UK supermarket chain Asda has launched a sustainable supply chain finance scheme.
In partnership with HSBC UK, the grocer has unveiled a sustainability-linked feature to its existing supply chain finance programme which will incentivise its suppliers to share their ESG data and establish ESG commitments and act towards those goals. In return, suppliers will receive enhanced rates.
Asda’s supply chain finance is a voluntary programme which expedites standard payment terms for suppliers, but the sustainable supply chain element – to be launched in January 2025 – will offer more than 250 Asda suppliers who currently use the existing scheme access to three tiers of enhanced rates of financing.
Access to each tier will be based on suppliers disclosing their ESG performance data, setting targets and moving ahead to meet those ambitions. It’s a way of encouraging a more sustainable supply chain which may help the retailer reduce its Scope 3 emissions.
Performance will be scored by the sustainability data platform EcoVadis, with those suppliers performing strongly against their ESG KPIs and sharing their sustainability data ending up with the most preferential terms. Asda said the scoring will have a particular focus on decarbonisation, but it will also extend to other elements of ESG (such as social initiatives).
Asda already asks its largest suppliers – those accountable for around 80% of its product carbon emissions – to share sustainability data through the EcoVadis assessment platform. But the news this week should incentivise all suppliers to act more responsibly.
Michael Gleeson, chief financial officer at Asda, commented: “As we continue to drive progress towards our own decarbonisation and ESG targets, supporting and engaging with suppliers forms a crucial step in this journey.
“Working with HSBC, we’re not only encouraging greater transparency over sustainability data in our supply chain, but we are able to use competitive financing to incentivise a significant number of suppliers to become more sustainable.”
Vivek Ramachandran, global head of global transaction services at HSBC, said: “By incentivising suppliers to share ESG data and improve their sustainability performance, this financing solution encourages transparency and helps to drive better ESG practices in Asda’s global supply chain.”
Suppliers who select not to engage will remain on current payment terms and default rates, and will continue to receive payment within 14 working days as part of the supply chain finance programme.
Asda said the enhancement to its offering is made possible with the support of multiple funding partners, including Rabobank.
Read more about Asda on Green Retail World
[image credit: Green Retail World]
