Developing your technology infrastructure and applications for the era of sustainability

SPEAKER A

Hello, everyone. My name is Chris Helias. I'm from Accenture, part of a small strategy group that focuses on commodity markets. Today we're going to be talking about the impact that sustainability is having on the technology landscape of our organizations and how we can respond to the new challenges of ESG and sustainability that they bring and how technology can support that. Maybe just quickly we go around and introduce ourselves and then we can jump into it.

SPEAKER B

Hi. Hello. Great. Hi everybody. My name is Darcy. I am an environmental sustainability manager with FGF brands. We're one of the largest bakeries in North America. Myself and the sustainability team work on projects relating to packaging, sustainability, sustainably sourced ingredients, waste reduction, and education. I've been in the CPG industry for about five years now, and prior to that I was a biologist with the Nature Conservancy of Canada and the Nautical Saga Valley Conservation Authority.

SPEAKER C

Hi. Magesh Nair, ex group CEO of ion and ex CEO of CCI as well. Not a sustainability expert. I've sat in enough investment committees to push back on sustainability investments, capital allocation, that kind of thing. So I can come from that angle. I did run one of my portfolios where methane based green energy plan bought 24 plants in the US. It was a co portfolio called Ingen Company, so we can add to that perspective as well.

SPEAKER D

Hi everyone. Judd Orr. I'm with Mars, Inc. You probably know our products as Snickers bar, Skittles, Iams, pet food and some of the others. I'm on our price risk management team where we hedge all of the commodities that we use and consume, and that does touch on some of the sustainability issues there. Prior to that, I was a trader market maker in gold and silver options for four years. So good to be here.

SPEAKER E

Hello. Hi, Richard Williamson. I'm founder of Gen Ten. We're a technology company that's been focused on commodity supply chain digital flows, if you like. Our mission was 24 years ago to bring sustainability, traceability and value to commodity supply chains through digital tech. It's nice that it's now on everyone's agenda to try and solve some of those problems. The persistence is there and I guess our tagline is work better together. And I figured that was quite fitting both internally within the company with our clients. What we do is in our technology, we try to bring collaborative processes and workflows to the huge amounts of unstructured data and processes that are amongst our clients in these commodity supply chain spaces.

SPEAKER A

Great. So it's a big topic when we talk about sustainability and the new challenges that we're facing it covers a lot of ground. So there's reporting. There's just emissions reporting of scope one and two and three, tracking that data and reporting it accurately, either for regulatory reasons or just for the individual mandate of the company. But it also gets into carbon credits, whether you're generating those credits, buying those credits as offsets, or even getting into carbon trading. And then to your point a little bit, there's traceability. What are the materials we're using? What are the sustainability attributes of those? Are we sourcing from regenerative agriculture? And how do you trace those attributes along with the physical product through the supply chain in a way that's defensible, in a way that you can, whether you're selling it onto your customers with those attributes. And then there's even additional topics around recycled plastics or recycled materials in our packaging, things like this. So it's a really broad topic. There's a lot of different aspects, but all of them, what they have in common is that it's maybe data that we weren't collecting, we weren't having to manage before. And there's implications in terms of, you know, the challenges to actually manage that data. And sometimes, you know, depending on the regulatory regime, there can actually be pretty significant consequences. I know I've talked to, talked to companies where they faced fines because, not out of malice, but because they didn't have the right data structures in place, they've incurred fines and other penalties. So it's a big space to navigate. Maybe just turning it over to the panelists, where are you focused? Maybe Judd and Darcy, who are kind of on the business side, where are you focused today in terms of your sustainability efforts, and where are you investing in technology to support those?

SPEAKER D

Go ahead.

SPEAKER B

Yeah. So I'm glad you brought up the scope one, two, and three missions, because that's a big area for us right now. So we've recently partnered with a third party to automate the capture of some of our scope one and two data. So that's all of our utility information. So natural gas, water, wastewater, electricity. What's really nice about this is you have a second set of eyes on your data that's coming in. You know, we know that there's human error. Both say, from my team's perspective, maybe they miss a decimal or they put a number in wrong, but there's also errors from a utility perspective. So just having that second set of eyes, automating that data coming in when we have 20 plus facilities across North America is quite helpful. So it's a time saver for our team as well. In that platform, we're able to enter the remaining of our scope, 1.2 emissions, and we're able to survey our suppliers to gather our scope. Three information. And one of my favorite things about the platform is that is how easy it is to share that information. And I think this is a theme that's pretty common, is that, you know, the information you're getting has to be understandable not just by the subject matter experts, but by everybody across the organization if we're going to enact meaningful change.

SPEAKER D

So I would have to say that it's, this is a relatively new concept for, for our company in general. We've been around for generations, but we're doing it and because consumers want it. So there is a lot of new data there that we have to look at and poke and prod. Not only that, but what are some of the risks and implications is really where I come into play from a carbon standpoint. And where can markets go? Where can we get hurt from that perspective?

SPEAKER A

And how are you like, how are you thinking about risk management? When you think about on the commodity side, whether it's carbon as a commodity that can, or even commodities that, commodities that have environmental attributes attached to them, how do you think about how you risk manage those? Are there changes in the approaches that you have to take versus your traditional commodities or inputs that you're managing?

SPEAKER D

That's a good question, because in other commodities you could aRb or do some sort of arbitrage to strip out and kind of don't want to say skirt the rules, but maybe like you're trading it right, but here you don't want to violate the spirit of some of these sustainability programs. So it's more straightforward in terms of looking at risk directionally, like a PPA or VPPA is probably a good example. You don't realize, most of the people involved don't realize what type of market risk comes with essentially a twelve year or ten year swap on power. So at least getting those conversations started is where I'm at.

SPEAKER A

The other question is, as you think about investing in solutions and technology to support these various efforts, you know, this is a space that's changing very rapidly, both from a regulatory standpoint. Also in terms of what schemes are out there, what consumers and what investors care about, how do you take decisions of where to invest, how can you be investing in a way that allows you to be nimble rather than putting a ton of capex into maybe a technology stack that might be obsolete very quickly?

SPEAKER C

First statement made by one of the head of trading comes to mind in my past life. He said, I want to be compliant, not world class in compliance. So it's a very interesting statement. First time when you hear him, like, what does that mean? Like, okay, so at least he's saying, good, be compliant. So if you look at regulatory thing and compliance, Europe takes the price on that, as you all know. So they are always leading in the space. So it's an evolving space in terms of rulemaking and all that. And then you as company industry try to do what you got to do, to report and collect data and all that. The worst is doing nothing. You don't want to be non compliant and not caring enough to put in any system or process, at least a spreadsheet and a person. So I'm starting from there, saying, you better start moving and start doing something and start tracking what you can do the best, and then eventually grow out. And not too fast, not too much capex. Why? Because by the time you get there, rules are changing. Right before ESG came in, we were all focused, as we used to call it as HSE. People know that as health, safety and environment. However, you jumble up the words. So there was an environment in HSE. It's nothing new. Nobody wanted to burn the planet by intention, right? So then comes the ESG as an investing focus, then gets the carbon credits, which is a monetary focus. You can make money off of it. Then you get the Rin credits, which is tax focus. So it's evolving. So sometimes it is. Just tell me, how much are you burning out? How much carbon are you outputting? All your footprint capture. Start from there. As I said, don't want to be world class. Do something first and keep pace with all the rulemakings. Right. Every regulatory body is meeting and meeting and meeting and then evolve and they publish. Then there is the notice period of where comments are collected. So you want to keep pace with all that at the same time, not build an SAP implementation for compliance.

SPEAKER A

I feel like, not to put you on the spot, but you mentioned that gen Ten has been in this space for a long time, and so you've been through significant changes. I'm curious, when you're working with clients, how you advise them and what you've seen, what is your take on how to invest in technology in a space that evolves like this?

SPEAKER E

Yeah, I mean, really, to your point, it's start quick and start small and keep an agile mentality and culture within the organization. Right. It's always good to talk so there's a Russian, a bit of a scramble about, well, okay, well, what is sustainable? What do we have to do? What are the KPI's? There's no standards or whatever. And you kind of, I mean, it's already happening. I'm not speaking, I don't know about you guys, but there is a risk, let's say, of creating silos of sustainability experts, of operations experts, commercial experts, of the people who are looking after the carbon credits, and they're under immense pressure. I mean, over in Europe, you've got this EUDR, the deforestation regulations. January 25 is the deadline to be compliant where you have to be able to prove that no trees were hurt in the processing of this bag of coffee or whatever. So people trying to scramble around to get the data and the processes together, and there's a group of sustainability experts who have been tasked with it, and they might get stuck on, well, hold on. They haven't decided what the framework is yet or, you know, what are the KPI's? How do I know if I'm going to be doing this right or not? And they may have run out of time in the day to go and talk to the operations guys to see what, what information is already there. They may have come from a different background, so they wouldn't necessarily know what questions to ask them. So obviously, there's a lot of opportunity for improvement in that sort of background. How have we been advising the clients? I mean, we've been taking, I mean, if I can plug a little project we were doing down in Brazil. I mean, it's not a little project. It's a really cool project, really, where, you know, we've got, and we did it in the cotton business. It's not part of the Eudr yet, but it's units, bales, that need to be traced all the way through the process. And they need to know which farm it came from. They need to know what the car, what the scope, three carbon emissions were, the logistics, et cetera. But we also knew that it was operationally, it was hugely inefficient in the commercial team for them to actually process the quality data of each of these individual, I mean, they're shipping hundreds of thousands, millions of bales of cotton. Each one has twelve or 15 data points to decide on the quality. And in Brazil and in other places, but where we were, there's like 100 different formats, spreadsheets, PDF's, et cetera, et cetera. And there's hundreds, well, tens of different ways of calling these quality attributes. So if I can use machine learning rather than AI, just to differentiate ourselves a bit. So we set about something to help them in scraping that data, processing it, teaching the computer to learn that format again, because instead of a day of somebody processing it, it was taking seconds to process. So that's already a good thing for the commercial team. Hasn't done anything on the sustainability yet, but because we knew that information also contained information about where the farm was, and we knew where to get the maps of where the farms were, and we knew that there were third party providers that do mapping of deforestation over the years with APIs, and we could bring that in as we're building that product. And because we wanted to bring sustainability to value, bringing those things together was kind of cool. And then with the tracking of the containers, we're using AI to track the ETA slippage on containers and vessels. But as a side effect or a byproduct, we know the vessel other stuff that helps you calculate the carbon footprint of that. So you're getting your scope three emission reporting done automatically, just by, at the same time helping with the operational efficiencies of those things. Now, if we'd have said to the people who are going to pay, we're going to do da da da da, it would either be no, or we're too busy, or it'll never happen. So we sort of did it stealthily by looking at the commercial side of this quality stuff and then opened the next page to show, oh, and we got this as well. So it was that sort of nimble, stealth like thing. But because we kind of knew what questions we. We wanted to answer for the industry. Sorry. That's what we did.

SPEAKER A

No, I think it's a great example. I mean, the, you know, one of the things we were talking about just beforehand was, you know, when you're competing for Capex, for any kind of investment like this, it's very hard. And I don't know. I know, Magesh, you have thoughts about this. To get that approval for something that doesn't have a bottom line impact, or at least not an immediately visible one.

SPEAKER C

Yeah, I think that's what I like. Sorry. That's what I like about this episode that you just shared, Richard. It's like, if you think about it, it is a little episode, but no offense there. So I know it's a valuable thing where if you come to me and ask for money just to be compliant, $2 million, you're out of my office in two minutes. Right. Versus you talk about make money commercially and really you know, get going. From a business case standpoint, everything becomes easier after that, right? Making a case to me and making a case to the board and shareholders and everybody. Nobody wants to be non compliant and pay fines either, don't get me wrong. Right? You want to do that and you're not going to get a trophy for putting in a million dollar system or do it with a spreadsheet. Sorry, Darshi, your spreadsheet continues. So that's how this thing works, right? You want to do the minimum and be compliant or find a business case to do a commercially viable solution. Because at the end of the day, every capex dollar is competing. There has to be a return. And either you make money or protect money or save money.

SPEAKER B

Only.

SPEAKER C

There are three departments. Which department wins in every company? Make money. Right? So you got to start from there.

SPEAKER D

I mean, I think you raised a good point though, when you talked about silos too. That's something that we have to push back against. And it's more about education also, because it's great if you have this cool platform that tracks everything that you need and internally it's good. But what about our folks on marketing or sales side or engineering or then you take it the other direction to our suppliers. And the data that they're giving us is frankly garbage. So how do you deal with that? You know, that type of thing?

SPEAKER A

Yeah, I mean, I think maybe the underlying enabler, I mean, ultimately is the data. And that data, as long as the value that data brings is not, you know, can bring value, whether it's in cost savings, whether it's in, you know, improved operational effectiveness, it can also serve these other goals as well.

SPEAKER C

And supply chain data and operations data by itself is a business case. It doesn't need compliance and regulatory and other things to justify if your supplier is not compliant. And imagine if you're Walmart. I know Mars is big as well. Companies like that who have been there for generations, you have muscle power on your supply supply chain. If your CEO gets on and say, only a vendor who is compliant with this standard template that I publish, you declare what you want, you send the form and say, you don't publish through this, you're not pulling into one of the trucks, is not pulling into my spot, right. All the suppliers was lineup. I remember decades ago when RFID showed up in our radar in my ConocoPhillips days, oil company days. If you're for the lubricants business and all that oil business, if you're not RFID compliant, there is no carton that's pulling into my warehouse. So all the suppliers had to build RFID technology to become my supplier, to be my supplier. So there is some power in negotiations and getting, at least for the major.

SPEAKER B

Players and just, yeah, adding to that, we see that happening right now. Like, we're in a situation where, you know, we have to comply with one of our major suppliers for certain requests for various levels of palm oil, say, production. And if we want to continue to be one of their main suppliers, then that's, that's the role that we have to face. And while, you know, when you first hear these asks, your first instinct might be, oh, wow, like, that's a big ask that's gonna. But really, these are the really great asks to get because this helps to shape kind of the framework of how you're gonna move forward. And, you know, I know we've moved a bit away from technology, but I think it still is the same, you know, font of that's what we need if we're gonna push the needle forward.

SPEAKER A

There is jumping back maybe a half step to what you said about supply chain and the value of that supply chain data. The other side of that coin, as you maybe are facing more, either regulatory or your counterparties are asking you to provide them more data about where you're sourcing your materials from, there becomes the question of, does that put your proprietary data at risk? How much are we revealing about our supply chain by reporting those things? And I'm curious if you have thoughts on that.

SPEAKER B

Yeah, I have a lot of thoughts. Really? I mean, I think the answer is yes. That definitely is a risk that is run. And I know it's not something that we very often like to share with our customers, where exactly we might be sourcing this certain commodity from. But I think there's ways that you can mitigate this while still kind of reaching the goal that you have. You can make the data a little bit more anonymous. Say, instead of saying, I sourced this barrel of oil from this farm in this country, can you make it more of a region or a country level? And in that case, from a carbon intensity perspective, you can still be getting that correct information. When we look at soil health and regenerative ag from region to region in a small country, that probably won't change that much. It's when you get to larger scales. So making the data a bit more anonymous, partnering with third parties who you know, you can trust to keep that data set anonymous. But, you know, we do run into problems here because, for example, we might source, say, from one supplier who sources from 1000 farms. Well, then what do you do in that case? You know, and I think when we consider this option, it can be partnering with these. And again, the theme of partnering, I think, is going to come up a lot in these conversations, but partnering with these large buying groups to create standards that each of their suppliers then has to follow will, I think, definitely become something that we see more and more in the industry. And I know we kind of talked a little bit about that, too.

SPEAKER C

So I want to add not only partnering with your suppliers, also when the regulators are making these rules, they give you some amount of input time and you definitely want to participate in your industry groups and rulemaking times. Really saying, for example, one thing that came to mind when this topic question, 2008 crisis, commercial banks took a hit and then everybody said, oh, every trading company and commodities will have to report all their trades. The crown jewel information of my database is who am I trading with? At what price did I buy national gas? And you want that information? As of last time I checked for any f agency, sorry, federal agency couldn't protect data. Social Security couldn't protect data. And you want me to give me my crown jewel of data to you in the software depository data repository. And how are you going to protect it? So bringing that to their CFTC level attention, having your industry consortium of group of people sitting and seat at the table and then weighing in, saying, what problem are you trying to solve? As opposed to getting into my trading book and then losing that information in public domain.

SPEAKER E

I was going to stay quiet for the rest of the panel because I'd hooked the microphone. But I do have something to say. It's like the regulators who, they have an understanding of the problem that they want to solve, and then they come up with an, we need to trace everything back to that place. You must give it to us. Without understanding the practical realities of how difficult it is to get that soybean that's been commingled with all these other millions of soybeans from different places in a silo that has been. It's difficult. It's expensive to empty a silo before you put more stuff in. Even so, they don't appreciate that. It's where the ideology and the reality are disconnected. So I think there are simpler ways and there are ways that already exist through certification and banding to give those levels of anonymity through the supply chains as it passes through the chain of custody. But I mean, it's good for business because there's lots of data that needs managing da da da for us. But yeah, there does need to be more of that conversation, communication, so that practical solutions are put in place to try and solve of this. Because you don't want to be sharing your crown jewels all the way down to the customer.

SPEAKER C

While we are at it, send me a copy is what everybody will ask for. A copy after that. My trading book.

SPEAKER E

And blockchain was the idea. It doesn't have to be blockchain, but that sort of encrypting of stuff to give it some unique hash key to prove it, I don't know. The standards and the requirements will change by the time it gets implemented when you have those collaborative platforms and blockchain.

SPEAKER A

Doesn'T give you a lot of privacy either, is the challenge scalability? I mean, on the other side, in terms of, there's the practical side of it, in terms of execution, in terms of protecting your data, in terms of being able to even collect and. And report that data. But another topic is how. And maybe this is stepping a little bit away from the technology side, but I know it's a topic that we all were interested in, is just how do you distinguish between the efforts that are actually going to move the needle and that we believe have impact versus greenwashing or simply gathering and reporting data or. I think there's been a lot of news around many of the carbon schemes, which are dodgy at best. And so how do you strike that balance? I know Magesh has thoughts, I know others do as well.

SPEAKER B

Yeah, this is great. And what I love, I don't say I love greenwashing. What I love about the topic of greenwashing is that it's so contemporary. I was just reading an article yesterday. I'm from Toronto and up in Quebec, which is a province in Canada, for those who don't know, you know, there's a lawsuit going on where some of our major retailers, the metros, the Costco's, the dollaramas, are being sued because they have these, you know, what they're calling recyclable or reusable bags that, you know, you buy at the point of sale. And they're saying they're recyclable, but they're not. They're not even recyclable in Quebec. They might be recyclable in 5% of the country, but that's not what recyclable is. And so, you know, when we look at the efforts that we're going to invest, invest time and invest capital in, these efforts need to be backed by the most contemporary science and information available, you know, when you're setting carbon targets, align with the science based target initiatives. Because we know that that's, you know, what, what science is telling us will keep global warming below 1.5 degrees celsius. And so it's, we really want to depend on, on the schemes that have that science background, you know, avoiding avoidance removals from a carbon credit perspective, you know, really just doing your due dil, due diligence and ensuring that, you know, you're doing your own background research and not relying on kind of face value from what other people are saying.

SPEAKER C

Yeah, I think I tried, I tried. I tried to avoid this topic. That's why the mic went around and came back to me. I think they, you know, the greenwashing thing is, if you pure. The last ten years of my career had been in the private equity world. So the reason I say that is prior to that, I spent about decade plus in the public company world, ConocoPhillips and oil company and all that greenwashing as a topic, or ESG as a topic, takes its own life form in two different modes, in public and private. As soon as you become private, you're not under the microscope and you really don't care about reputation risk because your stock price isn't going to kill you tomorrow. Right? Public company is all about reputation risk and public stock price and Costco getting sued. It's not just no good deed goes unpunished. That good deed is getting punished right now. Right? So all that, this is why you don't you want to be a fast follower, not a bleeding edge on sustainability, as much as our heart might be in the right place. But implementation is a different story. And implementation, even if you do it right, as per the new standards and all that, as Das explained. But even there, once the politics gets mixed, the rules changes depending on who comes to power and, you know, who really supports and how much they support and all that. I'm speaking from a us context, so I live in Texas. Sorry. Right. Full disclosure. Right. So everything takes its own form depending on where you are. If you're Germany, it takes a different form. Right? Completely. We know that. So this whole topic of sustainability changes depending on politics, depending on the timing. So you want to be very careful in jumping 2ft in. And even if you do it all with the right intent, it could be seen with a different lens and could be called as greenwashing. Even if you did the right thing at that time in available material. Costco supply chain guy probably did the recycling bag with the best intention and management mandate, with the best material he could get. But today he or she doesn't have a job, probably, and somebody is proving to somebody that, no, we didn't do it intentionally. That's all we could get at scale. Because if you're going to put it in every Canada Costco store, we needed that material.

SPEAKER B

Yeah. And I think what's interesting about that is, again, it brings up the importance of collaboration. If you have somebody in your organization who is a sustainability expert, I always say to my team, it might be our job or my job, but it's everyone's responsibility. And so when you're implementing any sort of sustainability initiative that is consumer facing, you have to run it by the appropriate parties who understand the verbiage, who understand legislation. For example, to call something recyclable, there's a threshold that it has to be recyclable in a certain percent of curbside communities. Right. And so it's making sure that you're including all of the right people in the conversations and add the layers of.

SPEAKER C

Impact investing and tax benefits.

SPEAKER B

Yeah, something like that.

SPEAKER D

I would add that, you know, Mars is a private company, so we're not really looking at our stock price. But to your point, it matters. And I think we look at it from not only the quality of our product, but the quality of the sustainability product. Let's say that we're trying to promote because it does matter. It might not matter in a share price, but if we do something that might seem like greenwashing, even if it's not, even if we armed our way to success, it's the consumer votes. In the end, that's really what matters for us.

SPEAKER E

Greenwashing, you can polarize anything these days, apparently, and that's one example of it. I like the voluntary carbon market as an idea. If I can't change how I'm doing something at the moment, I've got an option to offset it. In the meantime, I want to change my technology. But of course there is the humanity or the human nature aspect of it that maybe someone might take advantage of that. So nothing's perfect. I think with the red plus certification examples where people with the best intentions throw millions of dollars in net zeroing themselves these credits, only to wake up six months later being told that the credits aren't worth anything. So how does that help the next guy who wants to do good? He's like, I'm going to wait a bit for the frameworks to be a bit clearer and get some sort of security. I think, sadly, because there are, you know, you're talking about the US and Germany, you know, not mentioning Indonesia or Brazil or Argentina, Ecuador were to get that level playing field for everybody is. It's hardly possible, I would say, big challenges, but it shouldn't stop us all trying to, as you say, to make the product better, because we want to make the supply chain better, whether a regulator requires it or nothing. It's a good thing to get into, isn't it?

SPEAKER B

And I think it's worth noting that consumers do very much make their voices heard. I get multiple emails a week if we change the packaging. And even though in the grand scheme of things, it might be more recyclable, if the consumer is thinking that, it's not just based on their historic perspectives, we hear about it and we take those into account. So consumer perspective, 100% matter. And you can gain and lose customers very easily by making very small changes.

SPEAKER A

But I think it also, it underscores the importance of the moves you make. You need to be. You do need to be careful because, you know, the Costco example, it can go in your back and you undermine the consumer's belief in your sustainability claims when you do make them. I mean, I was just, I was at the farmer's market yesterday. I saw a little brewer with his beers. It says net zero beer, zero emission beer. And I immediately said, I don't believe that. I didn't for 1 second believe it. And I noticed that in myself because I think about these things a lot. And I realized how that's going to impact the ability of brands to differentiate themselves with consumers if consumers start to be overly skeptical of the different sustainability claims that we do make. We have ten minutes. Do we have any questions? Is there anything that people, topics that have come up people want to comment or question?

SPEAKER F

Yes. So I think, Jude, if I pronounce your name correctly, you mentioned that customer wants our data. And what data attributes do you think they're interested on? I know it may vary by industry and it may vary in terms of traceability, sustainability, but do we know what data they're looking for?

SPEAKER D

So just so I understand the question, do I know what data that our suppliers are looking for or we're going up the chain or down the chain?

SPEAKER F

Sorry, our customers. Our customers.

SPEAKER D

Oh, okay. Yeah. I mean, our customers really are looking at basically what we can do on the label is essentially where we're trying to prove or what we're trying to be authentic about, I guess you could say. So if we're 100% recyclable let's make sure that that's true. And it's not just a, it's not just like a several layers of different resins that can't be recycled or something like that. So really that's where, that's where it comes from. I think hopefully that answers your question.

SPEAKER F

Richard. Sorry, I would like to hear. So Richard's perspective. I'm very interested on the cotton attributes that we capture in Brazil. So in terms of impact, what data did you capture?
SPEAKER E

If you can share, I could share with you. So I mean, what are the attributes? I mean, it's all of the quality attributes of the HVI stuff, right. But you know, the farm, if you get the module data attribute does exist, you can get hold of the car files, get a database together of the, the car file is the map of the farms that go, that you can link your bales back to, et cetera, starts there and then moves forward to, you know, the container attributes that go along with the bales, etcetera. But yeah, because it gets quite specific in the cotton world.

SPEAKER F

In terms of impact, what data attributes do we plan to capture, carbon intensity, or do we look at emissions reduction and how do we capture? Are we there yet to know what we want to capture? Or we're just talking more generic at this point.

SPEAKER E

So the carbon emissions of the transportation, we have it for the ocean part of the voyage, the trucking upcountry, is a little bit more problematic. There is that. And then there's the, have any trees been harmed since 2020? Has it been farmed on recently cleared land, for example? I think they're the two main, on the ESG side of things, attributes that we are looking to solve the problem of.

SPEAKER F

Thank you very much.

SPEAKER B

And I think to add to your comment or question about what the consumer is looking for, and I find almost, sometimes it's what's missing, say, from your label. So if you're using sustainably sourced cocoa or sustainably sourced palm oil, that's more and more almost becoming a, like the norm of what consumers expect of some of our, especially large retailers like Mars. And when they're not doing that and they get caught not doing that, that's when the repercussions really come into play. I mean, I remember girl guides a few years back, you know, came out that they weren't using sustainably sourced cocoa and palm. And we've all seen the videos of the orangutans, like with the trees, with the bulldozers. And so those are the images that our consumers are starting to associate with, you know, when you don't follow or abide by some of these legislative, I guess, opportunities for the commodities that we know can have a more negative impact on the environment in their, you know, growth and then eventually cutting them down like the palm oil and the cocoa of the world.

SPEAKER E

It was something like 0.02% of the contents of the kitkat was from palm oil.

SPEAKER B

But that's what people, that's what people.

SPEAKER E

Think and it was years ago, the perception. So do you think there's a way to simplify the problem? And I can give a cotton example, I worked with a gene company, we did a bunch of studies on how do you decrease the water consumption. What we ended up realizing was can we just label non irrigated cotton versus irrigated cotton? That fixes your irrigation problem? Yeah, I mean there are those sort of, you know like the, the step by step wins. I mean it's not perfect, right? Because even with the un irrigated stuff, what are you measuring and how do you measure etcetera. So that was a simple solution to try to address the scratch the itch, right? And it's finding lots of those examples. I mean as I was saying before, some of the traceability requirements, I saw something about a pen. You will be able to know what is the carbon footprint of this pen? And it had plastic in it, had metal in it, had ink in it, et cetera, et cetera. And it's like you've got to think what was the carbon footprint of measuring, monitoring, validating the carbon footprint of that pen and how does that compare to it? It's that common sense bit. But how does that then translate to hold water, if I may say with the consumer. Exactly. Yeah, it's the law in the group that people will believe because ultimately then.

SPEAKER B

You'Re just waiting for regressions.

SPEAKER C

It takes about 100 private jets to go to Dao, Switzerland where we look at their report to study that and then call it cop out cop, sorry I used the wrong word. Cot cop meetings cop 26 or whatever, right? So that's what it takes to measure, monitor, manage and then market, right? Everything is cost. And every time the production of commodity supply chain, when you talk about what does it take to transport, just the shipping which you talked about earlier as well, that's emissions as well. So if you put all that right, the global supply chain is too complex to track all that.

SPEAKER B

I think it's too complex to track it altogether, but piecemeal, there are a lot of opportunities to track. We as a company know when we look at our scope, one, two, and three emissions, we know what our heaviest hitters are in terms of carbon. And that gives us a roadmap to then say, okay, I know my refrigerants are a problem, let's tackle that, because I know I can change. So I think it's just not like trying not to get bogged down and, oh, my God, this is huge. This is so hard. But just break it down into pieces, because really, like I said, my job, everyone's responsibility. So our transportation team is going to be responsible for optimizing our shipments. That's going to be their job. Our maintenance team, who maintains our freezers, that's their job. So having to make it like a holistic, company wide approach and to the.

SPEAKER E

Data structure and the technology part of it, of the discussion. I mean, the concept's not rocket science. I mean, where did it come from? That's a good question. Right? It's like, well, what kind of data could you possibly need to know in order to know where it came from or whatever? And so you can put that together. In its essence, it's really quite simple. It's the, it's the. I guess it's the worries of the repercussions if you try to be the first to be too transparent about your activities, like some of the things we've discussed here, that ultimately, you know, you no longer have a job because you try to recycle your packaging.

SPEAKER C

So the more you reveal, the more questions will come up. This is one of those business areas I can think of where it's like a legal discovery, right? You submit more supply chain data, I'll ask you more questions, and you'll keep giving me more data. And I'll keep asking you more questions. Eventually you'll regret giving me that much information.

SPEAKER A

How are we doing on time? Where do we.

SPEAKER B

We can start the drinks?

SPEAKER A

All right.

SPEAKER B

We can take one or two more questions.

SPEAKER A

Are there more questions? I just.

SPEAKER G

So listening to you guys, right? I think it's very interesting because some of you are from the retail sector, right? So you talk about recyclability of candy wrappers and labeling them for the end consumer, which is basically, this is recyclable, or no, it isn't, or this is organically sourced or no, it isn't. So there's that whole qualitative aspect, but there's another for, for raw materials suppliers. There's a lot of pressure now on those of us in this industry to actually start providing quantitative measures. So like a carbon emission number, right? Metric tons of, you know, whatever it is, tons of. Tons of carbon per ton of material. And I think you acknowledge that the data around that is sketchy at best. Right? But nevertheless, it's expected increasingly from our customers. It's expected. Now, for those of you who know about the european Sebam regulation, the cross border adjustment mechanism, there are now tariffs that will be put, very significant tariffs that will be put based on your quantitative carbon content of various materials, like aluminum, for example. So my question comes back kind of to, since we know the data is sketchy and yet we know there's an expectation that actual numbers are produced, hard numbers are produced. What kind of competitive pressures do you see that creating? Right? So when a customer is assessing two suppliers and one says, hey, I've got a really specific carbon footprint based on a particular plant that's producing this material. And the other one says, I've got the national average that I got from such and such database on some university's website. Right? Have you guys? I'm just wondering if you've sort of come across those kinds of pressures and how companies are responding to that.

SPEAKER B

I can talk a little bit about that, maybe less so from a carbon intensity perspective, but, you know, from like, a packaging or regulatory perspective, this is why when we make decisions for sustainability, again, we really want it to be rooted in, like, sound scientific data. Because if I have a supplier claiming something to me, and I think, well, that doesn't really seem that real. You know, I want to see the backup. I want to see what methodology you use to calculate your carbon intensity. You know, I know we talked about revealing data, but I think there's a way that we can do it and that you at least provide me with some of the background, like the math behind it and what data sources you're pulling from. Are we pulling from the same data sources? Are you using outdated sources or am I using outdated sources? So just making sure that you're aligned on the accounting, like the GHG accounting methodology. Following the GHG protocol, or asking your suppliers to follow a specific protocol to ensure that you're evaluating the same information the same way.

SPEAKER C

Just an audit process, right. Not a sampling audit process from your own auditor can have a sustainable key audit.

SPEAKER G

That's a very effort intensive activity.

SPEAKER C

That's why I use the word sampling, because, you see, you got to be careful when you open the do kimono, as they say. If you just give them all the data, auditors would love it. He called it good for my business consultants, auditors. Accenture would love it, right? PwC, they would love it. For the next twelve months, I could be auditing your supply chain data, right? So you have to ask the question, is a sampling audit, right. That's good enough. Process audit. That's much better. Process audit would be your question is process question. If I'm taking it from a national whatever, aggregated information versus transactional, just do a process audit and we could have a level one, two, three conversation. Who has put in how much effort and how clean it is and how current it is and all that. But once you certify that it is that standard, that this is where the standards evolve, right? Standards of reporting, standards of quality, standards of transparency, everything has to be standard. And if you jump the gun and do everything and you think, hurrah, I have arrived, give me the trophy. Sorry, good intention, but you're too early to the game and it's not even defined yet. And that's where you got to be very, very methodical and careful about these things. Implementation technology as well.

SPEAKER E

But in terms of trying to get things started, I mean, so a little bit on, when we were putting our technology together, we, I mean, we started off trying to standardize an industry, let's say, well, if we can get what the contract needs to say and what the attributes of a control instruction is, or what an insurance certificate needs to have, etcetera. And that was at a time we call it cotton XML, and people couldn't spell XML at that time, let alone adopt it industry wide or whatever. But rather than like just give up, it's about how do we sort of standardize the flexibility in the contracts, in the inventory so that you can have the attributes that, whether it's one particular methodology of your GHG or not, at least you know it's there to be put in if tomorrow regen, well, it's not pretending that it wasn't already, but if there's a new thing such as regenerative agriculture being an attribute that you need to trace through the thing, making sure that your architecture is there, where you're thinking, what kind of additional things could there be? That flexibility gives a bit of longevity to your systems and getting the APIs around. So if someone else is coming up with, we didn't write our own carbon footprint calculator or choose one particular one because no one had really agreed on which calculator to use, we just realized that there's going to be lots of calculators until they decide on one. So let's make it possible. Let's standardize the flexibility to say, well, which formula do you want to use? And then report on that and keep it standard, at least for yourselves, ready for the next round of, you know, evolution. Evolution of getting to that level playing field. But we can't wait for the level playing field before doing anything.

SPEAKER G

Thank you. Yeah, that's where we are. There's no standard for the standard, right. So you can produce a carbon machine number at a five tons per ton, whatever it is, right, means nothing unless you have a quality standard that says how you derive that. And that second order standard doesn't exist. So for companies who are lucky enough to have Darcy and a team of people pouring over the source documents, you don't have a clue what you're looking at. You're just looking at some generation number.

SPEAKER E

And that's why we were thinking, well, how can we get that number without increasing the burden of reporting, without increasing the burden of research and finding that information to see if we can get it as a byproduct, knowing that maybe five isn't really five, et cetera, but just to lower the footprint of the collection as well.

SPEAKER C

I think if I can add a CIO perspective, from an IT standpoint of all the customer functions, finance and compliance comes to mind as one or zero functions. They always look at it as, I have to be compliant. There is no flexibility word there. Regulators are not going to give you good marks for, you know, you try it. Good. Try it, Darcy. Well tried, right? There's nothing like that. Either you're compliant or you're not complying. You're not complying, you're paying the regulatory fines. From a CIO it perspective, Gladys or myself, when we are in the seats you're looking at, you don't even have a solid requirement. You want me to build a system in technology and infrastructure. Why don't you form up your requirements and come talk to me? So somewhere in between these two worlds of one or zero compliant, and then I want full requirements, you have to go to the next level and say, I would rather have that flexibility and do the 80% and look like I'm putting in a full effort in trying to be compliant, because when you really have an audit from a regulator, not doing anything will cost you significant amount. Waiting for standards to evolve to the t, and then I will invest in money in technology. Won't work. That is why spreadsheets, thankfully, there's always a spreadsheet. Right? So build one.

SPEAKER A

Anything else from the audience? All right, well, I think I know that everybody is thinking about the reception so thank you very much for joining us. Feel free to come and talk to us afterwards if you have more topics to dive into the details of cotton attributes in Brazil, for instance. But thanks a lot. Appreciate it.

SPEAKER B

Sustainability, that sounds fascinating. Please welcome the panel. Darcy Curran, Jud Orr, Magesh Nair and Chris Elise, thank you very much.