How ESG and Traceability are Impacting the Solar Supply Chain
Episode Summary
In this episode of the Solar Maverick Podcast, Benoy Thanjan talks with CEA’s Director of ESG and Traceability, Paul van Brenkelen, about the importance of Environmental, Social and Governance (ESG) in the solar supply chain, new traceability protocol created by the Solar Energy Industries Association (SEIA) in partnership with CEA, and how the US Government’s recent Withhold Release Order (WRO) and push towards global supply chain transparency is impacting the solar industry.
Podcast Transcript
Benoy Thanjan:
Hi, this is Benoy Thanjan, your host of the Solar Maverick Podcast. I'm really excited to interview Paul van Brenkelen. He's the Director of ESG and Traceability at Clean Energy Associates. And we interviewed actually Andy Klump and Paul Wormser before from Clean Energy Associates on the podcast; they provided very valuable insights and I'm excited to have Paul on the podcast. Paul, welcome.
Paul van Brenkelen:
Yeah, thanks for having me here on the podcast. Excited to participate.
About Clean Energy Associates
Benoy Thanjan:
Anytime. I think it's interesting because ESG and traceability is something that's really been talked about, especially the past year, especially this year. It would be great to learn more about Clean Energy Associates for our listeners who are not familiar with the company.
Paul van Brenkelen:
Let me introduce a few words about Clean Energy Associates in short. CEA is a global technical advisory company that provides comprehensive engineering solutions for the solar and storage industries. So clients are end owners of solar and storage assets who care about consistent, reliable, and optimized performance and see value in paying for our services, which are often also provided with the “Wow” factor to make sure we keep them happy. We want to become the leading global solar and storage engineering services company that creates a tangible impact with our customers by 2025. So that's our drive into the company. And for that, we offer a couple of services - comprehensive quality control and testing, engineering, design, technical advisory, supply chain management, and full component traceability, in depth supplier and market intelligence. And by now we are active in around 60 countries, visited many factories in the photovoltaic supply chain and with 90 gigawatts of projects, value of 75 billion in the industry, and also around 4 gigawatt of storage facilities. And this is all being built up by Andy Klump, the person who you referred to, in the last 13 years, with a base in both the US and in China. We've got quite a few people on the ground in China.
Benoy Thanjan:
And you’re based in Shanghai as well. Is that the primary headquarters of the company? I know there's multiple offices.
Paul van Brenkelen:
The main headquarter of the firm is in the US, but the kind of corporate headquarters where all the activities are, where quite a few activities are coordinated and where Andy is based, is in Shanghai.
Paul’s New Role as CEA’s Director of ESG and Traceability
Benoy Thanjan:
That's very helpful. And I'm excited to learn more about your role at CEA. Can you talk about what you're doing as Director of ESG and Traceability?
Paul van Brenkelen:
Let me elaborate on that. I'm reporting into the Vice President of Operations, and one of the executive leaders Paul Wormser, who was also on the podcast. So I was appointed as the Director of ESG and Traceability. It’s a newly created role anticipating all the needs and requirements for CEA’s customer base and supply chain development. So working with the various teams in a cross functional manner, we try to stay on top of regulatory frameworks developing in the various jurisdictions we are based in, or our active projects. So we anticipate on client requests or are recommending clients on industrial developments and then develop the related sales and marketing materials and operationalize the service deliverables for the various inspections; all the things or validation services we have and for reporting purposes. And then all the aforementioned related services are also linked to the supply chain traceability. It's a novel topic, which we will cover a little bit later, I guess, in the questions. So as for CEA, it is the related services we are developing. So that's my role. It's kind of an exciting role, in the current state we’re in, and in the photovoltaic industry, trying to do some good to the world also by trying to increase the implementation of renewable energies on a large, even global scale.
Paul’s Background and Experience in ESG and Traceability
Benoy Thanjan:
Definitely. That's really helpful to understand. And it would be great if you could talk about your background before CEA. I mean, it's amazing how much experience that you have and perspective that you could bring to the position. And it would be great to hear about your background before joining the company.
Paul van Brenkelen:
Thanks for that. I'm an engineer, which was also a question raised when I joined, but I'm a bit out of the normal mainstream engineer because I grew up in the countryside in Netherlands, attended colleges and universities, but they were all related to the agricultural fields. And in the Netherlands, you can be an engineer on the technical side or on the agricultural side - those are the only two universities where you can have that title as an engineer. So I started my career in the Testing, Inspection, and Certification (TIC) field there; so called TIC industry.
I joined a Swiss company called SGS back in 1994, and that was kind of an era with a very big focus on health and environment. So I became heavily involved, even on a global level, by running a competence center with product labeling, certification, traceability, carbon offset verification (which by the way, is also an element of the ESG; the Environmental part of it). So chain of custody solutions for clients, but also supporting through that same competence center, subsidies in many countries around the world. So I had new opportunity and the luck to be able to travel to 55 countries, which kind of is the reason why I ended up in Asia, because I fell in love with Asia, but also the opportunities it had and the developments you could see in countries like China and India at that point in time.
So I came here since 1998 already traveling into China, but based here since 2005 - because then I joined the competition Bureau Veritas, again in roles linked to product development, innovation, efficiency, improvement, data mining, and again, traceability. And then in the same period based out of Asia, I joined TÜV Nord, where I was the regional CEO for that company. But more importantly to mention is that's where I got heavily involved in renewable energies, in the sense of setting up a specific department for wind energy and solar. So that's where I was allowed to issue a few certificates to clients in Taiwan and in China already for photovoltaic. Then a few startups after the TIC industry experience, they were all also related to sustainability and environmental impacts, trying to reduce impacts on the environment. And that's kind of where I got exposed to ESG, through board involvements, financers, and loan situations where of course you get passed on the requirements of those organizations in trying to adhere to what they would like you to do in your organization.
And more over, I also obtained a couple of post-graduate degrees in corporate governance. So Institute of Directors, Financial Times diploma on Executive Director roles. So joining CEA means I bring the necessary TIC industry related experiences for traceability certification, together with the ESG-related activities in this new and opportunistic role.
Benoy Thanjan:
That is amazing to hear your background and so much experience in ESG and traceability before it's become popular, and really a unique sort of experience that not many people have. So that's really interesting.
Paul van Brenkelen:
Thanks for that. Looking forward to the further development of this role within CEA indeed.
What is ESG and why is it important?
Benoy Thanjan:
Yeah, definitely. And probably not all our listeners are familiar with ESG. Can you talk about what ESG is and define it and tell us why it's important?
Paul van Brenkelen:
So it’s a bit of a new buzzword, which is maybe not the right term to use by the way, but ESG stands for Environment, Social and Governance, and it's kind of related to what we call the triple bottom line report, and the triple annual reporting that comes, kind of out of Europe, where those requirements were written down. And it's often related, based on the company's responsibilities around disclosing information in their annual obligatory reporting requirements. So it's not only financial reporting, if ESG is being implemented, it very often means it's like an annex to a corporate governance code. And this is often linked to exchanges in jurisdictions. So they act in favor of the companies and they put the requirements out there where companies have to do annual reporting. And the ESG annex will mean they also have to disclose the information related to environment, social and more stringent corporate governance aspects.
So reading the annual report in which kind of drives it. And the reason behind it is that the world is evolving and developing. You already mentioned renewable energy is becoming an important impact to the environment, and the same applies here. Companies are not only required to maximize shareholder value; nowadays there is also involvement from the outside forces - let's call them stakeholders. There's also stakeholder involvement in the requirements to look into those parties, like inside organizations, as you know. Your employee could be a stakeholder; your shareholders, of course, are stakeholders about the social, like the surrounding environment, which you could be impacting people living there if it would be a certain industry with emissions, for example, or you have to do something with your waste management, which should not go into effluent in the surface.
So those are items in which people really have to look into. And those are kinds of requirements which you see in the ESG requirements linked to the stock exchanges often. So you've got the corporate governance scope, can either be from a country or the corporate governance code is run through the authorities, then being provided to those stock exchanges. And then that is often an annex as an evolvement and development into ESG related requirements, which then the exchanges expect to see in the annual reporting.
The Role of ESG within CEA and in the Solar Industry
Benoy Thanjan:
That is really interesting to understand that. And it would be great to talk about, obviously we talked about how Andy Klump and Paul Wormser from CEA have been on the podcast. And we know that CEA operates in quality assurance, engineering, supply chain space. How does ESG tie into what CEA’s currently doing?
Paul van Brenkelen:
In our current factory auditing services we are already involved in schemes and codes, like OHSAS (Occupational Health and Safety) or EHS (Environment, Health and Safety). So those are codes which companies are certified to, or where, for example, buyers or financial institutions are already requesting to look into those kinds of matters. So those are already elements of audits or validations we are performing. And then the latest development on the traceability related all these for the supply chain integrity means that we are touching already on the various ESG related components. There's not one global standard out there, but like I said, in those codes, there are elements which ask for waste management or environmental impact assessments or various KPIs being defined, which you measure or try to reduce because it has an impact on the environment. And on the social side, the responsibilities for dealing with the safety of your staff, or PPE, these kinds of methods or passing of labor codes, if they are relevant to the people you're dealing with.
So looking at the employee impacting situations, passing of those responsibilities, these are already elements of the ESG. So it will be an extension of what we are already doing, to be further developed and further defined. Like you said, it's a new topic, kind of a buzzword, but you know, with this becoming part of the responsibility of the supply chain, and as we are dealing with the IPPs and EPCs and financial institutions or owners of the assets, those are exactly the specific examples of companies or firms who would ask for these kinds of services, or require for companies to do something with this topic. So it will just be a further extension of the CEA portfolio or service.
Benoy Thanjan:
Definitely. It sounds like a natural fit to CEA’s services. And it sounds like, as you mentioned that it's really the supply chain portion and traceability portion related to ESG, not all of ESG, specifically that aspect of it, which makes a lot of sense.
Paul van Brenkelen:
Yeah. And the traceability part is indeed one of the aspects from the ESG requirements.
Traceability’s Role in Relation to Raw Materials Manufacturing
Benoy Thanjan:
Definitely. And you know, it would be helpful if you could just talk more about what is traceability, because maybe people are not necessarily familiar. And what you mean when you talk about traceability of the raw materials related to manufacturing.
Paul van Brenkelen:
It seems to be kind of a new thing, because there are certain developments, but traceability is already existing in other industries also - like I refer to my experience in the Testing, Inspection, and Certification industry. If you think about product labeling, it means there could be an economical benefit if you would take the advantage to start mix and matching various streams of products. So you would gain from that. If you think about product labeling and product certification over time, and in even the development I was involved in myself, very often on the backend of a product certification scheme, there were all kinds of requirements added on the traceability of the logo, and the various streams of product inside manufacturing organizations or process in organizations, where there were often requirements which asked for segregation in time or place. So imagine you've got an environmentally friendly stream of produce, or a stream of produce coming from a certain origin. You have to show the segregation in your organization. So that became an automatic evolvement of those kinds of schemes. And you've seen that heavily in the food related supplies.
Traceability in the PV Industry
Paul van Brenkelen:
But now again, thinking about investments and banking or banking institutions, even on a global level, they do lots of investments all around the world and therefore those requirements are coming into play also, where people or those organizations would like to see origin validation or the preservation of identity throughout the supply chain. So this is why this is also becoming important in the photovoltaic industry.
So traceability means you need to be able to follow physically, and through documents or an ID system, the stream of product from entering the arrivals of the materials - either them being raw materials or manufactured products, or wafers in this case for the photovoltaic supply chain - through the production system or manufacturing system or final material production, going into the final warehouse, and then being released for transport to a final destination. You need to be able to follow this in a documentary or a physical process. And for that, the services we have in place now, of course they will be based on supply chain protocols, existing ones, or to be developed ones. But the audit approach means that we also have to go onsite. So we want to see the site itself, the production lines or how the manufacturing process is being organized; talk to the people, see how they are being trained and implementing the processes or work instructions related to traceability; look at documents, look at the ERP, or the manufacturing execution system as they call it in the photovoltaic supply chain; and take samples. I think about executing a recall procedure. So we can really see, if you take a module or a wafer or a cell being barcoded or being identified, that you can trace it back and that you will be able to pull it off the market, which then would mean you've got a fully functional traceability system.
So that's a lot of words, but that's kind of what it entails. And it sounds maybe a bit complicated. It sounds maybe easier than it is in reality because of this asking for quite a bit of knowledge and experience of the various supply chain notes. You are trying to know what are the critical aspects or critical elements to look at, to make sure and ensure that at the snapshot we do, because it's time limited. We go outside, it's just one or two days that you check something and that needs them to represent the rest of the process taking place throughout the whole year or for the half year or quarterly visits we anticipate to come back on, to keep on validating that the system is in good operation. That is the definition of traceability.
Benoy Thanjan:
Yeah, that is a great explanation. I really appreciate you going into detail because I think you were able to explain it. It makes sense. There's a lot of complexity that is required. And I wonder how many solar panel manufacturers really have those traceability functions inhouse?
Recent Withhold Release Order (WRO) in US Affecting PV Industry
Paul van Brenkelen:
That's kind of a new development, in that sense. It kind of goes back to the current situation we are in where there's lots of questions coming in. And if you allow me, it's kind of an anticipation on some changes in the legal framework of the United States, where there was recently a WRO released, which is the Withhold Release Order. It’s based on a formal legislation where it is completely forbidden to import any products into the US which might be produced with alleged forced labor. And on top of that, WRO was released, which means that if you export your products into the US and CBP (Customs Border Patrol) would think that it is made with certain materials originating from a source of polysilicon-related materials being used in the production process, they could withhold the shipments to be released into the States.
So on top of that means there's lots of questions coming in from clients about, okay, can you help us with a traceability solution? So like I said, the legislation and then the related WRO means people now need to anticipate on what would the authorities potentially ask for as proof that we can show that our materials are being manifested with segregated source, or source not originating from a certain area where this WRO is related to.
SEIA and CEA’s Development of a Supply Chain Traceability Protocol
And then in between, in anticipation of supply chain and segregation and traceability, it was already the Solar Energy Industries Association (SEIA) in the US who anticipated on certain developments in the sector and came up with a supply chain traceability protocol in which CEA was heavily involved, by the way, in developing this protocol.
And then now based on the WRO being issued, we have developed this service further with the existing team and with myself coming on board recently, and then in anticipation of what we think, how we will be able to best help our clients with providing for proof that they are manufacturing in a way which is going to be accepted by CBP to release the products. Of course, that's going to be dependent on what we would find, and what's going to be the information written in the report. It means as much as 40 supply chain services we have in house and have developed, we have taken the SEIA protocol and edit a process certification type of an approach to help clients anticipate on potential questions coming. And then it goes back to what I've mentioned early before, we will do a desk review first and ask for many different documents in anticipation of an onsite audit. And then the combination of these two is kind of the definition of a supply chain integrity audit with a related report, which shows the status of the supply chain traceability system in place for the clients we are dealing with. And of course it's a bit different, because it will now mean that more than just going at one site and look at one note, we need to go into earlier or later notes of the client we are dealing with. So the real supply chain transparency and sharing of information between the different parties, up to the level that we are able to see the supply chain mapping and the function of the system, is kind of critical to be able to write such a report.
Importance of Traceability for Solar Firms in Reaching ESG Goals
Benoy Thanjan:
I know you talked a little bit about this before, when I asked you to define traceability, but why is traceability important for solar firms or those trying to reach their ESG goals?
Paul van Brenkelen:
The most critical part now is based on what I've just mentioned, with the reason for companies now to have traceability in place to show the provenance of where materials were originating from, because that's specifically where CBP is asking for proof for companies to show their ability to do so. So again, it goes back to this chain of custody process to be in place to really have the ability. And again, it's going to be based on the audits we have to perform and work with our clients proactively to see what the status of the system is because you could have like different levels of system integrity as we would like to call it. It could be either, you've got like full identity preservation, so you use materials which come from a certain area, it goes through the production process and you can follow it all the way to the end, into the final materials.
So then, that whole system is completely in place and any documents will prove that it's exactly working like this. Another level will be like segregation. So you've got materials coming in from different areas, but inside your organization, you can really show, the provenance and the segregation of the different flows of those two streams throughout your manufacturing process, if that would be applicable. And a third level could be, you have a mess balance, which means whatever goes in comes out, minus waste or breakage, or process impacts on the materials.
We do not know yet what would be a level of acceptance for your materials to then be allowed to be imported into the US. That's something we have to further work on and see what the requirements will be on what kind of level of system needs to be in place to show an acceptable level of supply chain traceability for Customs and Border Patrol.
Outlook on the Future of ESG and Traceability’s Role in the Solar Industry
Benoy Thanjan:
What is the future? I mean, it seems we're in the very early stages. What's the future of ESG and traceability?
Paul van Brenkelen:
Many questions are rising, and many articles are written about ESG, and even scholars are writing many articles about it, even on an academic level. So it's kind of a new development in that sense, although it's already there for quite a few years. But you know, it’s happening on the board levels, but now it's drilling down to companies and implementing the execution side of organizations. So it's not only developed because of this WRO – it should not just be a negative drive. It is happening because this legal situation is created. What people would like to anticipate on, which is answering your question, is it has to be a positive approach because ESG is out there, there are standards there. There are corporate governance codes, annexes are being included in them and it gets passed on and it's especially driven by the financial and banking related to financing environments. So it means they will start pushing it down into the organizations they are working with. And many of them are also our clients. So for us, for CEA it would really mean that it is there to not go away, it will be an opportunity. So it’s better to work on this, like proactively anticipate on future developments, then relate it to the photovoltaic industry. They already have protocol dev, it started in the US. And then on top of that, we developed that service portfolio, which it is for traceability, but we would like to try to call it already one of our ESG services, because supply chain traceability, interacting with your supply chain, bypassing down your values and your aspects you would like to look into as a firm or as a company, you will pass it down into the supply chain, and you need to proactively work on that yourself with your supply chain.
So these will be services we will be developing further or are developing now because of the WRO coming out. But again, we would like to call this traceability service and ESG service for the future, because traceability is not going to disappear. You know, I already mentioned, we do all kinds auditing; we will develop this further by including this in it, the traceability aspect, although many of the audits we do are kind of system management oriented, and this is more process oriented. So it still requires more specific knowledge of processes and specificities to look into, but you can add that into an audit team. That's something we will develop further by going forward. Again, it will become an extra requirement. It's just in line with evolving ESG demands and developments over time. There will even be a global ESG standard. I think about ISO 9000, everyone knows about it. Maybe on the ESG side, something similar will happen, or at least on a country level, there will be a standard there. So that then becomes common denominator and we can see what kind of aspects we then have to look into and assess at the client level and the supply chain we are dealing with. So that's how we would see it evolve again. Industry protocols are being developed in other industries, only supply chain side ESG is there not to disappear anymore.
Benoy Thanjan:
That’s a great point, too. And it's interesting because I know you talked about a global standard for ESG. I could see that happening in the near future. There's just so much evolution happening so quickly when it comes to ESG and traceability. So it'll be interesting to see.
Paul van Brenkelen:
Completely correct. Even if you look, you know I'm based in China, I've got a personal interest there myself in the topic, there’s like nine standards being applied. If you look at the financial institutions, there are many indices there; you have these ESG index funds where there are many different parameters, and the parameters are kind of these ESG elements they would like to see measured. And there are different depths or different focus based on those funds. So there is a difference, but it goes back to, you know, you are a firm, on a photovoltaic-related note. What do I need to do? This is probably something clients should anticipate on what would be coming. And then if you do a proper job, of course we will do, then it will be in line with hopefully those future developments and hopefully a more standardized approach to ESG.
Benoy Thanjan:
That's so interesting if you think about it, because just like the work with the traceability protocols that you did with SEIA, and then now what you're doing with ESG, you’re basically creating a standard or procedure before things have got finalized to be proactive for clients instead of reactive, and then creating basically your own standard that you hope to become the standard in the future.
Paul van Brenkelen:
That might be too much of a final will; at least that should be an end anticipating of what could be coming as a sector or an industrial evolvement, but it's not so much different as what I've done in some of the other industries exactly similar. And it's kind of in the CEA DNA of the staff we are having anyway, because people are so in touch with the clients and because of the different services we have, we have got so much market knowledge and regulatory knowledge and networks where we are most probably able to anticipate or define certain future developments. And therefore we can deal and discuss with our clients like, okay, you are at this stage, maybe it is good if you work together in trying to prepare you for what we think is going to be part of the future. And I've done that in agricultural industries, and as a matter of fact, some of them have become global standards as well as the code of conduct, even on the social side and the agricultural build, as well as the chain of custody schemes. So yeah, I think with the great group of CEA people we have, if we can indeed keep on dealing with the clients in such a manner, yes, I think we are able to come up with services which anticipate on future developments and add great value to clients and keep them prepared for their future also.
CEA Resources for Further Information (Website and LinkedIn)
Benoy Thanjan:
That is key, adding value to your clients and being proactive. And it just related to all the services that you're already offering. This has been an amazing interview, Paul, you've provided a lot of great insights about ESG and traceability and what CEA is doing to lead that and innovate. It would be great if you could tell us how can our audience learn more about CEA and you specifically.
Paul van Brenkelen:
Like I said, I recently joined, but there are many things happening in CEA on the social media site and trying to share information with clients or the photovoltaic industry and audience. So the recommendation will be, one, to check our website, www.cea3.com. We have quite a few podcasts and different webinars, interesting topics, actual ones who are providing great in depth, industrial experience sharing through those webinars. So that's a great recommendation, check the website. The LinkedIn page where many posts are done with people across the world from the CEA community sharing topics and information. So LinkedIn is also a very good platform to follow what CEA is doing. If you would look at LinkedIn and you would look at the website, you would also see that on the 29th of July, there is again a webinar being organized, which of course is another way to keep in touch with CEA and the folks we have who are sharing their information and knowledge with the photovoltaic industry. And I will be part of that also, if you would like to know more about me and more about traceability and the CEA services.
Benoy Thanjan:
Definitely. That's great, we'll have these links in the notes of the podcast. I appreciate your time, Paul. This was really helpful, and thank you again.
Paul van Brenkelen:
Many thanks for having me, a great honor to be on the Solar Maverick Podcast and be able to share the great work CEA is doing and what we are developing services for, traceability and the future development ESG, and servicing and helping our clients, so many thanks for providing this platform and the opportunity to speak with you today.
Benoy Thanjan:
Anytime. You're welcome. Thank you you for providing these valuable insights.
