ESG

“Waste + Information = Resource” How digital technologies like blockchain fuel the circular economy

Blockchain, Business models, Circular economy, Sustainability, Technology /

In a world increasingly conscious of its environmental footprint, the potential of digital technologies in driving the circular economy is a topic of great interest at The Value Department. This topic was the focus of a presentation delivered by Fleur Boos and Bob Gravestijn at #TheNTWKSummit23. Let’s first give some meaning to the buzzwords! View our presentation here! What is the circular economy and what do we mean by a sustainable approach? A circular economy is centered on the idea of resources being kept as long as possible within the economic system. Materials that have undergone an entire lifecycle, from production to end-stage, are returned to the economic system as an input.   A sustainable approach that focuses on minimizing waste and maximizing resource efficiency through a closed-loop ecosystem How can blockchain help the circular economy? Digital technologies can play a significant role in promoting this circular economy. For instance, Blockchain enables a central, immutable ledger of transactions, bringing higher levels of transparency across the supply chain, ensuring traceability, ethical sourcing, and more effective material flows. The technology is composed of several layers, including the application layer, aggregation layer, asset layer, and consensus layer, each playing a crucial role in its functionality. Combining those: Waste + information = Resource.  And this is not only theory or future dreaming, several organizations are already leveraging blockchain to support the circular economy. For instance, Lockheed Martin enhances supply chain management and aerospace manufacturing processes using blockchain technology. Similarly, Tex-Tracer with Fujitsu technology utilizes blockchain technology to enhance the traceability and transparency of textile supply chains, promoting sustainability and ethical practices in the textile industry. In addition, IBM Food Trust leverages blockchain for transparency and traceability in the food supply chain to improve food safety and reduce waste.   Other examples include Plastic Bank, which incentivizes plastic waste collection using digital tokens and blockchain technology for recycling and job creation, and Circulor, which uses blockchain technology to track materials and products’ lifecycles, improving social and environmental standards. Or Gainforest.app employs blockchain technology to monitor, report, and verify reforestation and conservation efforts for sustainable land management. And many more examples are out there – contact us to get introductions! What are the potential barriers to integrating blockchain in the circular economy? While promising, Blockchain technology comes with its own set of challenges. Blockchain’s impact on power consumption is a critical aspect to consider. The energy consumption varies depending on the consensus algorithm used, such as proof of work, proof of activity, proof of elapsed time, proof of capability, proof of burn, proof of authority, proof of stake, and proof of history. Understanding these algorithms and their energy footprints can help in optimizing the use of blockchain for sustainability. Other challenges include scalability, interoperability, integration with legacy systems, and protection of sensitive and confidential data.   Working toward how we can overcome these challenges is crucial to maximizing the potential of blockchain in the circular economy.   If you’re interested in learning more, send us a message and we’ll be happy to share the full presentation filled with more examples – we believe you’ll find it insightful! In the meantime check out a preview by clicking the button below. Don’t hesitate to reach out to us via message if you’d like to learn more about this interesting topic. View our presentation here!

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Navigating the storm of Supply Chain Finance – insights from BCR’s 9th Supply Chain Finance Summit

Supply Chain Finance /

Supply chain finance is currently undergoing significant changes driven by technology, disruptions in the movement of goods, and increasing focus on sustainability.  At BCR’s 9th Supply Chain Finance Summit on 24-25 January in Madrid, experts discussed the ways in which these factors are impacting the industry and the steps that companies can take to navigate the shifting landscape. The increasing focus on rules and regulations and the digitization of documentation is a major driver of change in the supply chain industry. The use of electronic bills of lading (eBL) is a prime example of how technology is improving efficiency and standardization in the documentation process. The digitization of documentation streamlines processes, makes it easier for companies to exchange data with third parties, and helps to ensure compliance with regulations, which ultimately benefits both the finance and transportation sides of the supply chain. Another key topic of discussion at the conference was the role of environmental, social, and governance (ESG) considerations in supply chain finance. ESG is becoming an increasingly important topic in the boardroom, as companies recognize that they need to take a holistic approach to managing their supply chains. For most companies, this unfortunately still means creating a balanced score card to assess their performance on various ESG metrics. But if you apply/implement it well, it can be a very useful metric to make a difference. Even so, it’s important to note that the metrics used should match the company’s DNA; its values and mission. It’s also important to understand that scoring companies on ESG should be done by a neutral trusted 3rd party; otherwise, there’s a huge risk of greenwashing. Trade and receivable finance were also discussed as an important tool for closing the global trade finance gap – the shortage of financing trade for small and medium-sized enterprises (SMEs) and emerging market companies is estimated  around USD 1.5 trillion to 1.8 trillion. The factoring market, in particular, is growing rapidly; the Global Representative Body for Factoring and Financing of Open Account Domestic and International Trade Receivables, FCI, expects the market to reach USD 10 trillion in the next 3-5 years. Non-recourse factoring, in which the finance provider (commonly known as the ‘factor’) assumes the credit risk of the buyer, is becoming the standard way of factoring. This is especially important for small and medium-sized enterprises (SMEs) which have a harder time accessing financing. Another important point discussed at the conference was the opportunity for deep tier financing.  The goal of deep tier financing is not just to lower costs for all parties but to actually mitigate supply chain risks. By providing financing to suppliers at the lower tiers, companies can help ensure that they have a resilient supply chain and that they are not exposed to unnecessary risks. In conclusion, supply chain finance is facing a number of challenges as technology, disruptions in the movement of goods, and sustainability drive change. Companies need to take a holistic approach managing their supply chains and consider not only the financial aspects but also the environmental, social, and governance considerations. By digitising documentation, focusing on ESG, and providing deep tier financing, companies can navigate the changing landscape of supply chain finance and ensure the success of their business. Take action today by assessing your company’s supply chain finance strategy and identifying areas for improvement. We hope this helps! If you have any other questions about these topics or anything else, please feel free to reach out! #BCR #SCFS23 #SupplyChainFinance #SupplyChainManagement #Finance #TradeFinance #ReceivableFinance #ESG #Digitization #Technology #Efficiency #Standardization #DeepTierFinancing #Sustainability #BusinessSuccess

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Why it is important to measure the impact your business model has on the economy, the environment and people?

Business strategy, Sustainability /

There are various environmental, social and governance (ESG) standards, frameworks, ratings and rankers, when it comes to how sustainability is measured and achieved. Delving into these standards, including new standards from the European Union (EU), is hard work and time consuming. And conflicts with the reason why you as a company are seeking for this information and guidance.  Hopefully, you want more than just compliant.  You want to be a responsible business and position sustainable behavior at the heart of your business model. The myriad of ways sustainability performance is accounted doesn’t help. Yet standards alone have the capacity to drive consistent sustainability disclosure. Reporting that is in the public interest, and independent.   The EU has introduced a classification system, a “taxonomy”, of sustainable activities, with criteria for when they may be defined as sustainable. If your business activity is listed in the taxonomy and you fulfill all criteria, the associated revenue, capital expenditures and operational expenses with that activity are considered “EU taxonomy aligned”. From 1 January 2022,  all large or listed companies are required to report their EU taxonomy alignment, along with relevant non-financial information that helps investors, financiers or the public to assess your ESG performance.  In this regard, the EU defines all large companies as companies with more than 250 employees, and with more than 20 million euros total assets on the balance sheet or revenues of more than 40 million euros. Small and medium sized companies (SMEs) may report on a voluntary basis. But the proposal will extend the scope of sustainability reporting requirements to all companies (except listed micro-companies).  The aim of the EU of introducing a standard like the EU Taxonomy is to promote investments in sustainable activities. And the financial sector can play a key role in a transition to a sustainable world; because of the capital flows that run through the financial sector. Banks can contribute by taking sustainability criteria into account in credit decisions and offering customers sustainable products. In short, in the (near) future your non-financial information and ESG performance will play an essential role whether a bank will invest in your company or provide a loan. So, it’s time to act now! However, most small businesses don’t have the capacity or money to focus on sustainability or a sustainable strategy to reduce emissions. Consequently, the lack of access to finance will play a key preventing factor in their future operations. One can make the assumption the path to a sustainable future is much easier for a large corporate than for smaller SMEs. As access to capital markets is generally not at the disposal of the smaller companies that make about 90% of the businesses globally, providing half of all employment.  As capital is a key enabler of a sustainable supply chain, the supply chain participants – large corporates, banks and governments – need to collaborate. They can co-invest, provide liquidity, share knowledge on how to strategize sustainability, and pass on innovation and technologies across the supply chain. To create or modify incentives to persuade supply chain partners to behave in ways that are best for everybody. To make sure supply chains work well and its participants interests are aligned.  Techniques as receivable finance and Supply Chain Finance, in general, can play an important role in achieving what’s best for your company, your business model, your supply chain, and to what extent you’re ‘sustainable’.  Want to learn more about how that works? Call now to learn why our service is right for you, and let’s work together! Alternatively, maximize your toolkit with actionable insights on how regulatory changes, business strategies and innovative financing structures are evolving around the ESG issues. A lot of information can be found at BCR’s Receivables Finance ESG and Sustainability webinar; see the full program here: https://bcrpub.com/events/receivables-finance-esg-and-sustainability-webinar.

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