Can you tell us briefly what is the idea behind Circulor?
Hello. My name is Douglas Johnson‑Poensgen and I am the co-founder and chief executive at Circulоr.
Circulor business is traceability in supply chains. We help our customers to prove and improve their ESG performance. ESG stands behind environmental social and governance that includes, for example, demonstrating sourcing critical raw materials like example cobalt used in the lithium-ion battery supply chain, which has concerns around child labour, or other materials for example nickel which have concerns around environmental damage.
So we are actually using the flow of materials, specific bits of ESG data including embedded carbon in order to digitise the supply chain and support procurement professionals downstream brands from using procurement as a tool for driving greater sustainability, for example.
What challenges do your company address in terms of the raw materials supply chain?
We support customers to demonstrate responsible sourcing, whether that is for raw materials that cause environmental damage or association with environmental damage that will potentially be associated with child or forced labour of the supply chain. An example of that might be to trace cobalt from mines all the way through EV (electric vehicles) batteries to demonstrate that none of that cobalt has come from artisanal mine sites where there is a risk of child labour. For example geographical places like the Democratic Republic of Congo.
How’d you managed to provide the right balance of visibility and control?
When you’re looking to manage risk within a supply chain and of course you’re digitising what’s going on within the supply chain, there’s a concern around not creating too much transparency because of course commercial confidentiality plays an important role within these supply chains. There’s a difference between traceability, which helps manage risks for example of where something has come from or to help, for example, understand the amount of embedded carbon that is being added by each participant in a supply chain, that is not the same as full transparency total disclosure of absolutely everything within that supply chain, including for example, who’s buying from whom in what quantity and what price. So there’s a difference between traceability and transparency.
What is unique about your approach?
We were the first to be able to demonstrate the ability to track raw materials from mines all the way through the supply chain to end consumption, where those materials change between the source, multiple times on their journey through the supply chain to the point at which they get incorporated within a product. I mentioned cobalt earlier. I’m going to stick with that just so I don’t use too many analogies. Cobalt is obviously miners, or that all goes into a smelter then goes into fine refining it’s amalgamated with other materials, and eventually, that is used to manufacture the cathode, which is of course, alongside the anode, the key elements of a lithium-ion battery. That material has undergone multiple steps of transformation on his journey, and so you have to be able to connect the input to the output of each one of those industrial processes reliably multiple times through the supply chain in order to be able to demonstrate traceability.
Reuters reported that you know the first example of doing this with a compliment or called tantalum in 2018. We’re now working with a whole variety of materials, not just in the battery space but also with things like the chemical recycling of plastic waste. That at the moment is what makes our approach unique, the ability to track through industrial processes.
What’s the role of the different blockchain technologies and how do you integrate them into your business?
Well, our platform is built on hyper ledger fabric, which of course is an open-source blockchain technology layer. But blockchain itself doesn’t solve this problem of improved visibility into a supply chain in order to manage risk. You have to combine it with other technologies. In our case, that is a combination of IoT, traditional databases where a lot of the business logic is held blockchain and also machine learning, used for example for identifying anomalies in the chain of custody within the supply chain to identify places where audit action should be focused. No digital technology today can completely replace any physical due diligence, for example, that you might do at a mine site, or as a participant within the supply chain.
How is Digital Technologies transforming the supply chain?
10 years ago, the ability to digitise the supply chain was far more limited than it is today. I mean we’ve had EDI systems, for example, we’ve had, procured pay systems for some time, and within the developed world, there is a significant number of track and trace type solutions available for managing logistics. What has not been possible is to digitise the supply chain to tear, N, all the way through the supply chain to actually see what is going on within the supply chain. I think over the last 12 months of COVID, we’ve all come to recognise the relative fragility of our approach to supply chain management and the need to better understand what goes on all the way through the supply chain to the source of critical raw materials. Today, car manufacturers have for example suffered from a global shortage of semiconductors, some car manufacturers have actually had to stop production of some models because of it. And the reason for that is the inability to match demand forecasting, with a true understanding of supply chain risk, all the way back to the source of raw materials.
And I think that’s how digital technologies are starting to impact the supply chain. 10 years from now I suspect supply chains will be well digitised and these sorts of tools such as the ones we produce will have become relatively ubiquitous.
How do you manage to find good tech professionals and how do you cope with the shortage of staff within the tech industry?
We’re quite lucky because we’re a business with a social purpose. In this case to prevent the exploitation of people or planets in the supply chains that we serve we find it relatively straightforward to recruit good technology talent, partly because we’re using a combination of technologies. Some are more mature than others but, you know, industry 4.0 Technologies clearly do attract people to try and you know for example become blockchain developers or work in machine learning. But when your business is doing something meaningful, it’s much much easier to attract talent to come and work for you because what they will do every day will make a real difference in the world.
Can you tell us what the key barriers to modernising the supply chain are?
So the key barriers in my view to modernising the supply chain are actually the status quo. We’re used to, you know, cascading questionnaires through the supply chain for example, around responsible sourcing of conflict minerals compliance, and just returning paperwork. The entire supply chain industry is driven by bits of paper and questionnaires and Excel spreadsheets, which is the most predominant technology in the supply chain today. And although things like control tower solutions have been around for a while, and a variety of supply chain digitization tools such as ours are now coming to the fore, the status quo, what is done today is still the primary way of running supply chains. I think, overcoming that status quo and having people realise that new technologies will not only help them save money but also materially improve efficiency, as well as manage risks better will take a little bit of time.
How to build an organisation with a successful supply chain?
My view is that the role of procurement is changing. Procurement is used to be the function of buying. Increasingly procurement is now responsible for managing the supply chain, including the potential disruptions and risks within that supply chain, and driving sustainability, particularly of large manufacturing organisations. If you take for example an electric vehicle 70% of the entire carbon footprint, the manufacturer of that electric vehicle is from all of the suppliers. How can a car manufacturer achieve net-zero, if they can’t find a way to measure, and then manage down that embedded carbon within their supply chain?!
How has the COVID-19 affected the supply-chain development process?
When the world went into lockdown in March 2020 global carbon emissions fell by about 7% which is what the Paris Climate Agreement requires every year.
And why was that?
Well, obviously we all stop travelling. But obviously, we’re at home and we’re still consuming energy and, you know, ordering things from Amazon and so global supply chains we’re still doing everything they did previously. And what it’s done is shone a light on the contribution of the global supply chain across all industries to pollution. And I don’t think we will have that brought into such sharp relief, had we not had COVID on even consumers on, you know on the street, realise that things like face masks and alcohol gel relied on all sorts of complex supply chains, and it took a while for them to gear up to meet global demand. So, it’s thrown the discipline of supply chain management into sharp relief in a way that didn’t really exist beforehand.
What will the future supply chain look like?
One word digitised.
I think digitization that has existed between for example an OEM and a tier-one for some time is going to flow down through the supply chain so that actually we will collectively have a far clearer idea of what is going on within supply chains. Procurement professionals will have the ability to manage things like the sustainability of their supply chains as part of their organization’s own NetZero ambitions.