The need for a collaborative approach
While international businesses may be keen to advance their sustainability agenda, SMEs, which can make up to 90% of a supply chain2, may not have the resources or the expertise to keep pace. Incorporating sustainable practices is costly, and many SMEs are still in recovery mode from the pandemic. To make progress on their sustainability journey they will need support.
Forward-thinking companies are addressing this issue through sustainable supply chain finance (SSCF) programmes. These offer more favourable financing terms to suppliers that demonstrate their progress in improving their environmental, health, safety and social standards.
The US retail giant Walmart has pledged to remove a gigaton (1 billion metric tons) from its supply chain by 2030.3 But like many retailers, a large proportion of Walmart’s Scope 3 carbon emissions were embedded in relationships with SMEs. To incentivize its suppliers to reduce their carbon footprint, in 2019 the retailer partnered with HSBC in a SSCF program.
Recently the apparel company PVH has also partnered with HSBC in a SSCF program, in what is the first tied to both environmental and social objectives, and based on suppliers’ sustainability ratings.4
As demonstrated by these and other sustainable supply chain finance programmes, finance is a powerful lever to improve the sustainability of businesses. Embedding sustainability in global supply chains is not only beneficial for the environment and society, but also for companies’ bottom lines.