Sourceful Raises $12.2M Seed Funding - Index Ventures

The Complexities of Sustainable Supply Chains

Supply chains often present significant logistical hurdles. However, they also pose a substantial environmental challenge. U.K.-based startup Sourceful is concentrating its efforts on addressing this latter issue – global supply-chain sustainability – while asserting that its methods can simultaneously enhance efficiency and lessen environmental impact. This dual benefit is central to their proposition.

Seed Funding and Growth

Sourceful has recently announced a $12.2 million seed funding round, demonstrating early investor confidence. The round was spearheaded by Europe’s Index Ventures, with partner Danny Rimer joining the board. Additional participation came from Eka Ventures, Venrex, and Dylan Field, the founder of Figma.

Established in June 2020, the startup intends to utilize this new funding to expand its operations and refine its platform for sustainable sourcing. Plans include increasing staffing levels across key departments such as technology, sustainability, marketing, and operations.

The team has already experienced a fivefold increase in size since the beginning of 2021 and aims to reach 60 employees by year-end. This expansion is occurring prior to the platform’s public launch, scheduled for early next year.

Platform Beta and Early Adopters

Sourceful’s platform is currently in a pre-launch beta phase, with approximately 20 customers testing its capabilities. These early adopters span diverse sectors, including food and beverages (Foundation Coffee House), fashion and accessories (Fenton), healthcare (Elder), and online marketplaces (Floom and Stitched). They are evaluating the platform’s potential to improve supply chain decision-making.

A Growing Market

The supply chain logistics and freight forwarding sector has seen considerable innovation in recent years, with entrepreneurs striving to improve efficiency through digitization of traditionally manual processes.

Startups focused on sustainability within supply chains are a more recent development, though poised for significant growth as global attention shifts towards decarbonization. Companies like Portcast and Responsibly exemplify this emerging trend.

Sourceful’s Approach: Sustainability and Efficiency

Sourceful distinguishes itself by offering a dual commitment to sustainability and efficiency. The platform connects client needs with vetted suppliers through a marketplace, managing the purchasing and shipping logistics – including some warehousing – and earning a commission on the total price.

The company’s name, while seemingly counterintuitive for a sustainability-focused venture, may allude to “fully optimized” sourcing. Sourceful aims to address the environmental impact of consumer goods by actively improving sourcing practices for packaging, merchandise, and components.

Addressing “Greenwashing” Concerns

Recognizing the prevalence of unsubstantiated “eco” marketing claims and deceptive “greenwashing” tactics, Sourceful acknowledges the need for transparency and verifiable data. The company is particularly focused on packaging, offering a design capability that leverages real-time data to encourage more environmentally friendly choices.

While ideally businesses should strive for zero packaging, Sourceful’s CEO and co-founder, Wing Chan, argues that optimizing existing packaging is a pragmatic first step, especially for e-commerce businesses where some packaging is currently unavoidable.

Optimizing Packaging and Beyond

“The best solution right now is to help you optimize your packaging,” Chan explains. “The next wave will be around circular forms of packaging – packaging that you can return to your courier, or reuse.” Sourceful prioritizes addressing the immediate pain points of cost, time, and lack of clarity regarding sustainable packaging options.

The company’s long-term vision includes minimizing supply chain footprints and offsetting remaining emissions.

Data-Driven Carbon Footprint Scoring

Sourceful utilizes data, combined with its network of vetted suppliers (currently around 40 in the U.K. and China), to help companies optimize sourcing logistics and reduce their environmental impact. A key feature is the assignment of a “carbon footprint score” to product choices.

This allows customers to move beyond qualitative claims – such as using less plastic – and display a benchmarked carbon footprint score based on a lifecycle assessment of the product’s creation.

Lifecycle Assessment and Data Accuracy

The assessment considers all stages of a product’s lifecycle, from raw material sourcing and manufacturing to transportation. For packaging, this includes evaluating the cardboard material, its origin, travel distance, and manufacturing processes.

Sourceful’s software engine enables clients to visualize the impact of different choices, such as altering box size on the overall carbon footprint. The company employs an internal climate science team and leverages publicly available data sources like ecoinvent, while also working to update these sources with more recent data.

Pursuing ISO Certification

Sourceful aims to establish its lifecycle assessment methodology as a universal standard and is currently undergoing ISO certification. This process involves independent review by experts from universities and consultancies, with completion anticipated before the platform’s public launch in Q1 next year.

Supplier Vetting and Accountability

Sourceful conducts its own supplier vetting process, without relying on external assistance. The company emphasizes the importance of thorough vetting, given sustainability’s central role in its value proposition.

Chan highlights the combination of data collection and on-site visits by teams in the U.K. and Asia as providing an extra layer of assurance for brands. He also notes that Sourceful’s deep understanding of each supplier’s manufacturing process, gained through building lifecycle assessments, enhances accountability.

Driving Forces for Sustainable Sourcing

Chan attributes the growing demand for greener sourcing to increased consumer awareness of environmental concerns and their willingness to support eco-friendly products. He also points to regulatory pressures, such as sustainability reporting requirements and net-zero targets, as contributing factors.

However, he believes that consumer demand is the primary driver, with brands recognizing the need to demonstrate their commitment to sustainability to attract environmentally conscious buyers.

Warehousing and Logistics Optimization

Sourceful offers a warehousing “managed service” utilizing a predictive algorithm for auto-stocking. This allows brands to store inventory and have goods shipped as needed, saving space and potentially optimizing transportation.

Bulk sourcing and optimized transportation, such as prioritizing sea freight over air freight and maximizing container utilization, can further reduce costs and emissions.

“Sea freight is several times more energy efficient than air freight,” Chan explains. “If we can organize more shipments to go via sea freight than air, that’s a major win.”

Ultimately, Sourceful aims to address inefficiencies throughout the supply chain, saving both money and reducing environmental impact.