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Sustainability in Logistics with David de Picciotto
82 Plays1 year ago
In this episode, David de Picciotto, CEO and Co-Founder of Pledge, joins Host Brian Glick, CEO of Chain.io, to discuss:
- 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
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Transcript
Sustainability: From Compliance to Strategy
00:00:04
Speaker
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 also new investors, and also as sustainability KPIs become increasingly important and scrutinized,
00:00:29
Speaker
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 they're producing and reporting back.
Introduction to Pledge and its Emissions Reporting Role
00:00:41
Speaker
Welcome to Supply Chain Connections. I'm Brian Glick, the founder and CEO at Chain.io. On this episode, we're going to be talking to David DiPichiato, who is the CEO and co-founder of Pledge.
00:00:53
Speaker
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, 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 DiPichiato's Background and Journey to Pledge
00:01:22
Speaker
David, welcome to the show. Thanks for having me, Brian. So, uh, why don't we start with a little bit about your personal background and, uh, how that led to pledge. 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, um, started the technology company actually in the sports media space. And that's, we, uh, started with a couple of friends, modestly exited upon graduation.
00:01:49
Speaker
and then followed this journey into the technology startup space, mostly in financial services, and then in the investment industry. And to cut 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
00:02:13
Speaker
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.
Investment Experience Influence on Pledge's Focus
00:02:31
Speaker
What I was hearing every day around my desk was about climate change, carbon emissions, KPI tracking, and more interestingly, I was
00:02:39
Speaker
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
00:03:08
Speaker
a simple question, which was how can we have the greatest impact in the shortened 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 realized that it's actually, it was actually relatively more mature.
00:03:37
Speaker
in terms of sustainability journey than other sectors based on different framework and standards that were developed. So there's very few of us in logistics who ever industry. This is obviously why companies like to 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, they were globally recognized emissions, calculation, and reporting standards, which had been developed.
00:04:06
Speaker
If I 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. So 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.
00:04:35
Speaker
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.
Parallels Between Financial Services and Logistics
00:04:45
Speaker
Coming out of, you know, financial services, private equity, investment, things that are, you know, are very money focused, kind of what were some of the learnings or some of the cultural surprises of getting into the logistics business?
00:04:58
Speaker
Well, there's actually a bit more parallel than what I expected, going from how under digitized the space is. One of my experience in financial services was at a digital bank called Revolut, which as I think about now 30 million users globally. And obviously this company grew exponentially in 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
00:05:26
Speaker
consumer experiences. This is obviously also something I found in logistics and something I found with some players leveraging technology to streamline custom 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 in logistics with different modes of transport, specific rules for each of these modes of transport. And then you add the geographic complexity on top of it.
00:05:53
Speaker
So you then suddenly have this multidimensional 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 Revolut, actually, we decided to leverage our skills and experience building global scalable technology product in a regulated and complex industry.
00:06:17
Speaker
and apply it in a space where we can make a real dent in the fight against climate change. 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
00:06:33
Speaker
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 a company that does manufacturing and has a ton of procurement in this and that and the other. You're introducing an entirely new category to the industry.
Challenges in Selling Sustainability
00:06:52
Speaker
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? 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
00:07:20
Speaker
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 as a problem, or they've heard about it or read about it somewhere. Then, obviously, the education problem of how much do they know about the topic and do they know enough that they eventually have to do something about it. Once they're aware that they need to do something about it, there's obviously the problem of how do you create urgency to adopt in a world where regulation
00:07:50
Speaker
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 the awareness is kind of a tech now. And now we're in between this education issue and the urgency to adopt issue, where to come back to your question now,
00:08:20
Speaker
There's a huge discrepancy, both at the company level, where I might speak to a company, to Freight Forwarder in Germany, to Freight Forwarder in the UK. One of them will have a fully-fledged sustainability team with targets, budgets in place, processes in place, typically driven or 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 type of issues.
00:08:48
Speaker
And both of these companies might generate the same turnover might target similar clients.
Emissions Reporting Driven by Sales in the US
00:08:53
Speaker
And so, so this is where the industry was when we started about two years ago. So it's interesting that, you know, that these teams often may report into finance in the U S 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.
00:09:17
Speaker
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?
00:09:34
Speaker
So this was the third point I wanted to mention, the focus on mine, so it 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
00:09:50
Speaker
multi-modal 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 a competitive advantage to win your business or at least business pipeline to be able to participate in these standards where it's now a requirement 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.
00:10:17
Speaker
And finally, to your point, as a retention mechanism to keep the client happy, especially as this type of service is becoming table stakes in the industry. Cool. One of the other things you mentioned was about kind of the convergence of standards. And, you know, and I know that that even within regions is moving at different paces and things like that. I sat in a session at TPM last winter where.
00:10:42
Speaker
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 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
00:11:09
Speaker
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 it is scary to think about all this stuff because it has a lot to do. And there's 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 I'm afraid for order, I'm getting pressure from my clients for
00:11:38
Speaker
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 Smart Freight Center,
Data Collection Challenges for Freight Forwarders
00:12:02
Speaker
and then send this data back to the shipper. This is the base minimum, obviously.
00:12:08
Speaker
You can do more, but there are very easy steps to just get started and meet that demand. And I think what you really meant here is ideally one that's located at pledge.io, right? I didn't mean this. That's why I said it. That's what I said in accredited vendor from the smart fit center. But yeah, but since you brought it up, it could be a good idea. So what's your favorite part of this journey so far? What's been fascinating for me
00:12:37
Speaker
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.
00:12:59
Speaker
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 these 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, but these same people a year or two later are now coming back and saying, hey,
00:13:29
Speaker
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 then going 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 emissions that this industry generates.
Attracting Talent and Investors Through Sustainability
00:13:54
Speaker
One of the things that often excites me when there's big changes like this,
00:13:59
Speaker
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 always use is in the US 15 years ago, we created this regulation, importer security filing, which said that you 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
00:14:25
Speaker
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 is we've worked through implementing our customers with pledge and other providers is similar data quality conversations are coming up around
00:14:54
Speaker
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 Afraid Forward didn't really care that much about because there's no regulatory requirement to 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? Yes, that's a very good point.
00:15:21
Speaker
It's been very interesting to see actually how the journey these straightforward are taking where initially they just think about the tick box exercise or compliance exercise. And yeah, I'll send you my shipment data. You'll send me back a CO2 output. I'll report it to my customers. But 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, then maybe the specific flight numbers, then asking them if they have certain stopovers and others.
00:15:51
Speaker
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.
00:16:13
Speaker
which is as you embark on a journey, what you typically receive. And as a result of that, they're trying then to speak to other stakeholders in the industry, to their agents, maybe to their carriers to see if they can get that more granular data. And surprisingly, the driver is sustainability. 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.
00:16:42
Speaker
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 also new investors. And also as sustainability KPIs become increasingly important and scrutinized,
00:17:08
Speaker
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 they're producing and reporting back. Is there a point at which companies maybe are going too far or trying to put too fine a point on the data?
00:17:26
Speaker
I would imagine, you talk about all these things about, does this vessel have a scrubber on it? 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? This is sometimes a problem when they start.
00:17:55
Speaker
that they 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 point 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 initiative that you can do in the meantime. But yeah, your point is valid when they start their journey. Cool.
00:18:24
Speaker
What other kind of challenges do you see companies facing when they go to implement?
Struggles of Sustainability Champions in Businesses
00:18:30
Speaker
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.
00:18:44
Speaker
because they don't necessarily have the business case to convince these stakeholders to implement a sustainability strategy or 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 it nice to have today? But the sooner you start, the more benefits you reap and also the bigger the competitive advantage you'll have versus your peers in the industry.
00:19:11
Speaker
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? There are companies who've 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 that provide this carbon accounting capabilities were not live yet.
00:19:40
Speaker
So it was more a 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. 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?
00:20:09
Speaker
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 with
00:20:32
Speaker
really narrow down the focus and aim to become the best in-class solution for the transport and logistics industry. Looking bad, that's something that would have saved us a bit of time and resources, definitely. We did the exact same thing. About two or three times a year, I pull 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 that said,
00:20:57
Speaker
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, nine, 10 iterations of refining. It's a good one. And you're never there, right? Until you get so big that you just do everything, right? I think it's a rubber band effect. Eventually, you get to the IBM or Salesforce where you're just going to do everything now. But certainly, at the stages that we're at, focus is key.
00:21:26
Speaker
What's coming up next? What are you guys excited about?
Impact of New European Emissions Regulations
00:21:30
Speaker
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.
00:21:46
Speaker
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 listed businesses. But this would also impact non-European businesses doing business in Europe. And that equates to about 10,000 businesses in the US, so non-negligible numbers.
00:22:08
Speaker
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 forwarders have suffered. I've had to revise their business plan and it feels or seems like slowly but surely
00:22:34
Speaker
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 in potentially implementing new initiatives, such as on the sustainability side. 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.
00:23:00
Speaker
And it's amazing how short our memories get. So yeah, it's interesting, you know, but the best companies are always the ones that invest during the downturns.
Investing in Sustainability During Economic Downturns
00:23:12
Speaker
Right. And that, you know, in a responsible way. And, uh, I think what's really good for your business and actually for chain IO as well is that in the downturns, people tend to invest in things that have clear returns and clear value and not necessarily just like.
00:23:28
Speaker
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. 100%. But for us, it's good news. Yeah. I think the benefit of technology and digitalization in this space is that it simply saves time and resources. And this is obviously something that every company but Ford doesn't pay particular attention to.
Pledge's Offerings and Integration with Chain.io
00:23:56
Speaker
So if people want to get in touch, want to learn more about Pledge, where do they go? Pledge.io. This is our website.
00:24:03
Speaker
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 start for free button and you can get started with measuring and reporting on your multimodal emissions in a few clicks. And then when you want to scale it, you can connect directly via chain IO to your 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.
00:24:26
Speaker
Thank you so much for this. It's, again, such an important topic to everyone, and we really appreciate you taking the time. Thank you very much, Brian. 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 Chainion network, they were actually our first company to build on our new OpenConnect platform, allowing software companies to develop their own plugins that connect to the Chainion network and
00:24:54
Speaker
get access to all of the forwarders and shippers that are on our platform. So very 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 at Chain.io.