Insight & Analysis

APIs could help drive circular economy

Published: May 2022

A white paper from Commerzbank finds API technology and digital ecosystems are key to the circular economy and sustainable supply chains.

Circle road with busy traffic at night

Application Programming Interface technology (APIs), is key to companies’ ability to aggregate the complex data needed to meet sustainability targets, according to a new report from Commerzbank. In its whitepaper “How API based ecosystems can serve circular economy”, the bank explores the potential of API technology to encourage collaboration and facilitate sustainable supply chains through digital ecosystems, positioning businesses to adapt to a sustainability focused landscape where goods that would usually be discarded create the basis of new products.

The whitepaper looks at the role of APIs as facilitators of data exchange and how this technology can be deployed by financial institutions and their clients to enable more sustainable business models. It explains how, by aggregating complex data from various sources, APIs can provide the building blocks for solutions such as digital ecosystems. This method of data distribution is crucial, reveals Commerzbank, if corporates are to meet their sustainability targets, comply with regulators, and transition to a more circular economy.

“Currently, market players all hold valuable data, but the system landscape is fragmented. The timely sharing of relevant information would deliver cost and time savings while also opening new business opportunities. Such a solution is not created overnight – it is established by taking small, concrete steps,” said Alexander Pawellek, Principal Product Owner responsible for digital innovation and strategy in trade finance at Commerzbank.

Commerzbank has developed a prototype digital ecosystem, the Sustainable Supply Chain Platform, to provide a working example of how APIs can best be applied to solve sustainability reporting challenges within supply chains. The aim of the prototype is to bring together partners from trade and sustainability finance to identify potential synergies. The platform will allow ESG ratings providers to share data on the ratings of certain suppliers. Using the API-enabled platform, buyers would be able to instantly assess the sustainability of their own supply chains.

APIs will drive the exchange of information between multiple stakeholders, enabling cross company communication between their IT systems. They also promote sustainable business models as they are a standardised method of connectivity. “APIs enable communication between different software applications without deep knowledge of the participating system,” states the report. “It results in high flexibility and greater functionalities. APIs are one of the software-based enablers of collaboration.”

“We are convinced that the challenges of today cannot be solved alone. We all need to collaborate to develop circular business models embracing the idea of true sustainability,” said Christoph Berentzen, Head of API Banking at Commerzbank. “Banks have always been committed to answering clients’ evolving financing needs with the right lending products and we are now seeing demand for embedded finance services, supplementary services to development such as digital ecosystems.” Berentzen concluded that Commerzbank is currently working on and prioritising this technology in its API banking cluster, looking to offer more and more open banking solutions.

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