Realigning Incentives in Global Supply Chains for Impact Claims—Investing in CommonShare

Realigning Incentives in Global Supply Chains for Impact Claims—Investing in CommonShare

Aug 14, 2023 1:07 PM
Posted by

Jahed Momand & Matthew Stotts

The UN’s Sustainable Development Goal 12 is “Ensure sustainable consumption and production patterns.” While admirable, this goal tangibly remains far out of reach in 2022 for a number of reasons, primarily because sustainability and transparency claims are often unprovable, sustainable consumption and production are not well defined, and the ability for consumers to find and buy reliably sustainable products online and offline is basically impossible once you dig into the supply chain behind these products.

CommonShare provides a robust B2B platform for traceability, quality, and claims management, with a shared incentive layer that enables collaboration between certification bodies, standards owners, retailers, and verifiers.

Cooperation and coordination in the supply chain are currently nigh on impossible, with standards owners and certifiers often at loggerheads over their adverse incentives. With their credits based system, privacy guarantees, and social graph, Commonshare is able to get all parties to collaborate to verify their part of the supply chain without revealing trade secrets or risks down- or upstream. CommonShare has mapped the product origination ecosystem in such a way that enables collaborative traceability in a way that’s currently impossible, but will most likely be required in the EU soon.

Coupled with a suite of APIs that extend claims management to every platform, CommonShare has the right combination of software platform and architecture necessary to get the multi-stakeholder marketplaces in sustainable retail to work together to meet standards of traceability.

The total addressable market is huge and growing, and regulations are driving consumer brands and retailers to invest in sustainable and transparent supply chains, especially in the EU. Every consumer-facing brand and retailer in the UK, EU-27, US, NZ, and Australia is a potential customer of CommonShare.

The team behind CommonShare has built another company in this space and exited to private equity. The team has the lead in an RFP process with a major retailer to build their supply chain traceability solution, and is poised to dominate this early but growing market.

What is Commonshare?

In the EU 27, the EU Digital Product Passport aims to make consumer products longer-lasting as well as easier to repair and recycle, as 80% of a product’s lifecycle is determined at the design stage. It will do this primarily through tracking the origin of components and raw materials in consumer goods, with the ultimate goal of enabling a circular economy in packaging and raw materials by 2030.

If this legislation were to go into effect today in the EU economic area (EUEA), it would be nearly impossible to enforce, and it would cause economic damage throughout the EUEA and to the economies who export to it.

The global retail market size is roughly $6.9 trillion, and the EU’s share of this is roughly half. Secondly, the global apparel market is $1.5 trillion and produces 100-150 billion items per year, with the EU representing $532 billion of that market. With legislation set to come into effect in 2023 ensuring product traceability to enable sustainability claims, exporters into the EU market will have to comply with this progressively, meaning that the ~$150 billion in apparel imports into the EU market are subject to sustainability claims.

Capturing this market represents a huge revenue opportunity, and can drive the sustainability of the overall economy.

CommonShare creates value through three products:

  1. A B2B platform for traceability, quality, and claims data management
  2. A shared incentive layer built between the entities on the platform (suppliers, retailers, and verifiers, and standards / certification bodies) to enable them to validate each others’ work and get rewarded for doing so
  3. A Microservices API that extends claim management to every digital interface through proprietary relationship middleware. A purchaser or retailer can get data into their interfaces via this API to make purchasing decisions as easily as needed

Why did we invest?

In tandem with this already existing platform, the team envisions building a cooperative and collaborative economy around claims within the platform. Standards owners and verifiers, as well as brands and suppliers are often at odds with each other due to their competing incentives. The team at Commonshare believe they have struck a balance that can satisfy the needs of all market players, without introducing a new rent to the ecosystem.

This creates alignment between suppliers, retailers, and verifiers in a way that disruptive technology looking to disintermediate or insert itself into these value chains cannot achieve, and it’s core to what makes CommonShare sticky.

Founder and CEO Martin Smith has built and exited two previous startups, one in the sustainability space. He has spent 10 years embedded in the space to understand the diverse needs of all the players. Whereas most technology plays in this space are trying to disintermediate or displace one of the players in the value chain, Martin sees an opportunity to bring them together and incentivize them with a token economy. Martin is personally on the bleeding edge of tokenomics design, having designed tokenomics for prominent Web2.0 companies. He brings this expertise to CommonShare in a way that no other person or player really can.

The team Martin has assembled has more than 10 years experience building complex middleware and cloud-based applications to make multiple disparate systems interoperate and communicate. Chief Technology Officer Abdel Kader has been working with Martin on this problem for 6 years, being the mastermind behind the product architecture referenced above that enables CommonShare to own the graph of business relationships between certifiers, suppliers, and retail brands in a way no one else can. The team boasts 4 engineers of near equal caliber, as well as a board of advisors well placed across Santander Bank, Goldman Sachs, and NGOs, who can bring key relationships to unlock the value chain for CommonShare.

Nothing contained herein constitutes investment, legal, tax or other advice nor is to be relied upon in making an investment or other decision. This article contains the opinions of the author, and such opinions are subject to change without notice. Furthermore, it may also include data and opinions derived from third party sources. Cerulean Ventures does not accept liability for the accuracy or completeness of any such information or opinions which can be subject to change without notice.