After partnering with Vasanda in June, Pole Star is incorporating Vasanda Ecosphere’s empirical climate impact data into its regulatory compliance solution, alongside CarbonChain’s emissions calculations, to extend PurpleTRAC’s sustainability screening offering.
To explore the environmental and social impact of the commodity industry, as well as the requirement for sustainability risk screening, we caught up with Philip Lilllifelth, CEO at Vasanda, and Simon Ring, Global Head of Maritime Trade Technologies & ESG at Pole Star:
Philip, why was the Vasanda EcoSphere developed and how does it relate to the commodity industry?
“Vasanda was founded in 2017 as a post-trade supply chain lifecycle automation platform. The ambition was to automate and map the journey workflows for major, physically traded commodities, as supply chains are complex, and our research indicated that more visibility was needed of the asset being transported. We also saw an opportunity to surf an upward sloping curve in trade digitisation and frictionless post-trade ops. The challenges we faced indicated that the market was not yet ready for this innovation, including AI, ML, and Blockchain. We found that traders and banks were still in the ideation process, whereas tech firms, such as ourselves, were steaming full speed ahead, so there was a disparity of sorts in innovation and adoption that we spotted early on.
As we continued to look for a USP for our product, the inflection point for us was the noise around ESG and sustainability. We were inspired by the idea that, as well as providing transparency to supply chains, the concept could be extended to screen further into the value chains of major commodities and output based on observed and experiential data, providing a pragmatic purpose for ESG, as a measure for performance, and providing a double materiality from real-time event triggers.”
How does the solution work?
“Vasanda aims to analyse, aggregate, and filter raw environmental impact data for financial institutions, traders, and corporates, and to distil the key risk parameters associated with a given commodity or supplier / grower / miner. Ultimately, we will start seeing traders and financial institutions pre-screening transactions to determine their sustainability risk, which could be the decider when taking on exposure or not. Vasanda screens a transaction, then matches its underlying asset to major associated environmental and social risks. The risks are categorised by environmental / climate impact risks, social conditions of the value chain of said commodity and, where available, the governance metrics for the supplier, producer, or miner. The consumption and processing of key datasets are automated, showing Vasanda does not adopt any lofty accounting standards for risk outputs, but rather relies on pragmatic output closely correlated with the physical process and journey of the commodity / asset.
Take the example of a soft commodity trade like soya; we will be looking for patterns of deforestation, soil degradation at the sourcing farms or, failing that, at a regional level as well as other environmental risks, including but not limited to water productivity and non-naturally occurring fires. Those risks are then matched with open source data and certifier audits that cover the social aspect of ESG for additional validation of the screening process. By combining this information with CarbonChain’s emissions calculations and the regulatory compliance layer of PurpleTRAC, this solution becomes a powerful combination for tracking risk at a transaction level.”
Why is this solution so important right now?
“As the sense of urgency around climate change continues to grow, we are seeing more and more governments beginning to mandate certain criteria and ensure regulations are met. What was once something that companies could choose to partake in, ESG standards are fast becoming a requirement across all manner of industries. What we have found in the current ESG environment is that, precisely because these regulations are new and there is no worldwide standard yet, there is a lot of confusion around complying with them and what data is required to do so.
At Vasanda, our aggregation of raw environmental impact data is a unique resource for those businesses needing to screen for sustainability risk and make real-time decisions. By basing our output on observed and experiential data we aren’t held to an inflexible and static rating number that is reviewed infrequently. Instead, we’re able to provide the user with the most up-to-date view, allowing them to adjust their decision-making process accordingly.
In addition to this, by providing this kind of transparent information to financial institutions, we’re enabling them to view the sustainability of each trade from provenance to market. As a result, we will see a trickle-down effect that benefits the individual farmers and growers who are making the effort on the ground to be sustainable.”
Simon, how will Vasanda EcoSphere integrate into PurpleTRAC?
“By integrating EcoSphere, PurpleTRAC will provide customers with a 360-degree view of regulatory and sustainability risk relating to any actively traded commodity. By combining this with the capability provided by our partner CarbonChain, in which a vessel’s carbon score can be calculated based on its GHG emissions, PurpleTRAC becomes the whole package for the full spectrum of risks across sanctions, compliance, and sustainability in the global commodities trade. During the sanctions screening process, users will be able to monitor vessels, shipments, and transactions for sustainability risk to ensure they meet their company’s sustainability targets. As a result, PurpleTRAC will provide an end-to-end solution for risk management, enabling users to investigate sanctions compliance, shipping documents, real-time vessel activity, carbon emissions and, ultimately, the environmental impact of a trade.”
Why is Pole Star supporting sustainability across the maritime industry?
“With record temperatures and extreme weather conditions currently making their way through countries around the world, Pole Star understands that ignoring climate change is no longer an option. The global commodities sector contributes 50% of global greenhouse gas emissions and, under a business-as-usual scenario, shipping emissions could increase by 50-250% by 2050. Consequently, as a leader in the maritime world, we are driving towards a sustainable future and supporting this by enabling the monitoring and reporting of trade’s environmental impact. Additionally, as new regulations are put in place, the industry needs to be on the right trajectory to meet sustainability targets, which requires action to be taken now.”
How will this collaboration impact the future of maritime trade?
“The maritime trade and shipping industry has been heavily paper-based in the past, generating a web of inefficient manual processes throughout the supply chain. Going forwards, collaboration is key to developing integrated solutions, as evident by this partnership bringing together sanctions and environmental compliance into a single platform. At Pole Star, we recognise that all our partners are mission critical to reaching our goal of creating a one-stop-shop for all our users’ risk requirements, and that’s exactly what Vasanda and CarbonChain bring to the table. By incorporating EcoSphere and Carbon Scoring, we are not only providing an easy-to-use and cost-effective solution, but we are increasing transparency and visibility to ensure that companies across supply chains are complying with their ESG responsibilities. The time for this collaboration is now, but the impact it will have will continue well into the future.”