There are many different ways to reward suppliers for adhering to sustainability measures. A new reward, better financing rates, was created last month by HBSC and Walmart.
The companies rolled out a sustainable supply chain finance program that pegs a supplier’s financing rate to its sustainability performance.
This global program allows Walmart’s suppliers who demonstrate progress in Walmart’s Project Gigaton or Sustainability Index Program to apply for improved financing from HSBC based on their sustainability ratings.
Project Gigaton is a Walmart initiative to avoid one billion metric tons (a gigaton) of greenhouse gases from the global value chain by 2030 through supplier commitments. Walmart’s Sustainability Index Program gathers and analyses information across a product’s life cycle, and was developed by The Sustainability Consortium (TSC), a global organization dedicated to improving the sustainability of consumer products, to help Walmart benchmark suppliers and encourage continuous improvement.
“In many industries, it is a company’s supply chain – rather than the company itself – that is responsible for most of the environmental impact and therefore offers the greatest potential for sustainability improvements,” said Natalie Blyth, Global Head of Trade and Receivables Finance, HSBC, in a statement.
According to McKinsey, a typical consumer company’s supply chain creates far more social and environmental costs than its own operations, accounting for more than 80% of greenhouse gas emissions and more than 90% of the impact on air, land, water, biodiversity, and geological resources.1
Being sustainable is seen as very important by businesses around the world. According to the recent HSBC Navigator survey, 81% of global companies say ethical and environmental sustainability is important to them and 83% aspire to be a genuinely ethical or environmentally sustainable company. Also, improving sustainability outcomes is among the top three objectives for making supply chain changes.
Nearly one-third of businesses surveyed in the recent HSBC Navigator survey plan to make sustainability-related changes to their supply chains within the next three years.
“We want to encourage companies throughout the supply chain to focus on sustainability, as we have seen first-hand how this sparks innovation and generates value. Investing in sustainability can not only lead to higher productivity and cost savings for suppliers but can also drive their business growth as they make a positive contribution to the world,” says Matthew Allen, VP Finance & Assistant Treasurer, Walmart.