Shameek Ghosh: 0:03

we are having a tremendous impact because we are helping them to first discover the supply chain, collect a lot of data, and helping them to make decisions so that they can increase their percentage of sustainable products

Tom Raftery: 0:19

Good morning, good afternoon, or good evening, wherever you are in the world. This is the digital supply chain podcast. The number one podcast, focusing on the digitization of supply chain. And I'm your host global vice-president at SAP Tom Raftery. Hi everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and with me on the show today, I have my special guest Shameek. Shameek, welcome to the podcast. Would you like to introduce yourself?

Shameek Ghosh: 0:46

Sure Tom. Happy to be here. My name is Shameek Ghosh, and I am the co-founder and CEO of Trustrace. I'm based out of Stockholm.

Tom Raftery: 0:55

Okay. And what is Trustrace?

Shameek Ghosh: 0:59

So Trustrace is a B2B SaaS platform for product traceability and supply chain transparency. We are focused predominantly on the fashion and the textile industry, which is under tremendous amount of pressure related to, answering the questions related to where the product is coming from, who has made it, how it has been made, what is the environmental impact? Are the people being paid fair wages throughout the supply chain, et cetera, et cetera. And we are helping them to answer that question by collecting data from different tiers of the supply chain, right from tier seven onwards. And, we are helping these people to get validated information so that they can confidently share it with regulators as well as consumers, thereby improving the compliance and transparency.

Tom Raftery: 1:52

Okay. And why?

Shameek Ghosh: 1:55

Generally, if you see that there's a strong, a tailwind towards sustainable products. And I think many of the companies have been claiming a sustainable products, but they are not very sure about whether it is a really sustainable or not because most of the companies only know their supply chain only to the tier one suppliers there. However, related to the demands from the consumers, as well as demands from the regulators. Now they need to know the full supply chain. Like, for example, if you are wearing a winter jacket, people will only know that tier one supplier. Now they need to know where the down feather is coming with the different types of fabrics that are coming, where the zippers coming from, where that the buttons coming from that, and why they want to know is because textile industry has a significant amount of impact, be it carbon footprint, be it water footprint, be it, land usage, be it, impact on society in terms of bad working conditions and all. So it has been a loosely regulated industry. And now I think they're facing a lot of, regulations and the scrutiny from the consumers there. Generally, we all know that gen Z is, driving a significant amount of sustainable or responsible consumption. And they are not only driving it themselves. They're influencing their parents as well as their grand parents, to move towards sustainable, garments and all that. So, I think it is well past that tipping point. And I think we see a significant amount of requests coming in just a data point that we heard from a very large brand, last week that during the, COVID the number of requests, reaching their headquarters with respect to where the product has been made, who has made it kind of questions. the increase has been five X year on year from last year. So now at the headquarter level, they got almost 13,000 requests there. And you have to understand that the requests going to headquarters means that the number of requests that the, the front end shop keeper is, is getting on this things. I think it is, it is really a big question that is bothering them. And when these regulations come in and I don't know if you would have seen. Two or three weeks back up the Walmart and Kohl's were actually fined by the FTC $5.5 million, because of incorrect claim of a product being a bamboo, whereas actually the product was Rayon. Right. And while we can always make fun of it that hey, why will somebody claim it? There is a significant amount of a data issue there because when the brands are claiming a product, they are claiming it through manual means. They have got a group of production controllers who are weighing and checking, and that can always be a slip. That is where a need for a very, very good digital platform for them to collect and organize the data. And then hence make a claim, is very, very essential for these people.

Tom Raftery: 5:03

Okay. And how did you get into this space? How did you decide to set up a company doing this?

Shameek Ghosh: 5:09

Yeah, that's an interesting story, actually. So, we are four engineers and four, uh, sort of software engineers. We've started around, uh, working on this idea around mid of 2016. And that just happened because, we come from a background of digital services and IT services where we have helped many other companies of the past, in delivering digital platforms for, printing as a service or IOT, et cetera, et cetera. But in 2016, beginning of that, one of the co-founders we are four co-founders. One of the co-founders actually who was working in UK, he moved back to India, predominantly that has a farm, which his father was managing was affected by the water pollution emanating from the textile factories in Southern India, in a town called, Guran Badur and we were quite curious, why are you going back? And what will you do? None of this problem is so big that my father is not able to handle and he is old. So I'm going to help him there. And we are, we have been owning this piece of land for uh, more than three generations. So it is, we are attached to the land and then actually are the other three of us. We started thinking about it. This is really something that we have seen when we come from different parts of India. I come from the Eastern part of India and we have seen that irresponsible production practices has led to a significant amount of impact on the forest, on the water and on the air quality also. Right. So we said that they have an I now live in sweden. And I was saying that he here people are so conscious about the environment and all we should do something. And this triggered this whole discussion that maybe we should create a digital platform, which where people are able to track, whether the supply chain is responsible or not. And, uh, we did not put anything on, we did not know much about the fashion industry. And that is where we started talking to few of the fashion brands, who are sustainability first kind of brands like Houdini, Filipa Grey. Uh, Iceberg kind of brands and we got great response from them. They said, yeah, what you're trying to say is exactly, uh, we have got significant amount of control issue because we do not have the right visibility of what is happening in these factories. And it is always left to us visiting the factory or third party doing an audit and all, but we want real time connection to these factories because it is such a dynamic space. And that's when we started building this platform. We brought in our digital expertise or, uh, software engineering expertise that then we worked with. There's a leading sustainability leaders and, co-created the platform. We were supported by the Swedish ministry of innovation also in this journey, as you will understand, a platform like this takes a lot of effort, time understanding, and of course the, the number of lines of code also. So I think it was a quite, exciting, but at the same time, a lot of effort went into this.

Tom Raftery: 8:19

Okay. Sure. And how are you getting access to the data that your platform has far these fashion companies?

Shameek Ghosh: 8:28

Yeah. So it is very important to us. The problem is so big no one company or no one. institution can solve this because we are talking about a fashion and a textile industry, which is around $1.5 trillion industry and fashion industry is very unique because it has got very, very long supply chains, supply chains that start as far as in Australia, New Zealand related to wool, it can go via Asia, multiple countries, end up in Europe with a stitched or, you have the final garment, some of these supply chains, because a garment can have three different raw materials. It's very, very complex in that nature, right? And if you're dealing with tremendous amount of volume, you're talking about billions of garments being manufactured, right. So in this regard, this is where I think that the traceability platform comes into everybody's critical roll back. You have to map all of the supply, all of these different kind of, legs of the supply chain together and, collect this information. How we are doing it is that, or what, the role that we play is that we are a brand centric, material, integrity, and supply chain and supplier performance tool. You have to understand there are certain set ups, like you have got Excel exchange, which is a audit and a standard body, which is focusing on fiber forward. We are coming from brand down, right. And at some point in time, all of these chains will integrate together. Okay. Typically we are focused on brand. We are focusing on large and ultra large brands who are having complex supply chain and they cannot solve this problem by putting hundred or 200 people because, still after putting a hundred, 200 people, you will not have the data quality that a digital platform can offer. So we sell our platform to large and our ultra large brands like Addidas, like Decathlon, like ODB, who are our customers. Then they work with their tier one suppliers to onboard them. The tier one suppliers bring the tier two and tier three suppliers and all of these supplies, suppliers, or the nodes, they'll start recording the material moment, in our platform. So, hence we are able to track what is going on in the factory with respect to social and labor conditions. At the same time, we are able to track the material movement about how much amount of sustainable cotton was consumed at a particular factory and all that there It is a tremendous amount of data that we collect. So just to give you an idea, for Addidas, we are almost collecting a million transactions every month with just make a fraction of their products. So when they are full-scale I think it is a tremendous amount of transactions that will be reported in the platform. Yeah.

Tom Raftery: 11:23

Wow. Impressive. And the regulations that are coming into play now, they're becoming stricter and stricter that that's proving a big burning platform, I guess, for your customer base right?

Shameek Ghosh: 11:37

That's right. if you look at it, sustainability around three or four years back was typically an activity that our chief sustainability officer will, will do. And most of the cases like chief sustainability officer in most of these brands are coming in from a marketing or a communications background to explain what they would like to do. Right. Whereas if you now see that you have got chief sustainability officers working very, very closely with the production and the supply chain setups, and in most of the cases, they're independently reporting into the, audit committee or to the risk committee in the board. Right. So compliance is a very, very big player. In fact, three out of the four deals that we are running now are led by the chief compliance officer reporting into the CFO or to the audit committee in most of these brands, and yes, it was a burning platform because for many decades, textile was, as I said, was a very loosely regulated, industry, people, in fact, they passed on the liability to the tier one supplier. The costs included the liability of managing that tier two, tier three tier four suppliers, but now they can't. They have to manage the, sustainability aspect and, taking control of it is very critical. Just to give you an idea, right. So in Europe, you have got a new European textile policy, which has set, multiple different things. It has to be circular. It has to be durable. It has to be sustainable. You have to do a deal with things like whatever you produce, you should know the composition so that you are able to recycle it. You are able to repair it, or do you have you. This is a fundamental shift that is happening in the fashion industry, which was a very, very linear process that produced more. You will sell more and you will get more revenues. Now they have to deal with the complete business model, as it is changing towards sustainability. And hence I think you will see, we see certain regulations in pockets like you cannot claim a particular product to be sustainable if you do not know the, ingredients or the way the best, uh, composition of the product, I would say this is us a specific pointed regulation. And then you have generally due diligence that you should not have any child labor in your supply chain. And then there are much more comprehensive regulations which are dealing with product environmental footprint across multiple different parameters. So I think the scale is going up and up for that. And like German transparency law currently says any, company, which has got more than 3000 employees have to declare. have to ensure that they don't have any child labor or bad social practices. Now that is going to come down to a thousand employees, right? So the catchment area for these kinds of regulations also going up significantly. And, the board, as well as the CXOs, sort of are under a lot of heat and many of the people, can lose a job in case they are not able to prove to the market because many of them are publicly listed also.

Tom Raftery: 15:19

Yeah. And it also speaks to potential for reputational damage for companies. If they're found to be in breach of some of these regulations, right?

Shameek Ghosh: 15:28

Exactly. I think a million or 2 million is not that big a cost for many of these companies, but I think the media coverage kills them because it is a very unique thing that fashion industry is also changing significantly from the buying behavior. Earlier, we will walk into a store and say, Hey, I want to buy this shirt, or I want to buy this pair of jeans right. Now people actually check the product offline. And if a media coverage is there and said that to, you know, what doesn't, this brand has been found guilty for, bad social practices or, improper claims, I can just switch if I don't think this brand is so good. And whenever I go and check in the online platforms or that I want to check this platform, I may not visit that. Then I actually start losing the brand and it has been proven by Nielsen's data that sustainability's biggest benefit is brand loyalty. Forget, product premium, forget, your current business, because you have brand loyalty if you are at like, if you're a B to C brand, or if you are a brand, which is existing in the e-commerce world, and if you do not have the brand loyalty, why should a consumer come and buy your product? Because when they're putting a garment on themselves, they are carrying a label because they believe in that label. If they don't have that belief, they will not buy that. So there is a both customer side is pushing consumer side is pushing them and as well as the regulations are pushing. And we are also seeing an emergence of a new breed of brands, which are highly transparent, which are very, very sustainable. Like you have got Asted. Patagonia is of course a hero, but I think, look at the number of the tier two brands like Allbirds coming out of nowhere and capturing so much amount of market share shows that, the consumers are letting go of a legacy brand, which is not trying to be sustainable to more moving more towards a brand, which, presents their complete, responsibility and the transparency in the supply chain and the product.

Tom Raftery: 17:37

And, Um, can you speak to any outcomes you've had with customers?

Shameek Ghosh: 17:41

Yeah. So, If I split the whole, this, transformation, what I call the sustainability transformation between sustainability role models, to sustainability leaders, to sustainability challengers, or laggards, right? I think sustainability role models are working with us because they want data to be collected. They have dealt with the problem of using responsible suppliers, but still they want to ensure that whatever they're dealing is, is the truth. Right? So for these kinds of companies, we have been a great tool in which we have increased their data quality and reduced the time that they spend in collecting the data by almost 90%. So typically, earlier they will have maybe a five or 10 people team in the head office and around the 30 to 40 member team in various parts of the world to collect this data, process, this data. But now we are organizing this data in one place. We use various AI algorithms and all that for them to give them the right reports, right? It is a significant impact, but not at the scale of what we are doing with the sustainability leaders, that sustainability leaders are people who are not born sustainable. So they have maybe 30, 40, 50 years old, or maybe 20 years old, but they're making a big leap forward towards having more of sustainable products. For these companies I think we are having a tremendous impact because we are helping them to first discover the supply chain, collect a lot of data and helping them to make decisions so that they can increase their percentage of sustainable products. Because most of them only have maybe five or 6% as their total products are sustainable and they want to take it to a hundred percent because this transition is super critical for them in that aspect the strategy. So for these people, I think it is not only automation related benefit, but we are actually helping making a significant amount of business impact. So the return on investment for these kinds of sustainability leaders for us, that we are having on them is more than 5X in the first year itself. Then comes the sustainability challengers and laggards. I think many of them are using our platform first to get the strategy in place. They first want to know where are they? How far are they, how can they achieve? So, because they want to make certain commitments to the markets as well as to their investors. And I think for them, I think we have largely a data collection tool. So my focus in the market is towards the sustainability leaders and sustainability role models who are either making a significant change in their business model, or they want to keep their position so high in the market that they still continue to be the role models there.

Tom Raftery: 20:35

Okay, fantastic and where to from here?

Shameek Ghosh: 20:38

So we are Sweden headquartered company. We have a, Swedish Indian company with 90 employed in India, around 20 employees in Europe. And this has been a great asset because we are able to, have a good connection into the supply chain in Asia and, that part of the world. And then we are able to relate or connect very well with the European branch. So we have got 40 brands as our customers. All the 40 brands or European brands as of now. And we see a significant amount of traction or a tailwind in Europe led by the European regulations and European Green Deal as the say, plus of course the consumers demanding for sustainable products there, but at the same time, I think since last one year, we are seeing a significant amount of requests coming in from the US side. So our intention is to become a player, both in north America and in Europe. Also, another aspect is we are very, very strong when it comes to the sports goods, outdoor wear, segment because, these brands, relate or connect very, very well with people who love environment, who are mountaineers or who do water rafting and all this kind of, they relate to that. So we have been very, very strong there. Now we are also seeing a good traction building up from. Uh, high street fashion as well as from the luxury goods market. So we want to move towards that side. And I think it is good for us because we are at a stage in which I think the product to market fit is very, very strong. And now we are looking more at a GPM growth. So we are also looking at a growing through partners like PLM, providers and all that also as well as, uh, ERP providers also in certain markets there. So the, that is what is going on. It is very, very heartening because I think a journey which started around four and a half years ago, that it was a sort of it, of course it started as a very hot hobby project, a part time project, but the kind of impact we are able to do because in the last 12 months, now we have, in the platform tracked, purchase orders worth $12 billion. And which means that what this products selected 12 billion or materials, $12 billion. At least I can. I know I can never be a hundred percent sure that everything I'm recording is the right but at least the probability of it being the right information is much higher. And this shows that the, how much transformation I am bringing into, or we are able to impact in the fashion industry there.

Tom Raftery: 23:17

Fantastic. And how has your co-founders father's farm?

Shameek Ghosh: 23:22

It is improving. And I think it has generally improving with the overall health of the agenda. There's been a lot of crackdown, which has happened in India also related to water pollution, specifically water pollution. And this is not only limited to textile industry, but also pharmaceutical industry and food industry and leather industry also, which have been very, very big polluters of the fresh water bodies there. And there has got a new policy for pollution control and on. And I think a lot of incentives have come in. So overall I think that, that the organic farm that my co-founders, the family owns it is, doing well but I don't know if you heard about the current heatwave in India. So it, shows that, while you can take the water now and now the climate and, and, of course the loss of green cover is also affecting them right. There's a lot of underlying things that has to be worked on. Right. And again, as I said, it cannot be done by one company or a group of 10 companies. It needs overall mindset change. And I think. when I read that number from McKinsey that it is a, $8 trillion transition cost for industry at fashion And textiles. But now I think the more I think about it and the more I see the activities on the ground level, I think that cost is the true cost of it.

Tom Raftery: 24:44

And it'll be money well-spent. Super, we're coming towards the end of the podcast now Shameek. Is there any question that I haven't asked that you wish I had, or any aspect of this that we've not touched on, that you think it's important for people to be aware of?

Shameek Ghosh: 24:59

I think one part, uh, which will be good for me to highlight is that the use of digital technologies, right. So we are a vertical SaaS company. We use a plethora of, best of breed technology tools. We believe in the story of blockchain, but I think the industry has to mature significantly in also establishing a blockchain related governance, but we are taking the initial steps of helping peer to peer validations being recorded in the platform. Thereby the cost of compliance can come down. And I think these, technologies such as blockchain, AI, the bots that we are using can help the industry a lot, if they can all collaborate together because technology for the sake of technology will not deliver the business results. Technology along with the right governance and the right collaboration ecosystem is what is happening. And that is what the, we are urging the fashion brands to come with us along with the suppliers to come and work with us. And that I think is a very interesting aspect. And if we are able to succeed in this space, I think it will be a great example, not only for the fashion or the textile industry, but also many other industries to follow, how you can work together, make world a better place. At the same time you also improve your business fundamentals by reducing the cost overall.

Tom Raftery: 26:22

Super super, super Shameek. That's been really great. If people want to know more about yourself, or about Trustrace, or about any of the things we talked about in the podcast today? Shameik, where would you have me direct them?

Shameek Ghosh: 26:34

I am very, very easily accessible over LinkedIn. I can share my email address to you also, you can put it there, but I will also urge people to visit our website. We have created a knowledge hub where we are putting our own experiences, also experiences of like-minded people that with whom the work about how traceability and transparency can help them change their business and how to achieve, traceability and transparency also, and we will be launching a playbook also about traceability, how it can be achieved in a month's time, and the best place to be plugged onto that is if they can subscribe to the knowledge hub and updates there.

Tom Raftery: 27:12

Superb superb. Shameek that's been great. Thanks a million for coming on the podcast today.

Shameek Ghosh: 27:17

Pleasure absolutely Tom. Very nice being here.

Tom Raftery: 27:22

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, head on over to sap.com/digital supply chain, or, or simply drop me an email to Tom dot Raftery @sap.com. If you like the show, please, don't forget to subscribe to it in your podcast application at choice to get new episodes, as soon as they are published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks, catch you all next time.