Artificial intelligence is rewiring global supply chains.
For nearly a decade, Working Capital Fund has invested in startups catalyzing responsible and sustainable supply chains. Amidst the current upheaval in global trade, Generative AI holds remarkable promise to bolster efficiency while uprooting human and environmental externalities.
This is evident across two key segments: startups building foundation models and those developing applications on top of them.
Foundation models (e.g., GPT-5, Claude 4) guzzle an internet’s worth of data, distill patterns onto artificial neurons, then communicate those patterns back to the world. Models specialize according to the type of data they ingest, ranging from text and video to atomic interactions and evolutionary biology.
Startups at the “application layer” build products on top of these models. In such cases, the foundation model functions like a utility—it’s intelligence akin to electricity. Every startup cannot be expected to build and operate its own power grid. To the contrary, most will plug into a nearby outlet, wire in the intelligence, and pay by the meter.
Ethical sourcing
Across both segments, startups have the potential to embed sustainability, labor rights, and resilience into global trade. One of our portfolio companies offers a vivid example: Radical AI is poised to transform the raw materials on which modern industry depends.
Founded in 2024, Radical AI is building a foundation model for materials discovery. Whereas ChatGPT predicts the next word in a sentence, Radical AI’s model predicts novel materials for industrial use. The implications of this technology are vast. Radical AI has the potential to discover alternatives to critical minerals, design high-entropy alloys for aerospace, and engineer scalable magnets for nuclear fusion.
For manufacturers and buyers, this means greater agency over the inputs their businesses depend on, reducing reliance on exploitative supply chains.
Take, for example, the clean energy transition. Critical minerals power the green economy, yet are tarnished with labor and environmental abuse. Reform has proven elusive, with global supply dominated by single-country suppliers like China and the Democratic Republic of Congo.
By discovering new battery chemistries and rare-earth-free magnets, Radical AI can ensure the energy transition is built on high-performance materials that are ethically and sustainably sourced.
Automating audits
While foundation models reimagine what goes into supply chains, application-layer startups have redefined how goods are sourced and suppliers are audited. Two of our portfolio companies are showing how AI can help companies implement their sustainability targets and meet labor and environmental standards.
Lilo, founded by two Stanford GSB graduates, uses third-party models to automate procurement for hotels across the United States. Over half of hotels in the U.S. are franchised. With no designated procurement teams, franchise owners scramble to stock each room, balancing price, delivery times, and brand-level sustainability targets. AI agents leveraging existing foundation models (LLMs) can procure from suppliers that optimize for all of the above.
Elm AI, in turn, applies generative AI to post-procurement processes—analyzing unstructured data from supplier audits. Large corporations such as Coca-Cola, Nestlé, Walmart, Apple, and Amazon conduct thousands of audits annually to assess supplier compliance with labor and environmental standards. Each audit can be over one hundred pages in length.
Elm AI automates audit review and generates corrective action plans for suppliers found to be in violation of these standards. Early customers of Elm report efficiency gains of more than one order of magnitude, allowing their teams to focus on addressing labor violations instead of parsing through PDFs.
AI is beginning to reshape how companies source materials, audit suppliers and design products — with the potential to embed labor rights and sustainability into global supply chains from the ground up. The examples above are early signals of what’s possible. If you’re building in this space, we want to hear from you.
Evan Okun is a principal at Working Capital Fund.
Guest posts on ImpactAlpha represent the opinions of their authors, and do not necessarily reflect the views of ImpactAlpha.
