Walmart has become the latest corporation to use supply chain finance to encourage sustainability in its supply chain.
The global retail giant is working with HSBC to offer preferential rates on its existing SCF programme to those companies who meet targets in Walmart’s Sustainability Index Programme (SIP).
SIP was developed by The Sustainability Consortium (TSC) to help Walmart benchmark suppliers on key sustainability metrics. It forms part of Project Gigaton, a Walmart initiative to remove one billion metric tons (a gigaton) of greenhouse gases from the global value chain by 2030 through supplier commitments.
This is the first time that Walmart has used its supply chain finance programme to persuade companies to improve their SIP ratings. “We want to encourage companies throughout the supply chain to focus on sustainability, as we have seen first-hand how this sparks innovation and generates value,” said Matthew Allen, VP finance and assistant treasurer at Walmart.
“Investing in sustainability can not only lead to higher productivity and cost savings for suppliers, but can also drive their business growth as they make a positive contribution to the world,” he added.
Walmart’s move is just the latest by global corporations keen to demonstrate their green credentials by linking supplier finance to sustainability targets. Puma announced a programme with BNP paribas in 2016, which later included HSBC and now covers 17 countries, while Nike and Levi’s have launched similar programmes.
Sanjay Tandon, Asia Pacific head of product and propositions, global trade and receivables finance at HSBC, said the trend towards connecting SCF and wider trade finance deals to sustainability targets was accelerating. “This is not just a one-off – we’re having these discussions with several other global corporations in the Asia Pacific region,” he said.
HSBC has recently prioritised sustainability as an objective for SCF programmes. In a 2018 interview with SCF Briefing, Stuart Nivison, the bank’s global head of client network banking, said, “One of the thing that has become very clear to me over the last couple of years – and has been echoed to me by NGOs and by other large corporates – is that sustainability is becoming more and more of a priority agenda item for the more forward-thinking companies.”
Management consultancy McKinsey has suggested that a typical consumer company’s supply chain creates far more social and environmental costs than its own operations, accounting for more than 80% of greenhouse-gas emissions and more than 90% of the impact on air, land, water, biodiversity, and geological resources.
Sustainable SCF is one of the key topics at the Supply Chain Finance Community’s SCF Forum Asia in Singapore on 23rd May. SCF Briefing readers can benefit from a 10% discount on the standard ticket price by using this link or entering the code SCFB10 at checkout. For more information, visit www.scfforumasia.com.