In this episode of the Sustainable Supply Chain Podcast, I sit down with JP Stevenson, Director of ESG Analytics at Global Assurance company LRQA, to delve into the intricate world of global supply chain management. We explore the evolving landscape of ESG compliance, the vital role of digitalisation in achieving transparency, and the imperative for systemic reforms.
JP sheds light on the challenges factories, particularly in Asia, face in aligning with diverse global regulations. He emphasises the uneven distribution of financial resources and expertise, which disproportionately affects smaller enterprises, leaving them vulnerable in a fast-evolving regulatory environment. Our discussion also touches on the innovative strategies factories are employing to navigate the energy transition and improve operational efficiency.
A significant focus of our conversation revolves around the need for a shift in the financial dynamics between suppliers and buyers to facilitate genuine capacity building. JP argues that a more balanced approach to these relationships is crucial, underpinning it with a call for local governments and financial institutions to play a more proactive role in supporting factories' compliance efforts.
Tune in to gain insights into the complexities of supply chain sustainability and the collaborative efforts required to foster ethical, efficient, and en
Elevate your brand with the ‘Sustainable Supply Chain’ podcast, the voice of supply chain sustainability.
Last year, this podcast's episodes were downloaded over 113,000 times by senior supply chain executives around the world.
Become a sponsor. Lead the conversation.
Contact me for sponsorship opportunities and turn downloads into dialogues.
Podcast supporters I'd like to sincerely thank this podcast's generous supporters:
Lorcan Sheehan
Olivier Brusle
Alicia Farag
And remember you too can Support the Podcast - it is really easy and hugely important as it will enable me to continue to create more excellent episodes like this one.
Podcast Sponsorship Opportunities: If you/your organisation is interested in sponsoring this podcast - I have several options available. Let's talk!
Finally If you have any comments/suggestions or questions for the podcast - feel free to just send me a direct message on LinkedIn, or send me a text message using this link.
In this episode of the Sustainable Supply Chain Podcast, I sit down with JP Stevenson, Director of ESG Analytics at Global Assurance company LRQA, to delve into the intricate world of global supply chain management. We explore the evolving landscape of ESG compliance, the vital role of digitalisation in achieving transparency, and the imperative for systemic reforms.
JP sheds light on the challenges factories, particularly in Asia, face in aligning with diverse global regulations. He emphasises the uneven distribution of financial resources and expertise, which disproportionately affects smaller enterprises, leaving them vulnerable in a fast-evolving regulatory environment. Our discussion also touches on the innovative strategies factories are employing to navigate the energy transition and improve operational efficiency.
A significant focus of our conversation revolves around the need for a shift in the financial dynamics between suppliers and buyers to facilitate genuine capacity building. JP argues that a more balanced approach to these relationships is crucial, underpinning it with a call for local governments and financial institutions to play a more proactive role in supporting factories' compliance efforts.
Tune in to gain insights into the complexities of supply chain sustainability and the collaborative efforts required to foster ethical, efficient, and en
Elevate your brand with the ‘Sustainable Supply Chain’ podcast, the voice of supply chain sustainability.
Last year, this podcast's episodes were downloaded over 113,000 times by senior supply chain executives around the world.
Become a sponsor. Lead the conversation.
Contact me for sponsorship opportunities and turn downloads into dialogues.
Podcast supporters I'd like to sincerely thank this podcast's generous supporters:
Lorcan Sheehan
Olivier Brusle
Alicia Farag
And remember you too can Support the Podcast - it is really easy and hugely important as it will enable me to continue to create more excellent episodes like this one.
Podcast Sponsorship Opportunities: If you/your organisation is interested in sponsoring this podcast - I have several options available. Let's talk!
Finally If you have any comments/suggestions or questions for the podcast - feel free to just send me a direct message on LinkedIn, or send me a text message using this link.
There's a really fabulous research institute out of the Polytechnic University here that focuses on what's called garment to garment production. And so they're able to actually using a production process that's about the size of a container. Take old garments, deconstruct them, and then reconstruct them again, into something that's entirely new within the course of a couple of hours
Tom Raftery:
Good morning, good afternoon, or good evening, wherever you are in the world. This is the Sustainable Supply Chain Podcast, the number one podcast focusing on sustainability and supply chains, and I'm your host, Tom Raftery. Hi everyone. And welcome to episode 17 of the sustainable supply chain podcast. My name is Tom Raftery, and I'm excited to be here with you today sharing the latest. Insights and trends in supply chain sustainability. Today, I'm talking to global assurance company LRQA, a fascinating conversation. And in the coming weeks, I'll be talking to FocalPoint, Fictiv, iValua, Avetta, Silicon Foundry, and more so some fabulous episodes coming up as well. Not just today's one. Now a quick question. What steps have you or your organization taken to make your supply chain more sustainable? Send me the answers by hitting the, send me a message link in the show notes of this or any episode. And I'll read the answers out next week. So again, what steps have you or your organization taken to make your supply chain more sustainable? This is an opportunity not just to showcase what you and your organization have done. But also to help others. And have your steps highlighted on the show. All right. With that out of the way. With me on the show today, I have my special guest JP. JP. Welcome to the podcast. Would you like to introduce yourself?
JP Stevenson:
Yeah, very happy to Tom first, thanks so much for having me on. Love the podcast. So my name's JP Stevenson. I am based out of Hong Kong. I am a Director of ESG Analytics at LRQA or Lloyd's Register, as it was known formerly. My career's been spent in supply chain management, so prior to to becoming part of LRQA I was a supply chain manager for my myself, for the apparel industry, also based in Hong Kong. But now my work with LRQA really focuses on supporting our work around data analytics. Some of you might not be familiar with our work as LRQA. We're the world's leading assurance service provider with a very heavy focus on ESG. We have about 60,000 customers globally. 5,000 staff. Most of whom are located actually in the world's production markets because our primary business is involved in the inspection, certification of factories. When it comes to the type of problems that we work on we're, we have a really big focus on the energy transition and what it means for supply chains. Big focus on sourcing responsibly. Really hot topic now with all the due diligence regulations that are being passed, have been passed. We focus on product integrity. So how do you know that the food that you have in your stores is safe to consume? Assuring assets and management systems so you can trust the institutions that you partner with in trade. But then finally, also, and really I think, important to the, the future of trade and the broader horizons for assurance, cybersecurity. So how do you strengthen your cybersecurity systems in a way that's mature and can avoid being penetrated by outside actors? That's the broad work of the firm. That's a lot. My, my core concentration is really on a also a big question. So every year we run assessments on as many as a hundred thousand entities across the supply chain. How can we take what we know from being on the ground in many of the places where products are made and then cross apply it to your understanding as our customer or someone that's interested in our the products we touch. To get a better feeling for what are the sustainability attributes of a supply chain. So it's a lot of boots on the ground work that we do, Tom, but there's a really heavy focus on backend supply chain digitalization, beginning with the factory first.
Tom Raftery:
Okay, so your customers might be based in the EU, in the US, somewhere like that. And they have suppliers in Asia, typically manufacturing companies, and they want to know either to satisfy their customers or to satisfy their regulators, or some mix of same, that the stuff that they're getting from their suppliers is made ethically, sustainably, that their brand is not at risk from purchasing from these suppliers. Is that kind of it in a nutshell?
JP Stevenson:
Completely. Yeah. One of the big, focusses that we have had within our Hong Kong operations for about two decades now we've been a leading social auditor, so really since the, the advent of social auditing as a common practice within supply chains. And in that scenario, we'll be brought in on behalf of our clients, many of the world's largest consumer goods brands to undertake due diligence on site, that would provide our assessment of the type of risks that you have in association with working with certain types of, of factories. Now, when, when we first began that practice I think a lot of brands were in a real responsive mode. You know, beginning in the nineties with the sweatshop scandals and, and Nike, you had some of these first programs that were developed to actually see how products were were made. We then assisted brands like Nike in developing the systems that you would need to have a risk-based approach to managing your suppliers. But a lot of that time, that means that you know, you're, you're a partner with the brand, but you're also a partner with the factory that sits out in this part of the world because at the end of the day, it's not just about policing factories, it's also about putting them in a position where they're able to remediate any deficiencies in their operations and then operate at world class standards.
Tom Raftery:
Nice. Nice. And when you talk about the social, it's, it's primarily the lack of forced labor, that kind of thing.
JP Stevenson:
Yeah. You know, it, it's varied. When we think about what makes up a great assessment, there's generally five buckets of risk that we look at. So, one labor related issues that could include forced labor, child labor issues around freedom of association. Second is health and safety. So this in particular, you know, a decade or so in response to Rana Plaza, it was a huge, huge focus of our work and really got built in to a lot of the revamping of the social audit process. So we make sure that you know, the, the sites that you work within have adequate protections in place for the workers. Also focus on the environment. Really important now, this would include assessing greenhouse gas emissions associated with the, the site's operations. Fourth pillar business ethics. So how do you trust actually that the operations of your, your factory are one run in a credible way? And then finally management systems. So each of those are, are distinct areas of risk. And what we've found within our operations is you really, you really can't take a one size fits all approach to ESG due diligence to supply chain due diligence. Just because depending upon the regions that you operate in or the product categories that you work with, each will have a very different risk profile that your response needs to be built around.
Tom Raftery:
Sure. Sure, sure, sure. And how do you do that? How do you guarantee that in any of those five buckets, these manufacturing plants are doing what they say they do, or are living up to the standards that their customers hope they're living up to?
JP Stevenson:
Sure. So first, I think guarantee is a really strong word, and actually I would edit that and encourage instead folks to think about supply chain due diligence as a recurrent process because it's not one and done. It's not that you go into a factory once and on those two days that you're there out of the year, based upon the assessment of sites, you can guarantee that actually what you're producing is being produced ethically. We've seen especially now that concept become quite common that you can just certify and move on. But you know, having been in quite a few factories myself, I would say that you know supply chains are complex. They're fast moving, so are the operations of factories. They evolve over time. And so the, the design of your program really needs to be much more focused upon on continual engagement with your, your suppliers., be they strategic or transactional to make sure that you have the right control mechanisms in place for the type of working relationship that you have.
Tom Raftery:
Okay. How much of this can be done digitally, and how much of it requires boots on the ground as it were?
JP Stevenson:
I love this question. So Tom, I think historically the approach that the industry has taken has been very analog. It's predominantly relied upon the budgets of really large consumer product companies to fund assessments of sites, which can be quite expensive because you need to pay for staff to be on the ground. The staff are, are certified. There's a certifying body that governs it. And based on that, you get a set of insights that you know, real useful in uncovering areas of, of risk, but you know, has deficiencies as well. Real simple example of that. Auditors don't necessarily have the ability to check if you know, there's injury to workers or fires that occur when not on the site. It's really hard to get documentation around that. It's also really hard to address real pernicious problems like forced labor or child labor based upon those types of, of visits. And so our answer has been for, for the past seven years or so our business has been digitalizing audit records because we are of the belief actually that great due diligence programs can be digital in nature and by digitalizing the assessment process around risk. So first profiling the sites that you work with and then looking at what type of control mechanisms like audits you want to have in place. It's a far more scalable, accessible process that actually democratizes the approach that you can take to vetting your supplier partners to not be really just about the world's largest brands, which as we know doesn't make up the bulk of trade, but also the SME.
Tom Raftery:
Sure. But just to clarify for me, in a digitalized situation, how can you know if there has been a fire or forced labor or any of the things that you know you can't gauge from a two days a year visit?
JP Stevenson:
Great question again. So we have supplementary tools. One that we have is called Sentinel. It's an adverse media scanning tool that every month screens about 300,000 factories for really, really localized disclosures of risk. And so just as an example, in China, you have on a provincial level grievance mechanisms. So hotlines that are run by governments where workers have the ability to report on what they're, they're hearing, seeing within the site. We take that data and build it in. So our clients, rather than just relying upon audits, would also then have the ability to every month receive a report out in the instance, you know? Is there risk around those types of issues that you flagged? I think more and perhaps, more pressing today though has also been, that's application to another type of risk, which is that around forced labor. So, you know, the numbers have come out for forced labor. Pretty recently. There's about 50 million people globally now that are in some type of labor arrangement that can be qualified as modern slavery. We believe through tools like Sentinel, which maps stakeholder relationships and is able to establish nexus to entities that you know might be involved with questionable labor arrangements. You're able to get a report out of those within your supply chain that you need to watch so that you're then able to go back to those entities and have a more serious conversation or talk to your procurement department about what you're going to do to exit those factories.
Tom Raftery:
Okay. Interesting. Interesting. We're seeing as well a shifting regulatory environment. I'm based in Europe. We're seeing similar in the US. It's starting to move there as well, not quite as fast. We have new regs coming up. How is that impacting you your organization and also the factories that you are, I don't wanna say overseeing, that's probably too strong a word, but checking on for your, your customers, for example.
JP Stevenson:
Massively. So these bills that are coming up, they're, they're passed in the the West, but the work is done in Asia. Take for example, on the environmental side like scope three emissions, which has become real popular target. How do you actually assess your Scope three emissions? Well, it involves working directly with your suppliers to get estimates of actually their emissions in a given year. And what's happening upstream. And a lot of that involves, first making sure they have the right management systems in place for doing accurate reporting of it. And then you know, are disclosing it appropriately. You know, you, you, you mentioned the US and the, the EU, I think there's a couple of bills within the past year that have really changed the tone of supplier relationships. And for that I would say while the EU has perhaps been the, the more vocal body through regs like the CS, triple D and developing really stringent guidelines on how you work with suppliers. The U-F-L-P-A passed by the United States. The, the Uyghur Force Labor Prevention Act, I think is perhaps equally challenging to, to both brands and suppliers, just for, although it's quite narrow in its scope, the way that the burden is structured on it. The targeting on it. When, when you're on the list, you're guilty until proven innocent. And with that you oftentimes have to develop really robust documentation management systems, lest your goods be seized at at, at port. And Al it's also been pretty challenging for that specific regulation for both brands and factories to figure out once they've demonstrated actually that they have adequate processes in place how to get their decisions appealed or off the targeting for, for that. So. I'd say that at least that's been the response. What I think's been really interesting though, Tom, about supply chain due diligence directives is I think we had long assumed that, you know, production markets of the world would lag significantly in the passage of frameworks that would be comparable or touch on these same points as EU and US directives now being considered. We, we've actually seen that change and happen much more quickly than expected. Couple examples in, in October, actually, the Korean Parliament tabled a bill that is pretty similar in structure to the CS Triple D. So you know providing equal prescriptions for both social and environmental due diligence. Japan has reporting requirements. We've seen China be quite aggressive in this. We've also seen India through the BSRS develop its own framework, which is foundationally different reporting standard from how other markets have approached it. So I would say that when it comes to looking at how ESG's shape supply chains, it's not just a Western centric dynamic.
Tom Raftery:
Great. That's great to hear. How is that at a practical level impacting the manufacturing organizations, the suppliers in Asia? I mean, are they having to have massive changes to their business practices or is this something they were doing anyway? Are they having to change their IT infrastructure to accommodate reporting of these things? You know, what's, what's the on the ground practical impact there?
JP Stevenson:
Yeah. Re really challenging again because it's the factories out in production markets that actually have to do the, the work of it. Additionally, we've seen at least, you know, through regs like U-F-L-P-A. When there's problems, it's oftentimes charged back to the supplier. So they're, they're financially penalized even if the, the work doesn't get done correctly. Practically, I think it's left a lot of factories in a position with inadequate resources to address the multiple challenges that, that they face. I think that the, the first point to bear in mind is a lot of larger factory groups will work with multiple regulated markets, and these regulations are not harmonized. There is not a set global standard that governs ESG supply chain due diligence today. So I, I think the factory's in a position where they've had to, to work pretty hard to stay abreast of actually what will be required with the of them. Really better groups have taken it upon them to have more empowered mindset and are now working with their upstream suppliers on also figuring out the management systems required for compliance. But I think we need to be really grounded in our expectations of it. You know, you're, you're looking at a group of entities that are still pretty distressed from COVID and the impact that the pandemic had on their financial positions. I mean, even pre Covid, we did some research that looked at, you know, what, what was required to undertake capacity building initiatives within sites and we found that generally, you know the project probably had to have a six month breakeven, really clear ties to efficiency, in order for it to be considered for funding by the, the factory. And you know, COVID only made that worse. It more broadly speaking as well on, you know, today there's drastic undercapitalization of production markets. I mean, to date there's a $2.5 trillion gap in trade financing. And oftentimes that impacts the amount of capital that is available for factories to begin the type of upgrading work that's required actually to be compliant with it. So I think most factories today would especially the SMEs because if you're, you're a real strategic partner, like many countries have, you know, four or five big production companies per vertical. That you, you don't have to worry about them. They, they, they have resources. They're key trade partners for larger entities, but it's these smaller organizations that maybe are now trying to balance the multiple markets that they operate in, that are in a position where they don't necessarily have a clear set of guidance from their partners nor the resources to actually be able to undertake the work on ground.
Tom Raftery:
Yeah, that was gonna be a question I was gonna ask actually. The difference between the larger manufacturers and the the SMEs. There's, there's gotta be challenges and you mentioned issues with capitalization as well. Are companies stepping up in Europe, in the US, wherever, and helping their suppliers with capitalization? Because if they are a strategic supplier, that would obviously be something you would've thought that would be in their interest to do so, help the suppliers out. But for SMEs, that's gotta be even a bigger challenge because they're probably less likely to be strategic partners. So is is, are we seeing, you know, in essence, a divide grow between the larger and the, the SMEs?
JP Stevenson:
Absolutely. So I, I would also say it's regionalized. We did some research during covid in conjunction with McKinsey on how this would play out with my, my previous place of employment. And we found generally in China, you know, capital was not an issue. Their, their manufacturing base you know, to some extent you're irrespective of size, really didn't have too many problems. I think for larger strategic partners you saw, especially if you were working with larger consumer brands, bridge financing arrangements that were enacted during covid. Some of those are in place today. Some of those are, are not, but there's countervailing forces with it as well. So you know to return to your question first, most of the other regions of production markets did not have the ability to access capital. I mean, markets like Bangladesh, I remember anecdotally a interviewing some suppliers there in the apparel industry, and they were speculating, this was mid covid, that about 60% of SMEs within that market and within that segment would you know, may head for bankruptcy as a result of it. So the, the countervailing force though, to those markets that you know, there, there was some type of protection on the part of brand partners. You know, it was also the treatment of supply chain financing within the brands. We saw tons of entities extend their days payables to, you know, as long as a year out. And so, again, I, I think that only really complicated the ability of, of factories to continue operating. Moreover now be in a position where they're, they're really willing to you know, help their Western trade partners comply with these regulations. I'd also say there's a bigger element of that too where you know, now you have factories that are really looking to diversify much more actively away from the, the west. I mean, we've seen generally a movement of, you know, growth and global consumption from being highly concentrated in the American and EU markets to being found in places like China, India and I think now more so than ever, you have suppliers that really wanna build strong interregional trade ties with those markets. Given a little bit of the resentment that's hung over from COVID and their treatment,
Tom Raftery:
Wow. Fascinating. Fascinating. So with with, with the increased interest and regulatory requirements around things like, I mean, you mentioned Scope three, are factories actually trying to reduce their emissions? Or are they trying to increase their ability to report and say, look, this is where we are. We've got a load of emissions. Or are they actually going out and trying to reduce their emissions to make themselves, you would hope more competitive?
JP Stevenson:
Depends upon the regional markets requirements. I mean, some countries have stronger push pushes around encouraging energy transition. But I would say by and large it's you know, both on the part of, of brands, and then the the consequent activities for, for factories, there's a focus on reporting and measurement. We, we work a lot on assessing scope three emissions within sites today. And I would say that, you know, most of the work that we've seen undertaken has really been pretty preliminary in developing direct disclosures from sites. A lot of folks that have more coverage of Scope three are heavily tied for to, you know, this part of the world and production markets for it. They've, they've used a assumption based models that oftentimes they have pretty big discrepancy between what the actual emissions footprint is. We're, we're starting to see that change even in, in standards. And you know, there, there has been a push by institutions when you're doing direct onsite assessment of emissions to actually have validation of that. So to to assure that you know, the reported emissions are are accurate. But I would not say that we have reached the state now where at least largely you have many factories that are in a position to be actively investing in changing their processes in response to the greater scrutiny of Scope three.
Tom Raftery:
Okay. And what kind of time horizon do you see for that to actually happen?
JP Stevenson:
Next two, three years? Yeah. I, again, I think it, it, it's definitely coming. But you need to have accurate numbers of your, your sites first. And that requires a lot of rebudgeting of activities on the part of responsible sourcing programs to, to make sure that you have accurate assessment mechanisms in place, reevaluation of your supplier policies as well. Especially if you're looking at you know, undertaking science-based targets and then, and then you, you set the systems in place with, with sites or, or think differently about who you would work with. But right now, that's not the primary driver we see of changes within supply chains.
Tom Raftery:
What is?
JP Stevenson:
I, I, I think a few things. So the U-F-L-P-A in particular has placed a lot of factories on watch lists. And I. I, I know now many of our clients will, in response to the analysis we do then sit down with their procurement teams and talk about how you would exit certain sites. You, you've also seen that transfer through to we, we work some with development banks how they think about you know, what types of projects they finance, what the supply chains are, are that back them. So I'd say that, that that's the big driver right now. I'd also say taking a broader view outside of just ESG, I mean the, the US China trade war continues to, to play out. We have seen at least decoupling of tier one, so final stage production from China that's led to you know, folks maybe moving from being 90% focused on China, depending upon the vertical to 70% for their tier one. Those are new entities. What's interesting about those supply chains though is you know, if you look further upstream with it like into the milling processes, say for apparel, not, not a lot of that has actually been decoupled from China. And so what you've just seen more than anything else is a lengthening of supply chains where you have more partners involved within it, which at least from our perspective, can also really enhance the, the, the risk associated with sites. I mean, rather than having close ties with you know, a number of entities, you now have more intermediation and you have to think about the control processes that go along with that.
Tom Raftery:
Nice. Okay. Okay. Where to from here? I mean, we have targets in Europe and in the US for example, that go out to 2030 for things like emissions reduction. How are, well, what, what, what do you see happening in Asia in the whole manufacturing sector, for example, in response to a lot of these things? Where is it all going for supply chains in the next 2030 is a little over five years away, so in the next five years?
JP Stevenson:
Yeah. So I think Asia has such an important role to play in the, the response, I mean, that point's obvious. The, the emissions sit out here, the work sits out here. But I think also the solutions sit out here. So one, one thing being based in Hong Kong that I notice is that it would be very hard to work on building different operating models for manufacturing from markets where you have not had a history of manufacturing, at least large scale supply chains within the past several decades. I'll, I'll give two examples that are, I think, pretty innovative. And, and come from Hong Kong where we've seen local solutions and they're, they're local because I think in these markets, yeah, you have the the talent. You also have the capital. I mean, let's not for forget the position of Hong Kong in global capital markets. It's you know, a necessary component of what comes down to actually funding solutions. So the, the, the two I like to, to look at first a you have within Hong Kong several trading houses that have gone and built on demand production models. Now take apparel. The, a supply chain structure, I know real well the, the traditional kind of rule of thumb for how you manage your inventories. Hugely wasteful, but also you know, hugely emitting was you'd order your stock, you'd sell a third of it for full price. You discount a third, and a third might end up in the landfill. And that's because. I know it's painful. It, it's painful. But that's, that's also the reality I'd say of most apparel supply chains today. You know, you're working on really, really long calendars. You have really inefficient processes that back the design of products. Back when I was a supply chain manager, we used to think that for every seven items that we were asked to actually design, only one of them would actually end up on the shelves in the store stores. So one company that I think is pretty innovative that's addressing this is a entity called KnitUp. And it's, it's backed by the, The Fund Group, which has historically been one of the world's largest supply chain managers for apparel. What they've done is they've taken a production vertical that for apparel is relatively mechanized. So we're with a typical apparel, supply chains. You know, you have heavy involvement of labor with the, the cut and sew of, of garments. But with knitwear actually dating back decades, it's primarily machine produced. You might have someone that's involved with, with linking it, but it's, it's not a, a huge component of the cost structure of it. KnitUp has used its position of familiarity with those types of production mechanics. So how those machines actually work to digitalize the design of apparel. To the point where you can actually go and produce whole garments on demand that are available in three weeks for your, your trade partners. And, and the idea behind that is you know, you design rapidly prolifically one, two piece orders. You test the market to see what works, and then once you have that validation that you then scale it up. One technology component of that outside of just, you know, having a great production model that's not super labor intensive, resource intensive is they've also taken the traditional process for apparel design and it's entirely virtual. So rather than working through the system of tech packs, which, you know, design team in New York sends to ya, and then you have to go figure out from the people that actually know how to knit garments and work these machines, what's possible and what's not possible how to create it. You, you can do it actually in, in one sitting and you're then able from that to, to get the shipment of these goods. So there's been folks that have experimented with concepts like that in the the West. We haven't really seen them work out for a few reasons. You know labor, expertise, resources, also industrial clustering. You need to be pretty close to your production markets and your upstream supply chains in order to make it work. But you, you can see that here. A, a a second is a, you know, There's a really a, a fabulous research institute out of the Polytechnic University here that focuses on what's called garment to garment production. And so they're able to actually using a production process that's about the size of a container. Take old garments, deconstruct them, and then reconstruct them again, into something that's entirely new within the course of a couple of hours. And so HK Rita, the, the institution that actually has developed it, you know, I think they're able, they've been able to actually develop that in large part, not only because there you know they got excellent leadership, but also because they sit really, really close to the problem. So I'd say those are micro examples, but when you add it up over the course of the supply chain, you actually have fundamentally different models that are emerging from this part of the world. That can potentially play a really transformative role in shaping you know, how supply chains manage the energy transition, but also other known sources of huge inefficiency and waste with how goods reach the west.
Tom Raftery:
Fascinating. We're. Coming towards the end of the podcast now, JP, is there any question I didn't ask that you wish I did or any aspect of this we haven't touched on that you think it's important for people to think of?
JP Stevenson:
You know, I, I, I think one thing that's really important to this part of the world and I know you'll appreciate this, Tom, is the upstream digitalization of supply chains and how that ties in to how we navigate the sustainability crisis but more broadly, think about better operating models. So I, I, I think you see a huge divide in the state of digitalization within supply chains where you know, in, in the west consumption is really fast moving. E-commerce has been hugely disruptive. It's a very data rich environment. The operating realities of the factory in Bangladesh is quite different. You know, they're pretty reliant on paper documentation to, to back their processes. They may have some sensors in place to, to measure certain elements of their processes, but it's not something that is widely used. There's still a real difficulty in assessing upstream supply chain relationships. And to that, I think the next evolution that has to happen around digitalization really needs to be focused on addressing those set of issues. And, and for that, we're looking at not just the core building blocks of digitalization. But also a rethinking of the financial relationship between the supplier and the, the buyer. Historically it's been one that's been quite one sided, built around control, and you've also seen as a result of it these huge gaps in liquidity that are really preventative of capacity building within sites. Let's not forget that, like actually banks do have a huge role and responsibility to play in financing trade. That's one of the reasons why you get preferential access to capital. There is a social purpose to this. And so I guess one message that I would have is that you know, we can't be stuck in an ivory tower when, how we think about the solutions or what's practical for the factory. It really involves system reform and with that asking more of local governments and financial institutions in how they enable factories to become compliant for it because I think otherwise there's probably not good solutions that we can execute on the timeline that we need.
Tom Raftery:
Fair. Fair. Great. JP, this has been really interesting. If people would like to know more about yourself or any of the issues we discussed on the podcast today, where would you have me direct them?
JP Stevenson:
Yeah. Feel free to contact me on, on LinkedIn. Yeah, I, I would love to connect further.
Tom Raftery:
Fascinating. Great. Super JP, that's been brilliant. Thanks a million for coming on the podcast today.
JP Stevenson:
Cool. No, my pleasure, Tom. Anytime
Tom Raftery:
Okay. Thank you all for tuning into this episode of the Sustainable Supply Chain Podcast with me, Tom Raftery. Each week, thousands of supply chain professionals listen to this show. If you or your organization want to connect with this dedicated audience, consider becoming a sponsor. You can opt for exclusive episode branding where you choose the guests or a personalized 30 second ad roll. It's a unique opportunity to reach industry experts and influencers. For more details, hit me up on Twitter or LinkedIn, or drop me an email to tomraftery at outlook. com. Together, let's shape the future of sustainable supply chains. Thanks. Catch you all next time.