In this episode:
- The cultural surprises and business complexities of supply chains
- Sustainability in the logistics industry
- The climate data that is important to freight forwarders
- How climate data can boost business growth
- Lessons David has learned as a founder of a climate technology company
- The benefits of digitization in climate technology
David de Picciotto 00:04
In a world where sustainability is increasing in importance also at the board level, what I found is that some companies are slowly starting to look beyond just the compliance angle, but also using it as a mechanism to attract the new generation to the industry, to maybe attract new investors. And also, as sustainability KPIs become increasingly important and scrutinized. This is something that back to the finance weeds, as an example, is getting a lot of importance in terms of how accurate is the data that we're producing, and reporting back.
Brian Glick 00:40
Welcome to supply chain connections. I'm Brian Glick, the founder and CEO of Chain.io. In this episode, we're going to be talking to David de Picciotto, who is the CEO and co-founder of pledge pledge is a company working in the emissions reporting space with a really cool tool. And we're going to learn about David's journey into that space, how he got it and chose logistics as a problem. And some of the interesting things about how different regions in the world are thinking about the problem within their business differently, whether from sales or from a compliance perspective. So hope you enjoy the episode. And here we go. David, welcome to the show. Thanks for having me, Brian. So why don't we start with a little bit about your personal background? And how did that led to pledge?
David de Picciotto 01:31
Yeah, sure. So I was actually born and raised in Switzerland, and started my first company when I was in college a few years ago, and started the technology company actually in the sports media space. And that we started with a couple of friends modestly excited upon graduation, and then followed this journey into the technology startup space, mostly in financial services. And then in the investment industry. And to get the long story short, I've always been passionate about sustainability, probably also coming from where I'm from in Switzerland, always been outdoors and quite sensitive to this topic of growing importance. And I knew coming out of my latest experience, which was in a private equity fund, that I wanted to build, again, a company that solves a big problem, and couldn't think of a bigger problem than climate change. Coupled to that, when I was at this investment firm, I was coincidentally lucky to be sitting right next to their ESG team. So what I was hearing every day around my desk was about climate change, carbon emissions, KPI tracking. And more interestingly, I was seeing that it was actually very difficult to do so for an investment firm, because their portfolio companies had actually a hard time to measure all these KPIs and to track them. And so this is where I thought, well, that's a great use case for technology. You can automate these processes, automate this calculation, automate this reporting, and then have a solid baseline to eventually do something about your footprint. And so we then decided to develop pledge on the back of our simple question, which was, how can we have the greatest impact in the shortest time span? This led us to look at what are the highest emitting industries out there. And obviously, this is where logistics cropped up being responsible for a fair share of global emission. If you look just at freight, it's just under 10% of global emissions. If you look at the wider transportation industry, it's close to a quarter of global emissions. So we thought, let's dig more into this. And the more we dig into the space, the more we realize that it was actually relatively more mature in terms of sustainability journey than other sectors based on different frameworks and standards that were developed.
Brian Glick 03:43
So there's very few of us in logistics, who ever
David de Picciotto 03:48
but industry, this is obviously why companies like Chain.io exist as well. But ultimately, they were the right building blocks to potentially do something about it. And as a result, also of this data availability, there were globally recognized emissions calculation and reporting standards, which had been developed. If you look at other industries, maybe in the food industry, or the retail industry, you have a lot of different calculation standards on what great looks like. But there's no global convergence, which we found in logistics with the example of the GLAC framework, which stands for Global Logistics Emissions Council, which is the only globally recognized methodology for measuring and reporting on multimodal supply chain emissions.
Brian Glick 04:29
So here it is, I will say I'm very excited to hear that we're ahead of the curve on something that's, again, extremely rare. So you came into this, you identified this industry after you had sort of a problem set and you said okay, let's this is a good industry to apply this to coming out of, you know, financial services, private equity investment, things that uh, you know, we're very money focused, kind of what were some of the learnings or some of the cultural surprises of getting into the logistics business?
David de Picciotto 04:58
Well, this is actually a Bit more parallel than what I expected, going from how to under digitize the spaces. One of my experiences in financial services was at a digital bank called Revolute, which I think has about 30 million users globally. And obviously, this company grew exponentially the past few years, because their proposition is easier, simpler, more transparent to use than existing banks who often have a lot of hidden fees and clunky consumer experiences. This obviously also something I found in logistics, and something I found with some players leveraging technology to streamline customer experiences today. The second aspect is both of these industries are extremely complex, extremely fragmented. And there are a lot of nuances, nuances in terms of different business processes, like you would look at logistics with different modes of transport specific rules for each of these modes of transport, and then you add the geography complexity on top of it. So you then suddenly have this multi dimensional matrix, which makes it very complex and obviously highly regulated, as well. So this is a second point. And leveraging me and my co founders experience who I met at revolute. Actually, we decided to leverage our skills and experience building global scalable technology product in a regulated and complex industry, and apply it in a space where we can make a real dent in the fight against climate change.
Brian Glick 06:22
So when I ask you a software nerd question, maybe not a technical question, but a question about selling software, or bringing this to market. You know, one of the things that I've experienced as a two time founder is that the buying process in a lot of logistics companies is not nearly as defined as it might be in you know, so a company that does manufacturing and has a ton of procurement, and this and that and the other, you're introducing an entirely new category to the industry, how hard has it been to identify who the buyer is or who the stakeholders are in these companies, and really kind of figure out how to take this from something everybody knows is a problem to something that someone pays you for.
David de Picciotto 07:05
There are many ways I can answer this question. Maybe I'll just take a step back, and mention something a bit more general about selling sustainability in the corporate world, even outside of logistics. The first challenge that I think every provider is facing today is just the awareness challenge, which I think by now in 2023, most people in developed economies are aware of climate change is a problem where they've heard about it to read about it somewhere, then then obviously, the education problem of how much should they know about the topic? And do they know enough that they eventually have to do something about it? And once they're aware that they need to do something about it? Is there this fear and the problem of how do you create urgency to adopt in a world where regulation for emissions reporting have not totally crystallized, everybody knows they're coming, but they're not there yet. Specifically, in logistics, they're coming starting 2024 and onwards. But yeah, so how do you create that urgency? And finally, once you've passed that hurdle of adoption, then how do you drive willingness to pay for that product? So these are the four stages, I see. I think awareness is kind of what it takes now. And now we're in between this education issue and the urgency to adopt this, you were to come back to your question. Now, there's a huge discrepancy, both at the company level, where I might speak to a company to a freight forwarder. In Germany, the freight forwarder. In the UK, one of them will have a fully fledged sustainability team with targets, budget in place processes in place, typically driven are reporting to the C suite or to the finance team to the finance function, while the other might not have a budget, not have a team not even have an internal responsible for dealing with these types of issues. And both of these companies might generate the same turnover, my target similar clients. And so this is where the industry was when we started about two years ago.
Brian Glick 08:56
So it's interesting that you know that these teams sometimes may report into finance. In the US here, as I've talked to our customers, almost everyone who's approached us about adding, you know, emissions reporting to their capabilities, has approached it from a sales perspective. And it's been client driven. So they see it as a revenue, I would say a defensive revenue problem, right? Not that they're going to make a ton of money on it, but that they're going to lose business if they don't do it, which is certainly not something that comes out of the finance department. It's something that comes out of the commercial side. Do you think that's a regional thing? Or just how does that sound to you?
David de Picciotto 09:34
So this was the third point I wanted to mention. The focus on mindset was more set on the compliance aspect, which is typically finance driven, or finance team driven. And there's obviously when we think about the value prop for companies like pledge who provide freight forwarders with a multimodal emissions measurement and reporting capabilities. At the end of the day, we're equipping these companies to meet the demand from their clients. So it's about helping them gain competitive advantage to win your business or at least business pipeline to be able to participate in the standards, where now it's now requirements increasingly, secondly, potentially increase wallet share with existing customers who might want to push more volume to them to get this co2 insights that they don't get from other LSPs. And finally, to your point, there's a retention mechanism to keep the client happy, especially as this type of service is becoming table stakes in the industry.
Brian Glick 10:26
One of the other things you mentioned was about the convergence of standards. And you know, and I know that even within regions is moving at different paces, and things like that. I sat in a session at TPM last winter, where there were a lot of acronyms and the person who was presenting who was not from pledge I'll give you that one went like 100 miles deep into, you know, all of these acronyms with no background, and it made me understand what it must be like for shippers when they approach a freight forwarder for the first time, and it was pretty intimidating. But I think my question is, how much of that do you really need to know versus just sort of trusting the data that comes back, you know, as more of a scorecard because it's really scary to think about all this stuff. So
David de Picciotto 11:17
it is scary to think about all this stuff, because it has a lot to do, and has a lot to do even outside just the emissions aspect. There are some other ESG compliance issues, biodiversity issues that companies or even regulators are looking into. That said, under the lens of a freight forwarder, and getting pressure from my clients for emissions measurement and reporting, it's actually less complicated and less scary than it looks. The reason is, the freight forwarder already has all the data available to meet that demand from the shipper. What they need is simply to push that data into a calculation engine, ideally, one which is accredited by the SmartFit center, and then send this data back to the shipper. This is the base minimum, obviously, you can do more. But there are very easy steps to just get started and meet the demand.
Brian Glick 12:15
I think what you really meant was ideally one that's located at pledge.io. Right?
David de Picciotto 12:21
That's why I said that I was an accredited vendor from SmartFit. Center. Yeah, but since you brought it up, it'd be a good idea.
Brian Glick 12:31
So what's your favorite part of this journey? So far?
David de Picciotto 12:34
What's been fascinating for me, is to see the pace of change. And while in the day to day, as a founder, you might think that things are going too slowly, or you want them to go faster. When I look at my first conversations with freight forwarders, when we started the company two years ago, a number of them were laughing at our faces, when we told them that sustainability is and will increasingly be a critical topic in this industry. And they were telling us, yes, maybe, but come back in a few years. And a year later, or two years later, speaking to the same people who are not necessarily at the board level or the C suite level, i.e. they maybe don't have the same strategic view of the company, as their managers might do. The same people a year or two later, are now coming back and saying, hey, now my biggest customers are asking for this data. Can you help me? It's been fascinating to see coming back to what I was showing earlier from this awareness, initial challenge to dangling from that educational challenge and adoption challenge. And so slowly, but surely the industry is again maturing. And I'm excited to see how we can make real change with respect to the overall dimensions that this industry generates.
Brian Glick 13:54
One of the things that often excites me when there's big changes like this, are that the benefits usually stretch out beyond the initial problem. And what I mean by that is, you know, one of the examples I was using this in the US 15 years ago, he created this regulation importer security filing, which said that he had to basically tell the government about stuff before it was leaving wherever it was going and companies said that was going to be impossible. I never know what my supplier ships to me until 40 to 72 hours after the boats on the water. And now you want me to know what's while it's still in the factory? Impossible? Absolutely not. And now, you know, flash forward 15 years. Companies can't imagine a world where they don't know what's being packed and shipped to them. It's incomprehensible. And one of the things that I've noticed as we've worked through implementing our customers with pledge and other providers is similar data quality conversations are coming up around transit like data, and actually knowing specifically not just where it's leaving and where it's coming to, but what route it's taking, and what vessel and things that oftentimes our freight forwarder didn't really care that much about, because there's no regulatory requirement to, you know, know where it was being trans shipped that type of stuff. Are you seeing a similar thing where your customers are learning more about their business as they go through the journey?
David de Picciotto 15:19
Yes, that's a very good point, it's been very interesting to see actually how the journey these freight forwarders are taking where initially, they just think about the tick box exercise, or a compliance exercise. And yeah, I'll send you my shipment data, you'll send me back a co2 output, report it to my customers, that oftentimes once they have their initial baseline, and we want them to go a bit above and beyond by providing more granular data down to IMO numbers and maybe the specific flight numbers, then maybe asking them if they have certain stopovers and others, they recognize sometimes that they have a data collection challenge and the lack of granularity in their data. And as a result of the shipper pressure, slowly incentivized to look in more depth at this data granularity, because ultimately, their shippers want to have the most accurate output as possible. And you can't go very far with averages, which is, as you're embarking on a journey and what you typically receive. And as a result of that they're trying to speak to other stakeholders in industry, to their agents, maybe to their carriers, to see if they can get that more granular data. And surprisingly, the driver is sustainability.
Brian Glick 16:27
And then obviously, there's all those added benefits of knowing those things and being able to start, you know, really understanding how your own business operates, which is always fascinating, right? How little oftentimes we know about our own businesses and how they function.
David de Picciotto 16:42
And in a world where sustainability is increasing in importance, also at the board level, what I found is that some companies are slowly starting to look beyond just the compliance angle, but also using it as a mechanism to attract the new generation to the industry, to maybe attract new investors. And also, as sustainability KPIs become increasingly important and scrutinized. This is something that's back to the finance suite, as an example, is getting a lot of importance in terms of how accurate is the data that we're producing, and reporting back?
Brian Glick 17:18
Is there a point at which companies maybe are going too far or trying to put too fine a point on the data? You know, I would imagine you're talking about all these things about whether this vessel has a scrubber on it right? Or what specific type of fuel is going in? And I'm sure those are the wrong examples. But do you have customers who are trying to be so precise, because they're taking this from the same perspective as the people who track every single penny in the company that they get in their own way, and don't know where to stop? Or is this a problem I'm completely making up?
David de Picciotto 17:51
This is sometimes a problem when they start to want to go too far too rapidly. And as a result, analysis leads to paralysis. This definitely happens. That said, I will concur that there might be diminishing returns at some points, where the effort of getting that extra granular information will only improve your output by less than 1%. That's obviously maybe futile, or there might be other initiatives that you can do in the meantime. But yeah, your point is valid when they start their journey. Cool.
Brian Glick 18:24
What other kinds of challenges do you see companies facing when they go to implement,
David de Picciotto 18:30
There's always a champion for sustainability within a freight forwarding company. That's what I found. But sometimes this champion doesn't have a seat at the table, at the strategic table, or at the board level. And so they run into a roadblock. Because they don't necessarily have the business case, to convince these stakeholders to implement the system, but the strategy initiative, and then our role becomes well, how do we enable this person to build this business case and convince the stakeholders that this is something that yes, is a nice to have today. But the sooner you start, the more benefits you will reap? And also the bigger the competitive advantage you'll have versus your peers in the industry?
Brian Glick 19:11
Are there any companies in the forwarding or logistics space who are really trying to go at this on their own? Or is everyone just making the decision amongst providers?
David de Picciotto 19:21
There are companies that have built solutions internally. Usually, these companies have been around for a couple of years or decades. And they've developed these solutions. Most of the time, not all of the time when a lot of these new tech vendors provide this carbon accounting capabilities. We're not live yet. So as the default choice, we want to do something about sustainability. There's no provider, let's do it ourselves. And now that they've embarked on this journey, they're like, I'll just continue doing it myself. And then you obviously have also non tech providers that support businesses on this journey such as consultancies.
Brian Glick 19:57
Certainly, as a founder, you know, I know that I make more mistakes a day than I probably do good decisions. And that's just part of the journey. So what's something that you've learned or mistake that you've made across building this thing,
David de Picciotto 20:09
probably when we started. And that's a typical mistake, trying to do too many things at once, and spreading yourself too thin. Where initially, we focused not only on one specific industry like transport logistics, but we also looked at other use cases outside of that industry. And obviously, two years in now, we've really narrowed down the focus, and aim to become the best in class solution for the transport and logistics industry. Looking back, that's something that will save us a bit of time and resources. Definitely,
Brian Glick 20:44
we did the exact same thing, about two or three times a year. I pulled up my original business plan for the business. And what the business is, today was a module in the original plan, I got a good piece of advice once it said, If you think you know the size of your business scope, cut it in half, cut it in half again, and then you're probably almost down to the size where you can start cutting, it's really eight 910 iterations of refining. It's a good one. And you're never there, right? And so you get so big that you just do everything, right, I think it's a rubberband effect. Eventually you get to IBM or Salesforce where you're just gonna do everything now. But certainly, at the stages that we're at Focus is key. So what's coming up next, what are you guys excited about?
David de Picciotto 21:29
One external item, which I'm really excited about are these regulations, which will mandate the reporting of supply chain logistics emissions by companies, there's a big regulation, and sorry for the acronym called CSRD, which is coming up in Europe, which will require companies to start reporting on these emissions in 2024. And that touches about 50,000 businesses in Europe, obviously, starting with the large list of businesses, but it will also impact non European businesses doing business in Europe. And that equates to about 10,000 businesses in the US. So non negligible numbers. And this will be another driver of adoption, for sustainability in the industry. This is really exciting, because I think we'll enter a new period of growth and recognition. The other thing if I think more so from a market standpoint, is coming out of the pandemic. Obviously, a lot of foreigners have suffered, or I've had to revise bit their business plan. And it feels or seems like slowly, but surely, things are hopefully settling down a little bit. And they have a bit more visibility on what's to come. And so this predictability is also helpful. And potentially implementing new initiatives, such as on the sustainability side,
Brian Glick 22:49
I'll speak for somebody who's been in the forwarding business for a long time, we all say when the rates are up, that we know they're going to come down. And then when they come down, we all act like it was never going to happen. It's amazing how short our members get. So yeah, it's interesting, you know, but the best companies are always the ones that invest during the downturns. Right? And that, you know, in a responsible way, and I think what's really good for your business, and actually, for Chain.io, as well as that in the downturns people tend to invest in things that have clear returns and clear value. And not necessarily just like, hey, we could have a supply chain branded coffee pot, that also does AI, right, that stuff goes away. The self driving mail delivery cart inside of the office isn't necessarily as important. So 100%, but for us, it's good news.
David de Picciotto 23:43
Yeah, I think the benefits of technology and digitalization in this space is that it simply saves time and resources. And this is obviously something that every company but for does it pay particular attention to?
Brian Glick 23:56
So if people want to get in touch and want to learn more about pledge, where do they go pledge.io.
David de Picciotto 24:01
This is our website, our product is fully self-serve, and includes a 14 day free trial. So you can simply go over to our website, you'll see a stop for Free button. And you can get started with measuring and reporting on your multimodal emissions in a few clicks.
Brian Glick 24:17
And then when you want to scale it, you can connect directly via Chain.io or TMS and be off and running. So we've got a whole on ramp there for you. So it's been a pleasure having you on. Thank you so much for this. It's again such an important topic to everyone. And I really appreciate you taking the time.
David de Picciotto 24:32
Thank you very much, Brian.
Brian Glick 24:34
Thank you so much to David for educating us on such an important topic. One of the things we didn't mention during the episode, but that's important is that as pledge has joined the Chino network, they were actually our first company to build on our new open Connect platform allowing software companies to develop their own plugins that connect to the Chain.io to network and get access to all of the forwarders and shippers that are on our platform. I'm so excited to have them on board. And we also recently did a webinar all about the deep dive topics of emissions reporting with pledge and a few other companies talking about the nuances and how forwarders can use this data. So make sure you check that out. You can find it on the Chain.io website, and we'll put the link in the show notes as well. Until next time, I'm Brian Glick, founder and CEO of chain io.