Asda is launching a new sustainability-linked enhancement to its long-running Supply Chain Finance scheme in partnership with HSBC UK. The move will see the retailer use financial incentives to encourage firms within its supply chain to adopt better sustainability practices.
Launching in January next year, the voluntary scheme will offer over 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 taking action on shared sustainability goals.
Performance will be scored by the sustainability data platform EcoVadis, with those suppliers performing strongly against their ESG KPIs and sharing their sustainability data rewarded with the most preferential terms. Asda noted that scoring will have a particular focus on decarbonisation, but 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.
“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, added: “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.”
Asda noted that there will be no operational disruption to existing suppliers in the programme. Suppliers who choose not to engage will remain on current payment terms and default rates.
NAM Implications:
- The only issue is whether Asda might be better served by focusing on more pressing issues affecting performance?
- i.e. Sustainability has yet to move from the ‘cost’ phase to the profit improvement phase…
- Just commenting…
