Tesco offers suppliers sustainability-linked supply chain finance

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Tesco is set to become the first UK retailer to offer its supply base sustainability-linked supply chain finance, in a move the retailer hopes will encourage more suppliers to sign up to science-based emissions reduction targets.

The voluntary programme, which has been in development for 18 months and is due to launch in September, will see annual greenhouse gas emissions data provided by suppliers independently verified and assessed by sustainability experts, Anthesis. KPMG are engaged to carry out assurance of the programme.

Tesco suppliers will be offered preferential financing rates via Santander’s market leading supply chain finance platform which incentivises suppliers to make positive changes to their business while tracking performance and creating a culture of continuous improvement. The rates will be based on each suppliers’ carbon data disclosure, emissions reduction targets and progress against sustainability goals.

Tesco 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. Tesco will 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 more ambitious 1.5-degree trajectory of the Paris Climate Agreement. And last year, the retailer committed to reach its net zero climate target in the UK by 2035, fifteen years earlier than originally planned.

In the same year, the retailer also set science-based targets for its supply chain, set on a 2-degree trajectory. Last year its 70 biggest suppliers reported a 12% reduction in manufacturing emissions, exceeding its science-based 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.”

Darren Jones, head of Santander Corporate and Investment Bank UK said: “Action on climate change is crucial and from individuals to corporates, we all have a part to play. Supply Chain Finance can be an effective tool for influencing positive change by linking sustainability achievements with competitive financing. Santander recently announced its ambition to achieve net zero carbon emissions across the group by 2050, and we are committed to supporting our clients in their transition to a low-carbon economy. We look forward to working in partnership with Tesco to provide this innovative solution.”

Dave Knibbs, director at The Tofoo Company, 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 Tesco’s suppliers in setting sustainability targets. 

Sarah Wakefield, WWF’s Head of Food Transformation, said: “Global temperatures are rising and the natural world, our life support system, is already feeling the heat.”

“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.”