Supermarket giant to offer suppliers access to preferential financing rates if they commit to science based emissions targets and carbon reporting
Tesco is set to become the first UK retailer to offer sustainability-linked supply chain finance, in a bid to encourage more suppliers to sign up to science-based emissions reduction targets.
The voluntary programme, developed over 18 months and due to launch this September, will require suppliers signing up to the scheme to provide annual greenhouse gas emissions data, which will independently verified and assessed by sustainability consultancy Anthesis and assured by auditing giant KPMG.
Suppliers will then be offered preferential financing rates via Santander's supply chain finance platform which incentivises suppliers to make positive changes to their business and tracks performance. The rates will be based on each suppliers' carbon data disclosure, emissions reduction targets, and progress against sustainability goals. Tesco expects the programme to be of particular interest to small and medium-sized businesses.
"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."
Darren Jones, head of Santander Corporate and Investment Bank in the UK, said the partnership highlighted the crucial role supply chain finance could play in driving climate action amongst smaller businesses, which can often struggle access the capital required for new clean tech deployments. "Action on climate change is crucial and from individuals to corporates, we all have a part to play," he said. "Supply Chain Finance can be an effective tool for influencing positive change by linking sustainability achievements with competitive financing."
In 2017, Tesco became the first company to globally set science-based climate targets for its operations to put it on the more ambitious 1.5C decarbonisation trajectory recommended by the Paris Agreement. Last year, the retailer committed to reach its net zero climate target in the UK by 2035, 15 years earlier than originally planned. It also set science-based goals for its supply chain, based on a 2C trajectory, and in 2020 70 of its biggest suppliers reported a 12 per cent reduction in manufacturing emissions, exceeding the supermarket's seven per cent annual target.