S02E11 - Planet - Net-zero - here we come: The ’all-inclusive’ solution for GHG emission management: measuring, reporting, reducing (Transcript - edited)

Daniel: Welcome to “The Supply Chain Dialogues, season two, episode eleven. I am Daniel Helmig.

Do you have a good handle on your greenhouse gas emissions and your supply chain? I mean, scope three, the most important scope of them all. Why do I say this? Because between 70 to 90% of greenhouse gas emissions, you create in your line of duty. Is located in your supply chain, unless you are a financial institution dealing with fossil fuel importers, exporters, or producers, then your upstream scope three is another interesting problem to have. If you're like many practitioners and leaders in the supply chain operations area, you struggle in getting companies that are your suppliers to provide you meaningful emission reporting and plans to get to net zero. And you haven't even tougher time to use the data to draw actionable conclusions.

Now today. I have the [00:01:00] privilege to have Christian Heinrich. Well, let me say it correctly. Professor Dr. Christian Heinrich. As my guest. Christian is a co-founder of the company carbmee®. And we will talk about this a lot today.

He's as well. And I love this professor of digital transformation at the Quadriga Hochschule Berlin. So he is teaching what he and his team are doing. He has well given lectures at Julius Maximilian University of Würzburg where he sits today. Uh, for the interview in an empty lecture hall and Universita di Bologna beside this.

I know that he loves Italy, not the least because his wife is from this beautiful country and spends as much time as possible there. And. Christian knows how regional sourcing and climate can have an impact on products. He as well together with his wife runs wine shops in Würzburg and Erlangen in Germany. These are called "Wohlsein", which translates as well-being as well as Cheers in English. [00:02:00] So without further ado, let's get into the interview, which I hope that you will enjoy as much as I did.

Christian, thank you very much for joining us.

Christian: Thanks for having me, Daniel, really a pleasure.

Daniel: We have quite some interesting questions that we can go through so therefore, why don't we just get started about your journey as It's the co founder of carbmee® and how the company has evolved since 2021, which is massive.

If I look at what you guys have done in the meantime.

Christian: Yeah. Thanks for giving me the chance for the intro. I think from a financial perspective and growth perspective, we can keep it very easy and short. We are growing three X every year, and I see also from outlook and forecast perspective, that's the same thing for next year, it was very challenging, to be honest, in the first one and two years, because no one understood the complexity of

what we are doing carbon emissions and supply chains right now, it changed massively, and [00:03:00] I would say the first three years have been the hardest, but we saw already in the year number three, a very, strong, almost hockey stick. Trend, which is from a financial performance and a team performance.

Very, very good.

Daniel: Excellent. , for the chief procurement officers that are listening to this, and I know there are a few, just let me tell you from my perspective, I had the chance to meet carbmee® and their product after. My corporate career and I could kick myself in the behind because I would have loved to have had the pleasure to work with him beforehand.

This is a great package and don't take my word for it. Just check it out. You will be amazed.

Christian, what inspired you to start carbmee® and how has your vision for the company changed or expanded since its inception? A couple of years ago,

Christian: that's a great question.

So we started at the end with a so-called 80 per cent challenge and I'm quickly explaining what I mean with that every company is [00:04:00] producing carbon emissions and especially companies who are producing something, hardware oriented, maybe manufacturing, fast-moving consumer goods, industrials, heavy, manufacturing, oil, gas, et cetera.

They usually have a very, big amount of shares caused by the supply chain, purchase goods and services, et cetera. And this is what we call the 80 percent challenge. We have customers, who have 96 per cent of all emissions caused in the supply chain. And right now, coming to your question, my co-founder Robin worked from a Sustainability perspective for a company called Siemens.

I guess almost everybody knows the company and they also have a very high amount in scope three emissions. And then he asked me, Christian, you from your background, working with BASF for co-founding procurement supply chain startups before you have process knowledge and automation knowledge in supply chain no one else has because you need to [00:05:00] differentiate between the various industries.

So, in the end, it was almost a duty or an honour, you can right now choose by yourself, that I start together with Robin carbmee® because he also said It's far more important to understand the processes and the business processes and then automate them instead of just doing a dashboard. Because with a dashboard you will never reduce any carbon emissions.

And also your children and grandchildren will be very grateful if you do that and if you offer the industry such a solution. Based on our knowledge. And this was at the end of the carbmee® start three years ago. And our vision is also exactly that. So get carbon under management, offer the software to companies, automotive companies, manufacturing companies, oil, gas companies, et cetera, that they get transparency first, and then based on the transactional transparency, they can start the reduction process.

Without spending, I would say tens of millions for, manual [00:06:00] consulting or Excel sheet work. I always compare it with the production planning area. It's always better to have a production planning system and not having only, spreadsheets.

Daniel: Absolutely. What you can measure, you can control the old saying but still true to some extent.

And I think it's as well. Great. Many companies that I've seen in this field as well as your competitors,, and I use always the Six Sigma approach, the DMAIC approach. Yeah. They, are good when it comes to D and M. So. Define and measure. But when it comes then to anything that is following in terms of analyzing, improvement, or even control, forget it.

It's not there. And this is scary like hell, I think. Since we are on scary already, can you, for lay people explain where we are concerning climate change and the level of greenhouse gas emissions?

Christian: Right now, everybody's talking about our environment and sustainability in Dubai these days, but this is [00:07:00] every, let's say, one or two years, the happening in the end of the year, then we have some regulations and we have the real status quo that I would say that some pioneers, decarbonization pioneers already have understood that they need to change their product portfolio more into the direction of generating more eco-friendly carbon neutral products in the future to have a new USP almost with the same old product.

But there are also others. They start right now because they have some pressure from regulations, maybe the carbon border tax adjustment or the SEC announcement or the private equity owners informing the board that they should reduce the carbon emissions to create more company value. Also in the next five to 10 years.

And that's a massive difference from a level of maturity, also from the level of, let's say sizes in the company. Overall,[00:08:00] what I have considered is that the awareness about the terms and technology is, way higher right now compared to two years back. So we are talking a lot about scope three these days and to give you an example, two years ago, I would say.

Maybe, seven out of 10 CPOs had heard this term first time in their life, two years ago, this year, already 2023, I would say nine out of 10 could explain what is scope three. that they are responsible for scope 3. 1 but not for scope 3. 15 with franchising for example and that's brilliant this is also how you see they are right now on the level of getting more and more transparency moving from spent based high-level estimations into transactional detail primary data secondary database because they understand also I can only reduce if I have transparency and This is should be automated because otherwise I'm [00:09:00] always measuring, measuring, as you said, with a DMAIC cycle.

And I will be never able to reduce anything. And that's already the target, which some of the companies have also put into the SVP, incentives for the commission.

Daniel: Yeah, now you work not only alone, but you work as well. You collaborate.

Can you explain a little bit about how you either work with Co-opetition or in other ways with partners and stakeholders in the climate action space?

Christian: Yeah, that's such a rapidly growing market, or also challenge, because also the regulations are changing very fast, and I have never seen such a fast, governmental push, even not in digitization in the last 10 or 15 years.

CO2 equivalent, GHG, carbon emissions, They are already seen as a new currency. And even if we have thought that bitcoins could be a new currency, which is globally established, I make a bet right now. And I would say that CO2. It's even more [00:10:00] established already right now than the bitcoins are, just to make, this kind of comparison between digitization and sustainable transformation.

So as a consequence, I think that this will be a massive shift. And this is also why we work together with different stakeholders. So climate institutes, which are more science-oriented, universities globally, they give us the knowledge and the input, what is the carbon price, how can you measure the carbon price, what's the difference in which country, then also from, political perspectives, which laws and regulations are relevant in which country, in which region, let's talk, for example, about CBAM, the Carbon Border Tax Adjustment, Everybody who is importing and exporting several categories need to pay some extra tax then soon, but they need to right now start already to do the reporting.

And then another big group where we are cooperating are our partners from a, more commercial perspective. on the one hand, it's consultant partners, they are implementing it. [00:11:00] So this could be accounting consultancies, sustainability consultancies, but also supply chain and procurement experts like you.

In that area of the partnering, we also cooperate with other software providers. Maybe you know, some supplier relationship management systems, some ERP systems, and then we integrate. So we do the calculations and we integrate it into their systems so that it's also easy to use for our companies and our clients.

I find it

Daniel: fascinating, because you work the network approach. There are so many others who are trying to be the jack of all trades and Then they just bite up too much and they are not able to handle you have to find very clearly where your value is and do you utilize other people to just pull them in to get this done?

I love that. and since we are talking about people in my last podcast, I had the pleasure as well to talking with someone about talent management in the age of AI and greenhouse gas emissions. You have some brilliant staff. Whenever I've had the pleasure to be [00:12:00] together with them, I was just absolutely amazed about the competency, the talent, and as well, the enthusiasm that your team have.

How do you get such high performance into your company?

Christian: That's a great question and a great challenge. So first of all, I think you need to have a very startup-ish approach. And this is easy for us because we are per definition a startup, so we can offer different ways of working. So, I would not call it workation because I don't like the word. After all, there's too much vacation in the vocation, but you should be flexible from that perspective.

We, for example, also give all our employees. every Friday in August, an extra holiday for free. So this is one thing. And if we have very intense working phases like we have seen right now this Q4, so we worked honestly speaking because demand was so heavily increasing. We just give them another three days of vacation for free between Christmas and New Year's Eve.

And this is [00:13:00] something like extra value our colleagues and team members value to us. So that's one thing. And the other thing is definitely also not only talking about your core values and our main value, our, North star is get carbon under management and help the industry to decarbonize itself.

So this is a massive vision and we have. Completely different team members. So some are sitting in Brazil, some are sitting in Portugal, some are sitting in Austria, so everything from everywhere and they share this knowledge and then we come together every, three to six months in person and we try really to improve that always.

We also invest very early, even if we are a startup in company trainings and company and people education programs. So everybody has a people plan and then we have some specialists announced. So from a startup perspective, this is very mature. We, so in our HR and people in culture department doesn't have 10 team members, by the way.

So [00:14:00] that's a lot, but we need to combine all these methodologies in order to attract the best talent. to keep growing like that.

Daniel: Sometimes you hear that from companies, but it seems it works on in your company, which is nice. And again, I mean, who you can get on board and to work with you, is fantastic in terms of competence.

Great.

Switching focus. , when I was a CPO and you would come into my office normally at some point in time, I just ask a very simple question, which is, okay, how do you differentiate yourself from your competitors? What would you

Christian: say? That's not easy to answer because the market is changing that dynamically from external.

Today, I would maybe answer. We have already a CBAM solution for reporting and reduction before CBAM has been announced. But this I would only tell to people who know what CBAM is. Coming from an original thing, so at the end, we are the scope three supply chain experts because we started from there regarding [00:15:00] Supplier carbon reduction, so we have a complex automated process which then is very simple because you can use it to measure, to track and to reduce the supplier carbon emissions.

Then we combine it with a product carbon footprint module and we combine it with a carbon accounting carbon footprint. This is also what Gartner said. We are listed in two categories, so carbon accounting and management. In scope three supply chain emissions as the only software provider, because we strongly believe that you need something like an ERP system for carbon management with different modules.

And that's it. Plus our industry expertise. So we are working for hardware-oriented companies with complex supply chains on a bill of material level.

Daniel: Okay. When I, for the first time saw what you guys are doing, I felt as well, it's a one-stop shopping solution to get to net zero, which is different to what you normally see.

They're all coming in then trying to sell you an accounting solution, which is not really [00:16:00] what you need specifically when you work as a CPO and trying to as well, reduce costs and a lot of other things in parallel and herd the cats of all your internal customers, . Oh, cool. One of the major attributes of your company is your software, it's called EIS.

Would you mind explaining what it stands for, what it does, and how you actually utilize it to beat your competition? Sure.

Christian: So EIS, um means environmental intelligence system, because even if we all love to talk from an easiness perspective about carbon emissions or greenhouse gas emissions, it's a little bit more than that.

And it's always becoming extended. So if we talk in three years, for example, about biodiversity, we will have an extra module for that. But today it's co2 equivalent, which is also waste water reduction, etc. And this is in general covered To make it very simple, it's a carbon footprint automation tool, which at scale can automatically [00:17:00] calculate product carbon footprints, supplier carbon footprints, and then at the end, also the company carbon footprint and coming from a, let's say, holistic one stop shop solution for you.

It is a must for me as a, let's say, software architect, that this is one integrated solution and that procurement from a category management perspective. is using the drill down functionality in the same software environment, as the accounting team later is reporting. As we all know, if you have two island solutions, you can then have a high discrepancy in accuracy.

And in the end, a lot of problems. And this is also a Big competition, um, USP. The next one is, uh, as I've said before, the industry expertise and the focus, because we are focusing exactly on, bill of material oriented or receive oriented industries with. Yeah, a lot of transparency in their supply chain.

So we have them making it more transparent, for example, giving the procurement [00:18:00] leads the chance to have a pre-calculated supplier carbon footprint without sending out an email, a questionnaire or calling our suppliers. So from a negotiation perspective, we turn the whole power wheel to the other side.

And this enables you to, first of all, get results and then get. correct results and then get them fast. So accuracy being fast and doing the whole thing in a very simple, easy-to-use perspective are great.

Daniel: My, old automotive supply chain heart is beating faster,

When you talk about that, you can provide. Carbon estimated to some extent, and with that, you can go into a negotiation that reminds me very much of what we have done in the past with cost estimating, and we trained our buyers in a way that you can understand what is the cost structure.

Of these parts. And just again, for my, colleagues in the CPO profession that are right now being bombarded with cost increases from suppliers, and in case you are in an industry where cost estimating was not there, if we forget for [00:19:00] a moment, aluminium and steel, energy-related cost Aspects of a part that you buy, whether it's in plastic injection moulding or whatever it is, you talk about two to 3 per cent in terms of cost. So if anyone comes to you and suddenly tells you, Ooh, that is so costly. If we change, this is what the Americans would call BS.

So, they might come to you because they're the only supplier and hence then you pay just for the point that they are the first entrant into the market that might happen. But, uh, it is worthwhile to look at carbon costing and carbon calculation as carbmee® is doing and as well, understanding a little bit the cost structure of this as well.

Okay. Sorry. That was a quick excursion. I could not hold back. Yeah. So comment

Christian: on that because yes, please. We are doing the whole, let's say carbon exercise, not because we like to save the planet for no reason. We also know the holistic view and the macro [00:20:00] perspective, but we also know that every company needs to earn money.

to be profitable and to remain it. That's what I mentioned to make the bridge from an investor's perspective. They already planned that high carbon companies have a lower company valuation because the margin will be eaten up due to this carbon problem in the next years.

Yes. We came to the procurement view, and we came from the cost breakdown perspective. We call it emission breakdown, by the way, and we also call it hotspot analysis, like we know our ABCXYZ classification, so it does not make sense to focus too much in the negotiations with so called C material suppliers.

In our case, it would be de-prioritized hotspots and non-hotspot suppliers. So focus on the hotspots first, make emission breakdowns, and make also according to science-based target initiative. Some companies are committed, make reduction plans and. By the way, those reduction plans per supplier can be also managed automatically in the software.

So that's another thing. [00:21:00] We do not need to have 20 spreadsheets in parallel, and then you cannot get them together.

Daniel: Exactly. So let's be a little bit more specific. Can you share some of the success stories or case studies that you had where carbmee® could help to significantly reduce greenhouse gas emissions already?

Christian: Yeah. So, I can now talk for 50 minutes, but I try to focus on one or two. So we had one client, almost a billion in revenue. They said, okay, we need to get transparency into our carbon emissions and not do it with manual calculations and asking in-house and externally.

They then just started with having a company carbon footprint, which is connected because the company carbon footprint said, okay, 87 per cent of the whole story is in procurement. It's in so-called scope 3. 1. So then we need to have a deep dive look into scope 3. 1. And then their first question was, how do I get the information about the material which I'm [00:22:00] purchasing and how can I then put a.

CO2 figure behind that, you know, we call it in our tech language, we match the material, the product workflows, the logistic workflows and the purchasing workflows with the emission factor. So that's at the end what our engine is doing. And that at scale, imagine you have 10, 000 suppliers, like in that case, and you have then maybe.

I don't know, 50, 55, 000 purchasing transactions per year. Out of those 10, 000 suppliers, you would have to calculate the 55, 000 supplier carbon footprints. You can do that also semi-automated, but it takes you one and a half years at the end. And then you still have the inaccuracy. This is something we did automatically.

And then it's also easy to start the cooperation and the collaboration. with the suppliers who are causing the highest amount of emissions, that's the so-called emission hot emitter, the hotspots. And then they start the reduction process because you get an easy recommendation. If this supplier would [00:23:00] use green energy for the production process, then you have your carbon emission savings, let's say about 8 per cent increased.

So I call it to bring the low-hanging fruit home, just due to transparency, So in the first wave, you do not need to change a lot. You just need to motivate and activate the suppliers so that they show you the maybe already carbon-reduced efforts they have done. As they do not show it to you, you cannot bring them home.

So the first 5 to 10 per cent are doable just because of that. And then starting the dialogue with the supply chain sustainability days or something like that, you give recommendations. So that's then the different way. So. This is the supplier engagement example. Then for another company, it was more of forward sourcing, um, cooperation with, car manufacturer OEM.

They said I need to think about which kind of material am I purchasing, but not from a low-cost country perspective, from a low-carbon perspective. And if you know that in advance [00:24:00] that one steel would be enough, the type. Then you can already say, okay, let's select this one, even if it's maybe 0.

3 percent more expensive, but taxes, are kicking in and the higher reduction effect, is way better, especially for the next six years of the whole production.

Daniel: It's fantastic. I mean, this is, this is exactly what you need when you are sitting in a procurement organization.

You are not the expert. You just need someone who can help you to figure out, okay, what are the, as you said, the low-hanging fruits and where can you already from the beginning plan for three or four years in advance, specifically in automotive, where Some of these cars or the programs come on board in four or five years, right?

. This is good. Coming to your webpage, you're certified for every major greenhouse gas emission standard. Right now you promote the CSRD. How do you feel about the number of different standards?

Do you think the range of standards helps tackle greenhouse gas emission reduction overall?

Christian: [00:25:00] Let's say it's good that everybody is doing something around that, but it's for us as a company, a very high invest to be always compliant to all standards, being. TRIF and ISO certified being compliant to all accounting rules also coming.

I think that in the future we will see a kind of consolidation led by the IFRS because then it's the big accounting, um, few and. We try to be compliant with everything which is coming up, which is new and has a global, reach, especially in our industries. Um, we did not even talk about ISO certifications regarding IT security, et cetera.

So that's a different thing, but it's also a certification in general. I think it's still the GHG then the pact and then, the IFRS who are leading it. And then there are some others CDP conformity is important. But there are different layers, and that's why we have a team of climate strategies, , when we have this network where we are exchanging to that we always are [00:26:00] on up to speed on the latest status.

And we implement what is necessary for our clients in the software. That's the advantage of software because it's a standard application software. This is then for everybody relevant at the end. And yeah, it's like CSID or like we had it in the last four months CBAM. This came in the summer break and then everybody should in January report already the Q4 figures for CBAM.

And I would say almost no one knew what CBAM was in September, and they should already start collecting the numbers from September on. So that's really, was very fast now.

Daniel: Okay. I know my opinion on this, which is that fewer standards are good standards. If you look at, the analysis that has been done via the International Monetary Fund, 40 biggest countries in terms of greenhouse gas emissions have over 200 different standards.

The automotive industry has too many different ones. And there are studies which looked at the rollout of other standards. And one of the main reasons why it actually [00:27:00] worked was that the standard, number of standards was reduced significantly. And I think that we are right now wasting precious time by dealing with too many.

I understand everyone, as you said at the beginning, everyone wants, like to do the right thing. At some point in time, they have to start singing Kumbaya together, I think.

Christian: I mean, I look, but I think it will need some years, but I think the IFRS is definitely giving a big push from accounting and then also the big four have to implement it in the companies.

And, but I'm 100 per cent with you. So as we know it from our mobile charging cables right now. I think it took some happiness. Yeah, that's true.

Daniel: When you look now back. In, the history of carbmee®. Any key lessons that you have learned over the journey with carbmee® and how do they influence your approach of tackling greenhouse gas emissions and recommendations you would give??

Christian: So from a company perspective and in the GHG environment, it's Focus, focus, [00:28:00] focus, focus, because you mentioned it, there are different standards, there are different industries, whatever. It's simply impossible to offer one solution, a solution which works for every, industry.

So we focus from the beginning on hardware-oriented manufacturing, automotive, et cetera, companies. And then we are also the experts there and can really deliver value to our clients. And this is the end, also important from the GHG emissions perspective, if they have a huge problem in scope three, then we are the best solution.

And this works if you focus on that and deliver the best solution in this area. So just making it very quick, it's really being focused in what you do and not being exactly, the holistic ESG solution for everything, which does not exist. I mean, if you think. A dashboard is already a solution.

Okay. That's the definition. But, um, yeah, there must be something behind it, which collects the data. And for me, a full solution collects the data and then shows the data. And from that perspective, it makes really [00:29:00] sense to focus.

Daniel: Yeah. Now as a, as a CPO or as a department head in any kind of procurement department, you look for something where each buyer can take the data and run with it and know what he or she needs to do and not some fancy dashboard for senior management that doesn't help you to reduce greenhouse gas emissions in your scope three.

Now, as a last question, Christian, thank you very much. But before we, we end this podcast, do you have any advice for supply chain operations heads today that are listening in about how to lead the greenhouse gas emission net zero transformation overall?

Christian: Yeah. And this advice is not my advice.

So I usually collect all the feedback. I don't count them anymore, but I was talking in the last three years with more than 500 procurement leaders globally from various, uh, hardware-oriented, uh, heavy companies, uh, industries. They have to reduce, they know it. And we should not even talk about that first. We should [00:30:00] first of all talk about your data strategy. So define where you get your data from to measure, improve, and reduce the topic. And after having understood that, decide for automation tool and then build up your sustainable procurement teams.

Or you just select. One person who is in the beginning, the sustainable procurement expert, this person should then also select the software, which helps you in the reduction process, which you can then implement in the company. And then you can also set the targets for the reduction per category, per country, per production site, whatever.

So first, leverage to data strategy from an automation perspective, and then make your decarbonization pillars and reduction projects which you then bring home over the next years. Very often we have time until 27 or 2030, and we should use the time, but then you should Use 2023 and latest 2024 in order to select your setup from the software and [00:31:00] org structure.

Okay

Daniel: Very good. So I hope that a lot of guys who can make a difference have listened in and utilised this and if you are not very clear just reach out to Christian And his team I will put in the show notes the linkages to the website and some of the contacts as again, as I mentioned, you will be amazed about the people you will talk to.

These are real experts who have a good understanding and are well-linked. So that makes perfect sense as well for every person that would like to do greenest gas emissions in procurement. Christian, thank you so very

Christian: much. It was a pleasure, Daniel, and it was a joy talking and explaining a little bit, having the dialogue with you, because I know you right now also some quite a while and as you are an expert in standards, carbon emissions, procurement, I don't, do not need to mention.

It's even better if someone like you understands also my world and then we can play the game together. That's great. Thanks for having me.

Daniel: Well, I hope you enjoyed this [00:32:00] episode of the supply chain dialogues. If you did, please subscribe on Apple, Spotify, Google, or any other major podcast platforms. There is more cool stuff coming. And if you are already a subscriber, tell a friend colleague, or any decision maker in your company or local regional or country government. Especially when we talk about greenhouse gas, emission reduction and how to get this done. We gave this year significant traction because of many of you doing this.

So thank you very much. If you'd like to reach out to the brilliant team of carbmee® to potentially help you, how to achieve net zero emissions in your company in the next years. Check out the website links in the show notes. which is www.carbmee.com com or directly go onto their website, under contact to get a de-carbonization expert engaged with you.

With that.

Be safe, be bold and happy holidays to those who have some over the next weeks.[00:33:00]