The world wants sustainability. After decades of false starts, there is a consensus among nearly all nations and the majority of people believe that humans can and should build a sustainable world. The corporate sector plays a critical role in achieving such a goal given the importance of consumption in the world's richest economies to fight toward more sustainable, inclusive societies. While consumers are a key pillar in the fight to achieve resilient, regenerative economies, they are generally confused on how to act on their beliefs.
Furthermore, convenience and distance are as, if not more, important attributes than sustainability for consumers. Standards (or eco-labels), and the network of standard owners and certification bodies behind them, were created with the promise of simplifying choices for consumers too busy to analyze product sustainability characteristics.
While standard owners and certification bodies may hold the most sustainable procurement data, their digital systems are woefully inadequate for mainstreaming sustainable procurement. We identify four major issues that should be addressed individually and where possible in coordination:
Lack of APIs
Almost all standard owners and certification bodies do not have application programming interfaces allowing for third parties to easily access their data. Where they have invested in developing an API, the operations within these APIs are generally structured in ways that do not allow scalability in utilization. Further, these APIs are not well documented.
A multi-line retailer attempting to verify sustainability claims across a reasonable number of standards their vendors use would need to employ a platoon of developers to integrate with these APIs. As a result, only the most sophisticated retailers and eCommerce platforms will be able to comply with growing regulations.
The irony here is that many of these standard owners exist to democratize trade and access to small to medium suppliers and producers. Their current strategy for engaging the buy side of the market supports increased concentration and lack of competition, making sustainability the domain of only large companies.
Facility Geotagging
In a world of Google Maps, normalization of data on facilities to include geotagging may seem a trivial exercise. Yet, the sheer breadth of countries that a medium-size enterprise may source across makes what may seem a trivial exercise a challenge for a non-profit standard-setting organization or all but the largest of certification bodies.
Despite the challenge, geotagging facility data in a consistent format is a critical exercise in making the supply chain known. This information is valuable to both corporate internal management and a retailer or brand’s partners. Internally, the whole organization can use such information. For compliance officers, such data composites can be mapped against third party geopolitical risk and climate modelling tools to prepare for a more fragile world.
Sustainability officers can use such information alongside point carbon estimates to understand the environmental impact of product journeys. Marketers and brand managers can help consumers understand the people and processes behind the products at eCommerce and retail points of sale.
Externally, distributors can use such information to better merchandize product offerings and generate, rather than respond, to consumer sustainability demand. Application developers and software platforms can layer sourcing information as a service into their applications to enrich their own data narratives (for instance, a domestic retailer showcasing all locally manufactured brands). Hedge funds and investors can use information to better allocate capital to firms with resilient supply chain strategies.
Merchandized Scope Certificates A scope certificate is a lego house of at least five different data composites: 1.) Product information and 2.) Facility information that meets a 3.) Standard as defined by 4.) Standard Owner audited by a 5.) Certification Body. Today, the world’s for-profit certification bodies are the repositories of scope certificate information. This information is currently structured in a format that is useful to very few stakeholders. Consider the structure of the data below from one of the largest certification bodies in the world. There are several challenges for any stakeholder that wants to use this information in an external environment: There is no real product information, only product categories. Compliance information is not tied to product merchandizing information (as far as we can tell, no certification body has product pictures and attributes). The product categories themselves vary across all different certification bodies so there is no holistic taxonomy. Facility data for where the product was produced or processed is non-normalized. How can a local distributor easily source those “Children knitted garments – 100% organic cotton”? How can a textile manufacturer choose those “Carded yarns”? How does an eCommerce company verify that the product in their stories that carries a GOTs claim is the same in that database? How does a researcher use this information to forecast sustainability trends? How does a young software entrepreneur build an application showcasing local retailers carrying sustainable clothing? Collaborative Transactional Certificates Transaction certificates are a lego castle of at least 9 data composites. Specifically, a transaction certificate defines a 1.) Transaction between a 2.) Buyer and 3.) Seller coordinated by a 3.) Inspection Body selling a 5.) Product from the seller from a 6.) Facility that meets a 7.) Standard to be used in a 8.) Product from the Buyer, all auditing by a 9.) Certification Body. Transaction certificates are critical to sustainable procurement because they track how a sustainably produced good moves through the supply chain. They form the basis of most Chain of Custody standards. Despite their baseline utility for compliance, today’s transaction certificates are woefully inadequate for every player in the ecosystem. Transaction certificates face all the challenges of scope certificates with some additional challenges. These include: Transaction certificates are measured in the weight of the product sold, e.g., 2000 kg of cotton. This will for a measurable sale is quite useless to a compliance officer trying to tie a group of finished goods to an original product. It nearly encourages fraud when translated into marketing campaigns as a unit within a store (for instance a Fleece jacket) is seldom actually traceable back to its origin. Different product segments (yarn vs. textile vs. shirt) all have different product characteristics. Coordination of players within the supply chain requires complex and standard taxonomies for product templates, similar to how ESG required standardized indicators. By building better sustainable procurement taxonomies and then coordinating data sharing across entities, search and information costs will be reduced for both wholesale and retail purchases. As demonstrated in many other markets, the reduction in those search and information costs should stimulate demand. At CommonShare we are currently working with our partners on several of the challenges addressed here. We welcome feedback and collaboration with organizations that are seeking to build common standards for sustainable procurement. Send us a note at partners@commonshare.com to explore how we can work together.