.
"We are looking a lot at plastics and what comes next … Is there plastic that is verifiably recycled? Are there plant-based alternatives? Could these plastics become non-plastics in the future," Chan told me when we chatted.
As has been the case for sustainability management applications, you can expect the established enterprise resource planning software companies to make a play for expansion into sustainability by wielding their existing influence within IT departments.
Two companies doing just that are Workday and Coupa. The former is adding features to its existing financial management software that will help companies start collecting ESG-relevant data and risk metrics. Likewise, the latter is adding analysis features to its procurement management software that help companies better understand how buying from certain vendors will affect their own corporate commitments for Scope 1, 2 and 3 emissions reductions, how those relationships could affect governance or how they contribute to supplier diversity goals.
"We don’t want this to be a separate activity, we want it to be baked into day-to-day spending decisions," said Donna Wilczak, senior vice president of product strategy and innovation at Coupa, when I spoke with her about the new capabilities. Among Coupa’s big customers: BMW, Cisco and Procter & Gamble.
What technologies do you believe will be vital for understanding and tackling Scope 3 reductions? Share your ideas with me via LinkedIn.