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Serai, an HSBC-backed online B2B platform for SME trade, has launched a solution that allows companies in the apparel industry to trace the origin of the cotton and other raw materials that go into their products, enabling them to manage environmental, sustainability and governance (ESG) risks across the entire textile supply chain.

 The solution, which is currently being piloted, enables suppliers to input information about their raw materials or intermediate goods, such as provenance or ESG performance, and share this with multiple parties over a secure platform.

“A large buyer could ask its supplier to prove what garments have gone into every shipment, and then ask its supplier’s suppliers what yarn went into those garments, and beyond that, what the origin was of the raw material used to make that yarn,” Vivek Ramachandran, Serai’s CEO, tells GTR. “Using Serai, this can be proved with invoices, payment data, and certificates of origin. The data comes directly from those counterparties, either via APIs or through an encrypted cloud server, with the owners of that data able to set their own permission settings in order to control how it is shared.”

The apparel sector is comprised of millions of small, medium and large manufacturers across the world. Its production chain spans continents, from the farming and production of cotton, wool and synthetic fibres through to the production of yarn and the eventual transformation into finished garments. With several parts of the chain in countries where governance over labour conditions, fire and building safety, and emissions is weak, it has become critical for suppliers, manufacturers and brands to be able to show and trace the origins of their products.

However, as Ramachandran points out, it can be difficult for businesses to have full visibility over their complex supply chains as much of this data is currently fragmented and managed manually. “The big clients know their tier one suppliers incredibly well. Many of them nominate tier two suppliers who they also know well, but beyond that, there isn’t much visibility,” he says. Serai aims to solve for this by giving global brands a simple means of tracing order flows, mapping upstream suppliers and tracking ESG commitments.

But ESG is not the only issue the system can tackle. As growing numbers of free trade agreements are signed involving some of the world’s largest garment-producing countries, Serai also enables importers to rapidly prove the provenance of inputs in order to meet rules of origin requirements – a key factor in allowing producers in countries such as Vietnam to meet the so-called yarn-forward rule of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and qualify for duty-free treatment.

“We are agnostic as to the use case,” Ramachandran says. “Serai is simply a platform that allows for the exchange of data in a safe and simple way.”

Through an app store model, Serai plans to integrate further offerings into its solution. In addition to counterparty credit checks, which it partnered with Coface to offer late last year, future add-ins will include working capital and supply chain finance, which Ramachandran says would not be restricted to HSBC offerings, but would likely involve other financiers. In addition, third-party audits of supporting documentation provided by suppliers on Serai, as well as invoice checks, could be integrated into the platform via APIs.

Serai currently counts 3,300 companies as active users, 65% of which are suppliers, with the remainder made up of garment brands and retailers. The next step for the platform will be to roll out its solution to other industries beyond apparel, with Ramachandran saying that he has already received enquiries from large players in both the coffee and the tech sectors.