Any company, large, or, small, can now offset carbon just by buying products they were already buying for their business. So, the idea behind it was, let's not penalise people for buying products that are maybe made from plastic and they have to buy them, but let's also reward them even more for buying the sustainable products. Made from fiber, bioplastic, et cetera. Good morning, good afternoon, or good evening, wherever you are in the world. Welcome to episode 61 of the Sustainable Supply Chain Podcast, the number one show focusing exclusively at the intersection of sustainability and supply chains. I'm your host, Tom Raftery, and I'm thrilled to have you here. A huge thank you to this podcast's, amazing supporters. You make this podcast possible. If you'd like to join this community support starts at just three euros or dollars a month, which is less than the cost of a cup of coffee. And if you're interested, you'll find the link in the show notes of this or any episode or at tinyurl.com/ssc C pod. Now in today's show, I'm excited to be diving into an episode with Andrew Hargest of Supply Club. And in upcoming episodes, I'll be talking to Simon Kim, who's the CEO of Glass Dome, where will be talking about product carbon footprint. Paige Janssen, CEO of Engie impact will be talking about sustainability data. Jen Chew, head of Solutions and Consulting for Bristol Cone, we'll be talking about AI and sustainability. And JF gnnge, who is Chief Strategy and Product Officer for Pendulum. And again, we'll be talking AI and data. But back to today's show. And as I said, my special guest today is Andrew. Andrew, welcome to the podcast. Would you like to introduce yourself? yeah, absolutely. So my name is Andrew Hargest. I'm the founder of Supply Club Supply is a hybrid distributor where we marry all the great products and services from traditional distribution with modern tech stack and digital tools. Okay. To what end? Yeah, absolutely. So our specialty is packaging and supplies for the food service industry. Very good. And why, as in, why did you set this up? What was your Damascene moment that made you wake up one morning and go, I know I should set up a supply club? Yeah, of course. So, like most startups or bootstrap companies, you're not really sure what the end result is gonna be, you just kind of get started. So supply club actually started as a different name called Ecopliant, which was a side hustle where we were selling paper straws to bars, restaurants, hotels, et cetera. I came from the packaging industry as a broker. We were a manufacturer's rep for packaging manufacturers in Northern California. And it was right around the time where that video with the straw in the turtle's nose came out and the scientists were pulling it out with pliers and it was awful and it raised a whole bunch of buzz and, outrage. And so we were looking to scratch that entrepreneurial itch and this video came out and so, as being an an outdoors man, we decided, Hey, look, like maybe there's a market here because people are outraged about plastic straws and, we have access to a paper straw manufacturer. We let's see what we can do here, right? You, When you start out, you. Don't really know what you're doing. So you just kind of start and figure it out as you go. So we bought product, we marked it up for more than we bought it for, and we sold it to customers. And that kind of snowballed into more customers. And, and then we expanded the product line. And, what you see today is absolutely nothing like where we started, but we've built out a pretty cool business that we're excited about. And looking forward to the future. Okay, so essentially the bottom line is you're selling sustainable packaging to primarily the food industries, correct? Yeah. So our core business is food packaging to the food service industry, restaurants, bars, hotels. Even hospitals meal kit companies, caterers, those are all our core customers. If you make and sell food in a to-go takeaway leftovers fashion and you need a disposable container or supply, in order to, meet that need for the customer. We can sell you that product. And sustainable packaging, I mean, it's come a long way, obviously. But what's holding businesses back from making greener choices today, because it's still difficult in a lot of places to get decent sustainable packaging. Yeah, definitely. So Really? I think there's two things that are the core issue. One is education. People don't really know when they hear sustainable, it's this blanket term that doesn't really get down to what it actually means. So education would be a big piece of that is what does sustainability actually mean? Is there a score that I can assign to this product that makes it more sustainable or less sustainable? And then of course, that gets into objectivity versus subjectivity, right? Like maybe someone's opinion of sustainability is different. So number one would be education, right? We need to help customers understand what options are available and and how it's going to help them achieve their business goals. Number two would be materials making sure that you are using the right materials and actually putting forth a sustainable product that meets the needs for businesses. Okay. And what are some of the biggest misconceptions that people might have about sustainable packaging? I think probably the the biggest misconception is that it's wildly expensive. I think when, when sustainable packaging and I'm doing air quotes right now, because, there's a lot of different types of sustainable packaging, but you, let's take fiber for instance. It came out as new, right. And people said, Whoa, this isn't a polypropylene black plastic container. This is a, this looks like it's made out of paper. Right. And people call it bamboo when it's actually made of wheat grass. There's just, a lot of guessing to it. but I think back in the day when these products first came out, it was more expensive, right? If you're gonna launch something new, you have to invest in the equipment to make those products and that's gonna make it more expensive, right? But as industry scales up, it becomes less expensive because you're able to produce more at a lower cost. And so now today, we're at the smallest delta between what I call petroleum-based plastics, which are your regular polypropylene, PET. Those are those black to go containers you might see after you're getting leftovers from a restaurant. And compare it to fiber-based materials where because manufacturing has improved so much and we're scaled up and, people have adopted more of it, it's actually brought the price way down to where, sure, it might be slightly more expensive, but even then, if you buy enough of it, right, if you're a large customer, you could actually save money because, fiber, PET, polypropylene, all these things are raw materials. They're traded on commodities markets too, so as, plastic goes up in price, fiber might be coming down. Right now we're at a great spot where the, the parity between the two is actually very close. Okay, very cool. And how do I know whether a fiber or material is sustainable or not? The best way to to tell is to look for the certifications. You've got a a bunch of good companies out there that are certifying things compostable. but then you also have recyclable and the whole recycling, system with the numbers. And then you have manufacturing seals like green seal, and ISO and all those different terms that basically tell you, Hey, look, a third party has looked at this. And they don't have any skin in the game or financial reward for this, right. Except for maybe getting paid to do the testing, but they can certify it as a third party removed from the financial reward or gain from selling the product and they give it the stamp of approval. So just like if you were to certify something vegan or certify something kosher, there's a a third party that goes and make sure that it meets those standards. And there is a growing debate about whether compostable packaging is sustainable in practice. What's your take on that? Really when it comes down to it, it's only compostable if it gets composted. Right. So if it ends up, if it ends up going to landfill or accidentally put into a, a, something that's contaminated with food, right? And and it goes into the recycling stream. Then now you've ruined the recycling stream, right? The recycling relies on very clean things. That's why they ask you to wash it before and dry it before they, you put it in a blue bin. So, when it comes to what makes something actually compostable, the main factor is the material. Second factor is manufacturing process, making sure we're not adding anything into it that is gonna make it not compostable. And then the third and and arguably most important is making sure that the people who are using it last, the end user has the correct information to put it where it needs to go. And then also, in addition to that, one step further would be making sure that our city's municipalities even private enterprise has the right waste capture vessels, so to speak on their properties or in their towns, so that people know what to do and they can do it when they feel the need to. Where I am, there is no special bins for compostable produce, goods, packaging, anything that's that. If you want to compost it, you have to do it yourself. And not a lot of people are willing to do that. How common is it where you are for the municipalities to have a particular collection for compostable goods? Yeah, so I'm fortunate to live in New York City, so in October we launched the residential program, but commercially it's been around for years, and New York being one of the biggest cities in the country, it's one of the biggest composting programs in the country, and then that means it's one of the biggest recycling programs in the country, but also the biggest landfill program in the country, right? So, There's a a, a lot of different things when it comes to waste and waste disposal, where, I mean, if you look at some, some statistics, right, the the big number is only 9% of recycling actually gets recycled, right? So your taking this thing that's been around for 30, 40 years. And you're, still educating, the public about what to do, right? And if you have a, something that's compostable, that looks like plastic, like a PLA cup or a PLA straw then the end user, the, the public, Is it on them to understand everything? I tend to think so. I think a good citizen to understand what they should do with their trash. It's, it's their trash, right? They should probably take some responsibility. And then also the accountability of the city and municipality to provide the, the right services so that if the, end user, if the citizen wants to do the right thing, they can Okay. Yeah, I guess that makes sense. What about the topic then though of tariffs? Because you know, there's a new regime now in the US and the new administration are very interested in imposing tariffs and have started imposing tariffs. And, of course, there will be retaliatory tariffs imposed as well. So, how do you see them impacting the packaging supply chain in the next few years? Or do you? Yeah, of course. So it's definitely something to, look into and make sure that you're making the right move so that you don't get stuck with a supply chain that is, let's say tariffed out of being competitive, right? So with the tariffs and the, the main target, I should say, being China and the fact that a lot of the stuff that I sell in Supply Club and also, the entire industry sells, most of it is made in China. So it's definitely a, I don't wanna say cause for alarm because there's always a solution, right? If you put your mind to it, you can figure something out. Now we're fortunate enough to where we're still building from the ground up. So we, we don't have 10, 15 wholly owned subsidiary factories in Shanghai that we're manufacturing all of our stuff and we're sending over a thousand containers a month. Maybe some of the bigger companies and and they're definitely on red alert, but for us, our supply chain is flexible enough and still, small and agile enough to where we could just, pick up and go to another country and make sure that they have the right machinery and the same quality standards. And once you check all those boxes, we're selling disposable containers, right? We're not, it's not rocket science and it's not a overly complex electronic. It's not an iPhone. So I don't wanna say it's easy because you still have to build the relationship, but if you have the material, which a lot of Southeastern Asian countries do have over there, a lot of fibrous material if you have the material and you have the machines and you've got competent people running the ,factories you can move to other countries, build the relationship, or, someone has already built the relationship and they say, Hey, we saw this coming. We've got a factory in Malaysia ready to go online right now. And oddly enough, we're doing similar stuff to that right now. So a lot of people are talking about tariffs. We're not so worried about tariffs personally or, within Supply Club. But, it is a big thing and, and, tariffs aren't a new thing. Tariffs have been around for a long time, and there's been tariffs on China for a long time, there's been tariffs on Malaysia, there's tariffs on, I don't wanna say everyone, I don't know enough to to speak to that, but there's tariffs on a lot of countries that, it's 5, 10% where you start to get into the, Oh, crap meter is when that tariff goes to 50 overnight. Now your, tariff cost has made your product cost double. And then with that volatility comes shipping rates go up and now all your inputs are messed up and you've gotta talk to your biggest customers and say, Hey, sorry, but I gotta raise prices 25% just to make money on this. And they're going. No way, man, I'm not gonna pay that. I'll go to the next guy. Right. And so it it really is gonna shake some things up, but also the fact that, there's solutions to problems. I think if you want to impose tariffs, that's fine, we gotta figure out a way to make it work with or without them, and that's what we're gonna do. Okay, fair enough. What about technology? Is that helping you at all? Everyone's talking about AI at the moment. Is that transforming, your business, the transforming logistics and supply chain? or are you ignoring it completely? How, how is that all working out for you? No, definitely not ignoring it. Definitely embracing it as much as possible. It's it's really remarkable. I think a lot of people are, are, at least at the consumer level, they're really fascinated with the way that it can, like, write a story or a poem, the creative aspect, right? I think most people that, have ChatGPT, they're like, oh, look how cool this is. I can tell it to write me an email, right? That's like one thing. That doesn't really interest me as much. Where it becomes fascinating is how you can use it to basically create a digital employee to provide a task for you. One example in our business is we were writing out product descriptions for every product we would upload to the site. That was taking us 10, 15 minutes, a product right. Now we use AI. We put all the inputs of the product we ask it to write us a product description, and that happens automatically when we upload a product to the site. And so now we've taken a 30 minute process, and we've turned it into a 30 second process. So that's one thing that I can speak to in my actual business that has, I wouldn't, I'm not gonna say it revolutionised, but it's one of those things where you're like, Whoa, this is powerful stuff. This is saving me actual time and money. And then furthermore into that, I would say. And, and this is kind of where I nerd out, is the coding aspect of AI. It's incredible. I am not an engineer. I am not a software developer, but with the base knowledge that I have and ChatGPT and other AI tools, I've been able to develop software on my website. Whereas I would usually have to pay a software developer 80 to a hundred dollars an hour to develop that for me. Now I have it at 20 bucks a month. And the possibilities are endless. And the fact that it's getting better every single week to where it can take less direction from you and give you what you want, is remarkable. So I'm not all in, we're not an AI company, but I'm looking for every single way in the business to institute, AI, and it's a buzzword, right? AI this, AI that, so it can get a little tiresome, but I think after a couple years, we're gonna look at this and go, Whoa, this was a huge unlock for tons of businesses, not just big businesses. But small businesses too, because now we can compete with the big guys because we have access to the same tools that used to cost a hundred grand a year. Now we can do the same thing for 50 bucks a month. It's really cool. So, I think you could tell I get super passionate about it because it's just such a, it, it's like what's fun for me in the business is to see where I can gain efficiencies by using this tool. Where I can make something easier on the customer. So, yeah, those are my thoughts on AI. I think it's, it's a remarkable technology and it's here to stay and it's only gonna get better. And what kind of uses have you made for it within the company? So I mentioned the product description piece that's one. Number two is the, just the coding. If I have a glitch on the site. I used to have to figure out, all right, I gotta find someone who knows how to write this coding language, and then I gotta pay 'em to figure out how to do it. And then I gotta pay 'em to do it. And so like being able to just have it as an assistant by your side, when you're trying to figure stuff out or, or using it for data analysis, right? If you, download a spreadsheet of, this week's orders, Hey, what was the most popular product? And gimme, the rundown of like price breakdown and cost and margin versus everything in the, in the system, you can just give it to the, to the AI bot and it'll analyse the data for you. So having it as an assistant by my side, but also using the API tools to connect different apps together and have it do work that we used to do manually, do it automatically. That's really the, at the core of what we've been using it for. And you're in a vertically integrated supply chain. How does that help businesses cut costs and improve sustainability compared to the traditional middleman model? Yeah definitely. So we are, I mentioned before a hybrid, right? So we sell other brands too. We're not completely hundred percent vertically integrated. However, we are working towards that because a lot of these products, actually, I should say most of these products that we sell are made at the same factories. They just slap a different brand on it. Right. And, and so a lot of this stuff It's not white labeled, it's branded. There's a cluster of factories in China that make 90% of the products. There's the PET cup guy. There's the fiber container guy. There's the bag guy. There's the paper container guy. And so knowing that. A lot of the cost and price of buying these brands is in the marketing, right? It's like if you go to the store, if you go to CVS and you buy Advil versus the ibuprofen CVS brand, it's probably five or $ more per bottle. It's the same exact active ingredient. So we have access to the same active ingredients that the other big companies have. So we're working towards building out our supply chain so that, and we're doing some of it now where if you're a large enough customer, we're bringing that in factory direct, right? But in order to serve smaller customers, we also work with other brands and make sure that we're selling high quality products and, making sure that customers, some people are, they they just like a certain brand, right? So they always want to go towards it. And you'd even think, some brands are synonymous with the product itself, right? A dart solo cup is what you think of when you think of a plastic cup. Or, or a Sterno is like a wax flame that keeps chafer dishes hot and you keep 'em underneath and it burns for six hours. People don't know what those are called. They just call 'em Sternos. So of course we definitely work with brands and we make sure that we're getting customers what they want. But we also know that if you're a large customer, you command the leverage to get a lower price and we have the access to do that as well. Makes sense, makes sense. And, what's one thing that you think is in the packaging industry that's still way too old school and needs to be disrupted? So that's what we're building at Supply Club is digitising all of the tools needed to run a traditional paper supply company or, or, or distribution really. At at the highest level. Our goal is distributors or distributors. If you're selling paper products or you're selling electronics, the really the goal is the same. Sell as much product to customers as possible and do it in a way where you're able to provide a service a value added service to those customers. So, our goal is to digitise those tools in a way that makes it easier on the customer to access the products they need to access and also easier on the businesses themselves internally so that information is shared properly. You're using data to the best of your ability to make decisions. And then you're also taking out unnecessary functions. Like, one thing I always bring up is sending paper invoices to customers or, or getting paper invoices from suppliers when I started I guess at the time Ecopliant, this was still happening, right? The, the most tech that we were doing was sending people a PDF of the product catalog and saying, let me know what SKU you like. Now we've put all of that on the web where it's accessible 24 7. It's funny because we're still, I don't wanna say we're behind because we do so much and and running a complex supply chain and distribution company is an amazing feat in itself and it's so value added and necessary, but there's certain things that I think the old school companies, the traditionalists, they just don't have time. They weren't built that way. So to rip out the admin function or the accounting function in the internal office. Is next to impossible because, it's gonna affect and ripple out across the entire business. Whereas we are fortunate enough to build the tool first using modern scalable tech and then grow into it. So that's kind of our goal is to make sure that we're digitising everything in order to grow and scale into where we want to go. We're fortunate to have sidekicks, like, the best engineer you could pay for right in your pocket with a computer program called ChatGPT. So I'm not trying to take from engineers, they're definitely needed, but you can do the work of 10 engineers with one now, just these, these awesome tools that have been given to us for, such a small amount of money relative to what the value they add. And what do you think the supply chain industry can learn from other industries that have already been transformed by tech? I would say more tech is best no matter what. I mean, look at our, look at our daily lives where, maybe for better, or for worse attached to our phones. But we have a supercomputer in our pocket and we're able to access any information anytime. So if you could take that capability. And put it into your business and now all of your employees have access to all that proprietary information. Why wouldn't you do that? Right? If you can share all that data and information across every, ladder in the org chart, then that would be beneficial to everyone because it doesn't add any marginal cost to have that accessible and have that nucleus, that brain be able to, see how overlapping departments can talk to each other, or maybe non-overlapping departments need to know what each other are doing. And, and so. Having that in a accessible human language form with no technical expertise needed, I think is a no-brainer. And we all know everyone loves incentives. You guys have this Green Bucks program to encourage change. Talk to me a little bit about that. You know, what was the genesis of it? How s it working out for you? Well, what is it? And how is it working out for you? Yeah, of course the Green Bucks program is our sustainability program, which is a twofold system. One is. Rewards and and a point system that accrue as you purchase product from us. But in tandem with that, it's a CO2 carbon offset program as well. We've partnered with a company called Carbon Click based out of New Zealand. They provide an excellent service and, and help companies offset their carbon emissions by funding projects around the globe that are verified carbon standard approved. Everything is legit and actually going towards removing carbon from the the environment. And we now have the ability to both offer rewards and reward customers for loyalty, but also. Give them the ability and the marketing capability to talk to their customers and say, Hey, look, just by buying supplies that we were already buying from supply club, we're now able to offset our carbon emissions by X amount. Just because we diverted our spend to someone else who is stewarding our money and our expenses, slightly different or better than the next guy. So how it came about was way back when in the 2000 teens, we had expanded our product line to just fiber and we were gonna be the fiber guys. However, that proved to be hard when someone needed fiber, but they also needed cups and they also needed bags and they also needed various other items. So, we wanted to be the experts in fiber, but we were being asked to provide other products, which is totally fine. But, the reason why we went the fiber route is 'cause we wanted to eliminate plastic. Well, that is easier said than done, I think, as we know. And, really we wanted to be a complete full service supplier. So a couple months ago and, and, and just the Genesis of it was, well, why should we penalise people for buying something they have to have for their business? If you need to have a, airtight seal on your packaging, and that needs to be plastic because bioplastic options don't offer the same airtight fit or resistance, then why, should you be penalised? So what we did was created a, a badge system that takes the aspects of the product. If it's compostable, that adds a certain amount of points. If it's BPI certified, that adds a certain amount of points. If it's, ISO, that adds more points. If it's green seal, that adds more points. So what we did was we scored each product in our database. And now depending on any product that you buy, the the amount of points gets put into your account. And then once you, we we did an equivalent of dollar to carbon tons. And then once that hits a certain point, we purchase those credits in your business's name, add 'em to your account. You can use them any way you want. You can share 'em on Instagram. You can share 'em with your board of directors, et cetera. Any company, large or small, can now offset carbon just by buying products they were already buying for their business. So, the idea behind it was, let's not penalise people for buying products that are maybe made from plastic and they have to buy them, but let's also reward them even more for buying the sustainable products. Made from fiber, bioplastic, et cetera. And how have your customers taken to this? The feedback we've gotten has been overwhelmingly positive. It's a, it's a no-brainer. You opt in excuse me, you don't have to opt in to the program. We just built it into our business model. So, it's one of those things where, okay, I'm getting discounts on all my purchases and also contributing to a positive cause around the world. It's kind of a no-brainer, right? There's, we're not taking anything from the customer. It's just built into our products. It's built into our business model now, Left field question for you, Andrew, if you could have any person or character alive or dead, real or fictional as a spokesperson or a champion for sustainable packaging, who would it be? And why? Man that's good. I'll give you a left field answer. So I I think Benjamin Franklin. And the reason why is one is he was a respected individual, right? Founding father. But also he was innovative. He has tons of inventions. He was curious and obviously I I don't know him, but I feel like if he were a spokesman, he would be the guy who would say, no way, that's crazy. Let's try it. And, and that's kind of how I like to operate is like, let's figure out all the ways why it won't work before we table it and say that it's not gonna work, right? I don't, I don't like feeling like the answer's no. At first I, I like to say, Hey, let's see if that works rather than saying no, that won't work. And he just seems like the kind of guy that if he were around today, we would be able to kind of partner up and say, let's go for that big moonshot idea. Let's, let's, let's do it because we can try, not because we might fail. So he's my answer, Benjamin Franklin. Very good. Interesting. Nice. Okay. We're coming towards the end of the podcast now, Andrew, is there any question that I did not 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 be aware of? I don't think so. I think we covered a lot and I appreciate all the great questions and, the conversation that we had. One thing I wanna leave the audience with is just the fact that we're making incredible strides in both science and technology and we always hear about the, plastic problem or, big oil and all the problems that we have. And so I wanna leave the audience with some form of optimism because we have so much going for us, not as just a country in the US but as, as the world gets more and more connected and technology advances faster than ever. We made it this far. We're gonna do great things and continue to build on, on what we've already built. So a lot of negativity out there, but I see overwhelmingly positive advances in technology and just, civilization in general. So we're gonna be okay. Great. Fantastic. Andrew, if people would like to know more about yourself or any of the things we discussed in the podcast today, where would you have me direct them? Definitely. So the best way to reach me is my personal email address. It's Andrew A-N-D-R-E w@mysupplyclub.com. Just how it's spelled MY supply club.com. Okay. Andrew, that's been fascinating. Thanks a million for coming on the podcast today. Thank you, Tom. Great to be here. Thanks. 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.