New initiative will see supermarket giant offer incentives to suppliers who undertake sustainability improvements
Asda has become the latest major company to introduce a sustainable supply chain finance scheme, announcing it has extended its partnership with HSBC UK to provide enhanced rates for suppliers who embrace sustainability practices.
The voluntary programme will offer over 250 suppliers a range of incentives to encourage them to share environmental, social, and governance (ESG) data, establish sustainability targets, and act towards meeting goals.
The scheme will offer suppliers who currently use Asda's existing supply chain financing scheme - which has been in place for over 10 years - access to three tiers of enhanced rates based on the sustainability commitments they make.
Performance will then be scored by the sustainability data platform EcoVadis, with those suppliers who perform strongly against their ESG key performance indicators (KPIs) and share their sustainability data rewarded with the most preferential terms.
Asda already asks its largest suppliers - those accountable for around 80 per cent of its product carbon emissions - to share sustainability data through the EcoVadis assessment platform.
The supermarket said the scoring would have a particular focus on decarbonisation, but would also cover other ESG-related areas, such as social initiatives.
"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," said Michael Gleeson, chief financial officer at Asda. "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 GTS at HSBC, said the bank was pleased to see its long-term partnership with Asda extended to support the company's sustainability ambitions.
"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," he said.
The new scheme forms part of a trend that has seen a growing number of corporates offer more attractive financing rates to suppliers who commit to improving the environmental performance.
The approach helps corporates curb emissions and environmental impacts across their supply chains, often unlocking financial savings in the process, while suppliers can secure access to competitive finance that allows them to invest in new clean technologies and sustainable practices that can reduce emissions and costs in the long term.
You can now sign up to attend the fifth annual Net Zero Festival, which will be hosted by BusinessGreen on October 22-23 at the Business Design Centre in London.
