Doug Johnson-Poensgen, Co-Founder & CEO of Circulor, the leading platform helping to bring traceability to complex industrial supply chains.
During the conversation, Doug shared his thoughts on traceability platforms, commingling, tax laws, impact at scale, polar explorers and espresso martinis!
1. What’s Circulor’s mission? What is your USP / point of differentiation?
“Circulor’s mission is to help make the world’s most complex supply chains more transparent and help prevent the exploitation of people and planet.”
Circulor‘s differentiation is that we are one of the few working examples of a traceability platform that is able to follow materials between source and consumption. Our first live project was tracking a material from a mine, all the way into a phone. We now work with a whole variety of car manufacturers, this can be for the traceability of battery materials to working with plastics recyclers like Total to track waste plastic back into new plastic for example, which is a continuous distillation process. That is a level of complexity above the usual track and trace. The digitalization of the supply chain to tier n is in its infancy, whether it is demonstrating responsible sourcing as is required for example by the German supply chain laws or demonstrating recycled content as will be required by plastic taxes. That all requires understanding within the circular economy of materials which cannot be done without a traceability platform.
2. What have been the most significant milestones on the Circulor journey so far?
“The starting premise behind the business was that new technologies can unlock all problems.”
I have an interest in blockchain (plus the likes of machine learning and AI). How can one put a combination of technologies together to give a digital identity to a commodity at source, and then follow that commodity through industrial transformation processes? Supply chains are not linear. Their networks and materials are routinely commingled, mixed and amalgamated by virtue of the transformation process as well as the features of commodity trade for example. To handle that requires a significant complexity.
Newer technologies like machine learning applied to that complexity and traditional business logic, and the ability to try and build trust between participants in the supply chain; you couldn’t historically do this from a technology perspective. Some of these technologies didn’t exist 10 years ago, so the biggest milestone for Circulor was being able to demonstrate that what was possible.
I can now follow material from a mine, all the way through a supply chain into a phone. That led to a pilot with Volvo cars to track cobalt, in their electric vehicle battery supply chain, which has evolved into a business now where we’re the leader in battery traceability.
3. What do you look for in the perfect customer and what do they look for in you?
“A perfect customer is usually a downstream brand, looking to use sustainability as a driver of top line growth.”
Today, brands like Volvo and Polestar, both customers, looking to differentiate a product as more sustainable. If you’re going to make a claim like that, you need to be able to underpin it with some evidence. You need a mechanism to seed your supply chain in order to use your procurement ability to try and find more sustainable uses in your supply chain.
“We’re just about to enter into a global arms race to try and secure the more sustainable materials”
…and batteries are a good example where electric vehicles are actually very pollutant things to make, with batteries accounting for 50% of the whole of the supply chains contribution to it. If you are a European producer of batteries or nickel sulphate in Finland or wherever, there’s a finite amount of suppliers that have the good stuff.
We’re working not only with car manufacturers but also producers at the upstream end who are looking to differentiate their products.
Another one of our customers and investors is BHP, the world’s largest mining company. We’re tracking commodities out of their mines and attaching sustainability metrics to very large parcels of material that they’re shipping, often as part of a direct supply deal with a downstream brand. That downstream brand is potentially paying extra to have more sustainably produced nickel which is a very polluting material. Another driver of change in this space are things like green steel, where has that steel come from, has it come from coal fired smelters or has sustainable electricity been used to smelt steel which makes a material difference to the carbon footprint you inherit in constructing something, whether it’s a car or a building.
“We’ve done very little traditional tendering because innovative, new ideas are not yet something you can easily compare the field on in a traditional procurement sense. At the moment, customers are coming to us because they’ve heard case studies or they’ve seen us speaking and say ‘How could you help us?’”
Some of the drivers Circulor considers are:
- How do I differentiate my product? Consider it from a sustainability perspective.
- We are being urged by our investors or lenders to improve and demonstrate improvement in our ESG performance – how can we attach data about ESG performance to the products that we ship?
- How do I get a grip of my supply chain?
- How do I understand my supply chain through to tier n?
- How can I be confident that I’m sourcing responsibly and I don’t have child labour in my supply chain?
- How do I measure my supply chain ecosystems contribution?
Factors like this affect your cost of capital. If you’re a coal miner today, it’s likely there are fewer lenders prepared to give you money than there might be if you do something cleaner. We can also start measuring it and figuring out which procurement action to use to improve it.
4. What are the foundations of a great team?
“Peter Drucker said that culture trumps strategy. I completely agree that it’s very helpful to have a mission that energises people.”
We all live on this planet and – although I’m a middle-aged fart – most of the folks that join the team are younger and they also want to make a difference. They recognise that tackling things like climate change is a major challenge. The WEF published a report at the start of this year about contribution of supply chains to global carbon emissions – 50% of global carbon emissions come from eight supply chains.
Polestar has committed to creating a net-zero car by 2030.
“That’s beyond audacious because no one has the faintest idea how to do it, except they recognise that this is an ecosystem play, including the whole supply chain.”
They’ve cited Circulor as one of the key tools they intend to use to understand the supply chain’s contribution to their carbon footprint. With our folks at Circulor, we are committed to the same mission to make a difference and make the world a better place.
5. As we emerge from COVID what will you be doing differently?
The majority of our team has been recruited in the last 18 months during COVID and as a result we’ve all learned to work differently. I’m currently sitting in an office which is obviously a bit of a novelty. In terms of what the new world of work looks like, we’ve actually just opened a collaboration space in Hammersmith, London. It is not a traditional office at all. We’ve made everyone a home worker although some people do come in to use the space, whether that be to collaborate with colleagues, work in a different space or to socialise. We’re doing exactly the same with our team in Berlin.
We’ve learned over the last 18 months how to onboard really complex industrial players onto our platform without visiting them. In fact, one of my last trips before we went into lockdown was a factory visit in China for a batch of manufacturing plants plotting the process between goods in and goods out.
We will take a subset of the data from their own quality management systems and create a proportion of that picture of end-to-end traceability – all which can be done entirely remotely now!
This is all thanks to the discovery activity of people working at the front-end using production management systems to help us get an understanding of how to integrate traceability through their processes. For instance, we can see how a one tonne bag of cathode material ends up in a specific batch of battery modules.
6. What is the vision for Circulor for the future and what will be most important to achieve it?
“Impact comes from scale.”
We were profitable before we took any external investments, which is fairly unusual for most tech startups. The whole point of this is to be able to create sustainable business from the start. In the last 12 months, we’ve attracted investments of about $20million which is fuelling this the first stage of growth. My co-founder is currently in the US trying to establish an office there; another founding partner is in Singapore to do the same for Asia-Pacific.
Joe Biden has been helpfully signing executive orders around security, where critical materials come from and if they’re recycled locally – all these themes which we’ve had in Europe for a while. We have US customers such as Boeing (also an investor) and that’s very helpful in terms of credibility for us in US.
“Through scale comes impact, so the more customers we acquire, the more complex supply chains we work in, thus the more impact we will help our customers achieve. It’s an indirect matter as we’re a software company, so we’re not going to change the planet entirely, but by enabling big organisations like car manufacturers to do business better, we are making a difference. What drives me is impact at scale.”
7. How are you doing good for the planet?
In our last investment round, we were asked by one of the investors to try and quantify the impact we could have with an individual car manufacturer through buying smarter. As an example, ‘What impact could that car manufacturer have simply by spending its money better, with greater visibility of sustainability?’
“We calculated that they can make at least a 25% reduction in the carbon footprint of their supply chain’s contribution to the things they manufactured, just by buying more sustainably and finding the right suppliers.”
While that’s complicated, five years ago no one was digitising the supply chain to tier n. Compare that to the billions you might have to spend in research and development to engineer the carbon out of new materials and all the other things that you might be doing to try and get down to net zero.
Extra: How are you looking at your own ecosystem in terms of digital partners?
It’s not just digital partners, there are also consultancies and audit firms. If you’re a procurement professional in a car manufacturer and you need help with sustainability for example, you’ll probably engage an audit firm to go and have a look and see what’s going on. For us, they are an indirect channel to customers who we know are trying to manage risks or grapple with these issues, and so we’ve been developing a number of partnership arrangements with very large certification firms like SGS 18 months ago. Not everybody works with many auditors but it acts as a way of engaging with customers where their core business is not technology: ours is.
We chose to build our platform on Oracle, by using a combination of databases and their blockchain managed service. We wanted to create an enterprise class solution out of the box. Our customers are big enterprises, and if I’d stitched something together on a combination of Google Cloud and Alibaba Cloud there would have questions around scalability, our ability to manage that infrastructure, security, etc.
By choosing a large cloud provider like Oracle, we can focus on our customers’ problems and help solve them.
“It’s a huge data challenge: we can receive millions of standpoint records from participants in just the battery supply chain, every week! This is also where blockchain helps (I hate the B word!) as it provides notarisation and a good audit history which creates trust.”
How you first give a digital identity to a commodity in the Congo for example is important for providing confidence and a reputable history of its location, source and knowing people have been paid properly along the way. That’s way more important than there’s, there’s a blockchain behind it. Yeah. Everyone likes talking about AI and blockchain, it’s just another technology.
INSTANT DOUG INSPIRATION
1. What is your favourite book or blog & why?
I am a big fan of Climate Tech VC – these are two females, who work for venture capital firms in Silicon Valley and decided as a side hustle to create this platform which is looking at innovative solutions, driving sustainability and other aspects across the planet, picking out some amazing entrepreneurs. They tell the story of some really clever technologies and people trying to drive real change in the real world and arguably the defining problem of our age which is climate.
2. Who is your favourite inspirational leader & why?
Fridtjof Nansen – my father’s godfather was a polar explorer in the early 1900s, who became a Swedish politician and diplomat and worked for the League of Nations, which was a precursor to the United Nations. This created the ‘Nansen passport’, the first refugee passport after World War One which has now subsumed and has become the UNHCR the UN High Commissioner for Refugees. He inspires me because he is a guy who’s worn many hats, such as trying to be the first guy to the North Pole, which he achieved, but then turned his attention to using his fame to try and make a real difference in the world – in his case around refugees and displaced persons. I find that hugely inspiring which feels quite close to home and is not just something you’d read in a book.
3. What is your favourite app (not your own) or piece of technology?
I’ve always liked technology. Since I was kid, I’ve tinkered with everything, like taking apart tractors. Now, I prefer the Apple ecosystem which just blooming works, its an inspiration. If I draw one lesson from that in terms of technology, once your customer gets it, it must be frictionless, even a complex technology in a complex space.
4. What is your favourite cocktail?
The Espresso Martini has become a legend for the Circulor team, but I’m not a complete convert. I do love a malt whiskey.
5. What’s your favourite way to celebrate a success?
Apart from the espresso martinis which is the office thing, I actually quite like a quiet moment on the outside. I don’t smoke very often, but occasionally sitting out in the moonlight on a summer evening with a cigar is one of those sort of personal religious moments, once a year or so!
1. Sustainability impacts everyone – we all have a duty to do our bit
2. Technology and business logic together can build trust with other customers and suppliers
3. New technologies can unlock all problems
4. Innovative and new ideas are not yet something you can easily compare the field on in a traditional procurement sense
5. Have a mission that energises people
6. The problem that you are solving is much more important than the technology behind it
7. Impact comes from scale
Circulor is a leader in bringing traceability to complex industrial supply chains. They help customers to demonstrate responsible sourcing, to monitor inherited emissions from the supply chain and to underpin their circular economy ambitions. Circulor also help procurement and sustainability professionals see and manage what was previously invisible.
Our industry is moving forward faster and faster, empowered by innovative, progressive digital procurement solutions created and led by inspiring teams. ProcureTechSTARS are the digital procurement company CEOs and Founders that are leading the change, they are entrepreneurs, engineers and architects collaborating to transform procurement and the enterprise. In an open conversation with these leaders Lance Younger will be discussing the highs and lows of building the future now, the challenges they’ve faced, their perspective on accelerators and hot topics, and what keeps getting them up in the morning (and keeps them up at night).