Sustainability-linked supply chain finance on offer from retailer Tesco

Supermarket firm Tesco is 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.

“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,” said Ashwin Prasad, Tesco’s Chief Product Officer. “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.”