BankingCorporate to Bank RelationshipsPredicting the rise of sustainable supply chain finance

Predicting the rise of sustainable supply chain finance

Earlier this month it was announced that HSBC and Walmart have joined forces on a finance programme that pegs a supplier’s financing rate to its ecological footprint. The Global Treasurer spoke to HSBC's Global Product Head of Supply Chain Finance, Daria Johnen, to find out more about the future of sustainable supply chains.

Why has HSBC joined forces with Walmart to launch the sustainable supply chain finance programme?

“HSBC is actively building new partnerships and frameworks to help deliver a more sustainable future for all and in addition to the recent announcements, in 2017 we opened a $100m fund for sustainable financing initiatives. We take sustainability seriously. In addition, whenever our clients also have sustainability agendas, we are really very happy to support them and, where it’s applicable, their supply chains.

“Research by McKinsey established that a substantial share of the potential impact around sustainability is not generated by corporates themselves, but within their supply chains. So, if we have means to address sustainability in the supply chain, of course we will work with clients to assist them and support their agenda.”

Do you expect other large organisations to follow suit and roll out their own sustainable supply chain finance solutions?

“We hope so and there are definitely signs that momentum is building. Another client of ours – Puma – also offers a sustainable supply chain initiative through us, and we are working with a number of other clients at the moment. We hope to make some more announcements soon.”

Is it possible to put a value on the impact of a programme like this?

“I think there are many ways to measure the value. Walmart decided at a certain point that they would like to concentrate on reducing greenhouse gas emissions throughout its supply chain through its Project Gigaton programme. By providing positive incentives through sustainable supply chain finance, organisations can drive their goals and provide better rates for finance. It’s a positive for all involved.”

How does a programme like this benefit corporate treasury?

“When a company is already following some kind of sustainability agenda, or thinking of putting one in place, it’s of huge benefit. Supply chain finance is an important element of the treasury function. Any incentives can be highly beneficial. Sustainability can save money, enhance payments and credit and drive brand enhancements through reputation and so on, so sustainable supply chain finance is an essential tool in the treasury toolbox. It’s a great way of helping organisations reach their targets within their supply chain, across numerous areas.”

You mentioned the treasury toolbox there. What other tools can help treasurers and organisations when it comes to sustainable supply chains?

“There are a lot of emerging financial products that have a green or sustainable label attached to them, including the likes of green loans and green bonds. Arguably, you could say they come from the same toolbox. While I can’t comment on the success of those within HSBC given my area of focus, I can say that we’re seeing a lot of interest from corporates in sustainable supply chain products.”

HSBC has stated that it believes supply chains are one of the most important levers for banks and businesses to create a positive effect on the world. Do you see this accelerating over the coming months and years?

“I think this is a good question. There haven’t been many facilities launched to the market so far, which carry the sustainable supply chain label. Clearly, it’s still at an early stage, but we believe sustainability is a very important part of the corporate agenda. I genuinely think we will see more facilities being made available, but because it’s at such an early stage it’s hard to forecast exactly how it will develop and the timescales involved.”

Given the unpredictable political and social landscape that organisations around the globe are dealing with, does sustainable supply chain finance provide a welcome amount of good news?

“It’s hard to say, but it’s important that tools to support the agenda now exist. It’s also important that the corporate to bank relationship is strong enough so that where a company chooses to focus on sustainability, the bank can deliver the tools that can help. It’s about progress and working together to help our customers deliver their goals to the benefit of them and their supply chain.”

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