Let's Transform Trade for Good.
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When we conceived of Sourcery as a member-owned sourcing and digital trade solution, we wanted to be certain that everyone from growers to brands had an equal seat at the table and that all voices could be heard.
We studied and borrowed from the governance structures of farm cooperatives around the world, employee owned companies, multi-stakeholder organisations and pioneering frameworks such as B Corp Certified to build a for profit business that could be truly inclusive, transparent, accountable, equitable--and highly profitable.
Early on, we made the difficult decision not to accept philanthropic donations or grants as part of our company charter (despite us doing the hard work of many non-profits to support sustainable farmers). In addition, we also decided not to accept outside investment of more than $250,000 USD from any one investor during this early stage of growth to ensure our governance would live up to its democratic principles now and in the future.
For example, in 2023, we turned down $5 million USD investment opportunity in Sourcery (crazy, right?) that would have sold a 25% equity in the business giving a venture firm with little knowledge of fibre and textiles, yet have more influence than our Partners who are experts in trade when it comes to fibre, yarn, fabric and finished goods.
"In 2023, we turned down $5 million USD in investment in Sourcery because of our commitment to ensuring our Partners and shareholders were equal participants at the table."
In turning this money down, we chose the more difficult path (just ask our employees?). However, it was the right path because we truly believe in building a business that not only transform trade for good, but stood as a testament that businesses themselves can be a force for good if they are profitable. Since its founding, Sourcery has been profitable.
We know that too many start ups need big sums of money early on, yet often these early sums buy power and and imbalnced influence requiring founders to kowtow to investor special interests that can change the business--for Sourcery we are bound only by our operating principals that therefore allow us to put the needs and interests of all of our Partners first--these Partners are also our investors.
Since our founding in 2020 and the years that followed, Sourcery was profitable while we put into the place the Direct-to-Grower Solution, conceived of our the above business model. Now as we chart the course for the future, what we call the digital transformation, we have the upper hand when raising capital from venture investors so we can scale over the next several year and accelerate the transformation of trade for good.
As one of our investors remarked, "this is the best business, where its owners are its clients...when we buy, we make money." This is what a because looks like that truly has a product-market fit--there is not guessing.
Shared Equity and Shared Accountability
After turning down this investment opportunity that would allow us to fly high, but likely not be able to choose our flight path or destination, we conceived of and built a pioneering stock option solution that set aside 40% of all of our outstanding equity for our Partners to earn through the Equity Credits Programme (ECP)--making it possible for our Partners to collectively have the controlling interest in Sourcery.
The ECP operates similarly to a Restricted Stock Units (RSUs) programme that is offered to many start-up employees (including our own), yet gives growers (farmers), manufacturers and traders who are actively 'transforming trade for good' the opportunity to earn and vest stock equity in Sourcery. This ensurres that all members from small holder farmers to giant and powerful manufacturers and brands can benefit short term and long term from the business they have built and continue to build.
Our Partners aim to create a business formed and owned by multiple shareholders and stakeholders and are working to ensuring Soucery is a place where the term 'collaboration' is not an exercise in 'placation' but is a business imperative where all members assume shared risk and reward that comes with ownership and requires fiduciary and legal responsibility (members hold no financial or litigation liability in Sourcery).
"Soucery is a place where the term 'collaboration' is not an exercise in 'placation' but is a business imperative where all members assume shared risk and reward that comes with ownership."
In addition, we set aside an additional 15% equity for these Partners to invest in Sourcery and for our Partner Seed Round that we launched early last year and are nearly finished with raising close to $1 million USD. Once this round closes, we an earnetly and truthfully say that Sourcery is owned and lead by our Partners (brands, manufacturers, traders and growers) and that everything we do is truly "Built by the Trade, for the Trade."
This is so critically important in this early stage of the growth of our business because our Board of Directors , who are also our members (and clients) do not have have degrees from Harvard, Yale or INSEAD. They do not undertake theoretical research for 'think tanks' or sell risk mitigation strategy and solutions as 'management consultants' that publish the 'state of the sector' reports or white papers on 'what the future of fashion could be' or espouse idealistic notions of sustainable fashion, but instead have real world experience actually growing, selling and manufacturing fibre, yarn, fabric and finished goods and therefore understand implicitly the 'on ground' realities of the trade that is often missing from those who are believed to to be leading sustainable fashion forward.
At Sourcery we are lucky because our Partners are don't just understand the 'on ground' realities they live them day in and day out and with that experience and knowledge they bring real, practical and executable insights and guidance that is is invaluable to our business and the solutions, products and polices we implement to ensure we actually transforming trade for good.
These collection insights lead to collective action and this is what forms the backbone of who we are as a company made of a multiple stakeholders and shareholders who are committed to investing in, owning and driving forward the transformation.
Unlocking Impact with ore Transparent, Reliable and Efficient Trade
When things started to take shape in mid 2022 after running several "Direct-to-Grower" pilots with major brands and retailers and thier suppliers, it become clear to use that that to actually drive forward sustainability in fashion forward in a measurable, meaningful and equitable way that we had to accept that social and environmental impact could only be realised as a byproduct of better business and trade--in other words we had to unlock impact through better business.
We asked the brands, manufacturers and growers whom we engaged with early on to be absolutley honest with us about their primary business imperatives, priorities and concerns and that we would be absolutely honest with them. In those days, we used to have a informal disclaimer to many brands that through Direct-to-Grower you will learn what is really going on as we will share with you and invite you to experience the 'on ground' realities that exists on farmers, in facilities, and throughout the value chain when it comes to what really happens behind the curtain of sustainability claims, logos and certifications.
The purpose of this exercise was not to point figures or undermine the efforts that manufacturers and grower were making, but rather to invite those who actually cared about real progress to invest in the change needed to transform trade for good so that many of the certifications and standards they relied upon could actually be delivered by the growers and manufacturers with whom they relied upon to produce their fibre, yarn, fabric and garments.
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Many of these growers, manufacturers and brands are today our Partners at Sourcery and have become our most ardent supporters (and investors) as we have committed to building a system of trade and impact that is more transparent, reliable, efficient and equitable and delivers meaningul, measurable impact and real monetary value for the growers and manufacturers by ensuring they can be recongised and truly rewarded for their commitments to commercial, social and environmental impact at scale.
This system that we call Direct-to-Grower doesn't aim to 'go beyond certification' but rather build a system of trade that enables growers and manufacturers to be able to actually deliver to the standards and certifications that exist today through shared investment, primary data collection and share responsibility and accountability.
This new system of trade is built on the ideal that the new era of impact reporting relies on primary verified transactional and impact data that serves as the currency for certification and standards to prove empirically and scientifically that 'sustainable fashion' is actually sustainable.
It's time to transform trade for good.
A New Way Forward
As members and owners of Sourcery, our Partner brands, manufacturers and growers are ready to transform trade (and impact for good). Over the last five years, we have listened closely to our Partners, we even became traders and agents ourselves so we can feel their pain, understand their day to day and many have helped us develop our way forward as an organizations that is driven by four primary business imperatives and guided by six (6) Partner Principals.
1. Sourcery must be member-owned by growers, brands, manufacturers, traders and brands. It is, learn more here.
2. Sourcery must enable more transparency, efficiency and trust in trade that mitigates counter-party risks (costs and reputation). Trade with us here.
3. Sourcery must harmonise and simplify transactional and impact data and document collection and verification to make it easier, more cost effective, more trustworthy and less risky. Learn more here.
4. Sourcery must ensure that those who are truly committed to commercial, social and environmental excellence from growers to brands are recognized and financially rewarded for their commitment and efforts. More please.
Transform Trade for Good, Together.
We need standards. We need certification. Yet we need a system of standards and certification where social, environmental progress is a byproduct of better business and trade and we celebrate and reward measurable progress rather than purity that does not exist.
Yet the system as it exists today is deeply flawed and broken and simply tightening the screws of compliance, adding lines of unnecessary code or needless additional paper work is not going to work because the paper trail alone is not going to magically ensure that farmers in India or Turkey have access to non-GMO seeds or that recycled cotton or polyester feedacks actually and suddenly exist at scale.
In other words, the wood that once served as a framework for and envision future for 'sustainable fashion' is already well splintered and rotting and can no longer hold the screws that were holding it up in the first place. Tightening the screws them will only increase the size of the fissures in the grain. We need tor rebuild before the whole thing collapses (some believe it already has).
We need to reclaim what is good, recycle or toss out what is not (incessant audits and notions of purity) and build a new framework that is supported by a strong foundation of sustainability impact that is built for the 21st century and the digital age and truly set up to system that can deliver more commercial, social, environmental progress and value that is more transparent, efficient, equitable and profitable for all.
This is what it means to transform trade for good.
As part of our pledge to transform trade for good, Sourcery Partners invite all standards, certifications, multi-stakeholder organisations, trade bodies and others to join us as Impact Partners as we continue to transform the future trade for good.
Let's keep what is good so that we can transform trade (and impact) for good. This means working together to rewrite the rules and shift the trade and impact paradigm so that everyone can benefit--growers to consumers (as well as mama Earth!).
Hint: This approach is far more profitable then selling audits, transaction certificates, claim units and collecting the associated fees. Whats more is that the pulls of capital commercial investment ready to invest in the future of trade far, far exceed the largest of the richest families and foundations who have funded sustainability in the past.
The Future of Trade is Digital (and Data is King).
Learn about the groundbreaking Connect Platform that will enable our approach to trade to scale far beyond cotton, fibre and textiles as Sourcery takes steps in our digital transformation to ensuring everyone from grower to consumers benefit. Is your coffee "Direct-to-Grower?"
Let's transform trade for good.
Crispin Argento, Co-Founder and Managing Director Sourcery
I'm a ?? | A Brave Supporter of Conducting Business for Good | Sustainable Business & Impact Leader | MS in Sustainability with a BFA.
2 个月I really appreciate the transparency and the business model you've been implementing. There's so much for other businesses to learn from here.