A vision for ESG integration
Kim Randle and Arne Geschke – FairSupply’s chief executive officer and chief technology officer respectively – co-founded FairSupply three-and-a-half years ago. They outline how the firm is ahead of the curve in providing a supply chain-focused ESG data product for investors.
For more information, see: fairsupply.com.au
Environmental Finance: What market trends have informed your strategy and product development?
Kim Randle: The mainstreaming of sustainability factors into investment decision making, combined with global efforts to standardise sustainability reporting – especially in relation to modern slavery disclosure, carbon emissions reporting, nature-related risks, and biodiversity loss. At FairSupply we take investment portfolio data, apply it to the supply chain and then quantify those different risks at each tier of a supply chain at the security level.
We’ve recently launched a biodiversity dataset in response to the development of the Taskforce on Nature-related Financial Disclosures (TNFD) framework. FairSupply’s Extinction Risk Footprinting tool enables businesses to map the impact of species extinction risk along the length of their supply chain. It also combines species vulnerability via the IUCN red list and users can understand extinction risk as a quantifiable representation of biodiversity loss. We have also aligned FairSupply’s data outputs with globally recognised reporting frameworks, such as the Task Force on Climate-Related Financial Disclosures (TCFD) and Partnership for Carbon Accounting Financials (PCAF).
Arne Geschke: A big challenge for companies is understanding Scope 3 emissions – those emissions that are linked to or associated with the emissions within the supply chains of companies. It is very complex. For example, a large industrial company, such as a car manufacturer, could have something like 15,000 suppliers. If you were to map supply chains all the way up to tier 10 providers, you would be dealing with tens of millions of supply chains.
Previous attempts to assess impacts along those supply chains have been crude approximations of what is happening. There is a need for more detailed and informative solutions out there. Scope 3 is where we see the biggest interest in our product. We have a data- and methods- driven approach. We utilise high-performance computing, AI and our combined experience in dealing with such datasets.
EF: What are some of the main challenges you’ve faced?
AG: We maintain between 50 and 60 billion supply chains here. Those are based on publicly available datasets, which we must process in very sophisticated ways to mould information together into a one, unified global supply chain framework. That posed several mathematical challenges that are amongst the most complex being solved on the planet today.
I have been working on developing a solution in this space for nearly 15 years – previously in an academic setting. That equipped me with the underlying knowledge I needed to understand supply chain frameworks and build them in a purposeful way for the applications that we are offering at FairSupply.
Supply chain solutions have become highly sought after but it is a high barrier of entry for anyone who hasn’t spent the last decade looking at these frameworks. I was working on it at time when nobody was thinking about that it.
KR: The methodology used to map the supply chains hasn’t changed much over time. The supply chains have certainly changed, however. How we overlay ESG data is kept up to date by ensuring we have world-leading subject matter experts on our data team. We are able to update the datasets very quickly. For example, the Australian 2023 Global Slavery Index was recently released, and we incorporated it into our supply chain engine within a week. We are in a good place to both inform the conversation and be a part of the solution.
EF: What are you working on for the future?
KR: Once our clients understand their risk foot printing then the next question is what can be done to manage these risks? Our product development is focused on assisting our customers to proactively assess the risk of future investments or spending decisions – as opposed to just retrospectively looking at what risk is already exists in their portfolios.
AG: We are also seeing an appetite for verifiable carbon impacts of investments. We expect financial products to head in that direction e.g., carbon-linked green bonds. But there is the need for solid methodologies that underpin carbon-aware investments. Robust methodologies need robust datasets to inform them. That is still missing in the market and that’s where we see where the marketing heading.
We believe ESG should be as front of mind as the finances of a company and ESG performance should be tracked with the same lens. To achieve this, ESG data products will be required to integrate that into the everyday operations of a company. That’s one of our core missions at FairSupply: to provide those kinds of products and facilitate the integration of ESG into business operations in an easy way.
