Financial technology companies are ramping up their focus on how they can offer ‘sustainable’ supply chain finance that helps maintain the health of the entire supply chain.
According to panellists at SCF Forum Europe, the use of SCF needs to shift towards ensuring supply chain finance supports everyone in the chain and is not just an exercise in increasing DPO for large buyers.
Simon Allen, global programme manager at PrimeRevenue told delegates in Amsterdam how the company worked with the Swedish retailer ICA last year on its SCF programme. The solution enabled local suppliers to ICA to invest in a new production line which in turn allowed ICA to increase its spend to the supplier, he explained. Supporting orders from a local supplier also limits the carbon footprint of the retailer, Allen said.
Thomas Dunn, chairman at Orbian, insisted a SCF model based on only supporting DPO extension for larger buyers was “no longer fit for purpose”.
He urged fintechs to ensure SCF solutions must be eligible for all suppliers – including the smallest player in the supply chain.
He added that “assurance of liquidity” is also essential, in that programmes must make liquidity available to suppliers when required and not on a funder’s “willingness to do something on that day”. He says such a strategy is not sustainable.
“The social norms of prioritising of sustainability goals will only grow,” he added, reflecting on the wider growing awareness of the impact of business on the environment and climate.
Andrew Burns, vice-president, Europe, at C2FO, a company that has provided SCF programmes to the Dutch supermarket Jumbo and Austrian chemicals producer Borealis, said: “The relationship between buyers and suppliers is symbiotic. What is core to maintaining that relationship is providing financing options that match not only the buyers’ but the suppliers KPIs at the right time.”
There was also a call to consider how to reach the next tier of suppliers in a so-called supplier eco-system. Joachim Hermansson, senior director of fintech and banking alliances, at Tradeshift, said the company was exploring the use of ‘smart contracts’ – a tradeable asset that can be used for the whole supply chain, including providing financing to second, third or fourth tier suppliers.