Tesco is set to become the first retailer in the UK to offer its supply base sustainability-linked supply chain finance, in a move it hopes will encourage more suppliers to sign up to emissions reduction targets.
The voluntary programme is due to launch in September and will see annual greenhouse gas emissions data provided by suppliers independently verified and assessed by sustainability experts Anthesis. Finance giant KPMG has been employed to carry out assurance of the programme.
Tesco suppliers will then be offered “preferential” financing rates via Santander’s supply chain finance platform, with the aim of incentivising suppliers to make positive changes to their business. The rates will be based on each suppliers’ carbon data disclosure, emissions reduction targets and progress against sustainability goals.
Tesco stated that it will regularly update the scope of the sustainability data requirements in line with market best practice and its own sustainability commitments. The retailer expects the programme to be of particular interest to small and medium-sized businesses, with it promising to provide online tools and support to help these suppliers enrol in the scheme.
In 2017, Tesco became the first company globally to set science-based climate targets for its own operations on the 1.5-degree trajectory of the Paris Climate Agreement. And last year, the retailer committed to reaching its net-zero climate target in the UK by 2035, fifteen years earlier than originally planned.
Last year, 70 of Tesco’s biggest suppliers reported a 12% reduction in manufacturing emissions, exceeding its target of a 7% reduction.
Ashwin Prasad, Tesco’s Chief Product Officer, said: “In this critical year for climate action, we’re delighted to be able to offer thousands of suppliers access to market-leading supply chain finance linked to sustainability.
“This programme not only provides suppliers with a real incentive to set science-based emissions reduction targets, it will help embed sustainability goals throughout our supply chain and support the UK in realising its climate change targets.”
The Tofoo Company is one of Tesco’s suppliers planning to take advantage of the scheme. Its Director Dave Knibbs said: “As a business, we recognise the importance of doing what we can to protect our planet and the Tesco supply chain sustainability programme is strongly aligned with our company values and our aim to become BCorp certified in the next year.
“The supply chain finance programme offers a great incentive for us and similar suppliers to make a noticeable difference when it comes to sustainability.”
Tesco is working in partnership with WWF to halve the environmental impact of food production, including supporting its suppliers in setting sustainability targets.
Sarah Wakefield, WWF’s Head of Food Transformation said: “We’re working with Tesco to address one of the biggest environmental challenges facing our planet: how we produce and consume food.
“We welcome this latest leadership by Tesco, to be a part of the solution by incentivising their suppliers to report on their emissions and take action to align with 1.5°C climate targets. This takes us closer to achieving our shared goal of halving the environmental impact of the average shopping basket.”
NAM Implications:
- More details of how the cost of finance compares.
- i.e. sustainability-linked vs non-sustainability-linked…
- …would help in accelerating acceptance.
- In post-Lockdown, every little will help…
