Asda Ties Financing Rates for Suppliers to Decarbonization, ESG Reporting and Performance
UK-based supermarket retailer Asda announced the launch of a new sustainable supply chain finance scheme in partnership with HSBC UK, adding a sustainability-linked enhancement to its Supply Chain Finance program to encourage sustainable practices through financial incentives.
The new sustainability-linked supply chain finance program follows a commitment by Asda to set science-based carbon emissions reduction targets across its value chain. Scope 3 emissions accounts for 98% of the company’s carbon footprint, with the vast majority of these originating in Asda’s supply chain.
Michael Gleeson, Chief Financial Officer at Asda, said:
“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.
“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.”
Under the updated program, Asda will offer more than 250 suppliers three tiers of enhanced rates of financing, based on disclosure of ESG data, target setting, and taking action on shared sustainability goals. Suppliers performing strongly against their ESG KPIs and sharing their sustainability data rewarded with the most preferential terms, with performance scored by sustainability data platform EcoVadis. In addition to a primary focus on decarbonization, the scoring will also consider other ESG elements such as social initiatives.
The sustainability-linked finance program will launch in 2025, and will be voluntary, with suppliers choosing not to participate remaining on current payment terms.
Vivek Ramachandran, Global Head of GTS at HSBC, said:
“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.”