Asda & HSBC Boosts Scope 3 Emissions in Supply Chain
Asda has announced a new sustainability-linked enhancement to its Supply Chain Finance program, in collaboration with HSBC UK. The initiative, set to launch in January 2025, aims to promote sustainable practices within Asda's supply chain by offering financial incentives to suppliers who demonstrate and improve their environmental, social, and governance (ESG) performance. The move aligns with Asda's broader commitment to decarbonisation and sustainability.
Scope 3 Emissions: Targeting multiple categories
- Category 1 | Purchased Goods and Services: A supply chain finance program could incentivise suppliers to adopt more sustainable practices, potentially reducing emissions associated with the production of goods purchased by Asda.
- Category 2 | Capital Goods: The program might enable suppliers to invest in more energy-efficient equipment, affecting emissions in this category.
- Category 3 | Fuel- and Energy-Related Activities: If the finance program encourages suppliers to switch to renewable energy sources, it could impact this category.
- Category 4 | Upstream Transportation and Distribution: If the collaboration includes incentives for more efficient logistics or low-emission vehicles, it could impact this category.
The categories impacted will vary depending on each supplier's circumstances and the program implementation.
Tiered Incentives Based on ESG Performance
Launching in January 2025, the voluntary scheme will be available to over 250 Asda suppliers using the existing finance program. Suppliers will have access to three tiers of enhanced financing rates, determined by their ESG performance, data disclosure, and efforts to meet shared sustainability goals.
Michael Gleeson, Chief Financial Officer at Asda, highlighted the importance of engaging suppliers in the company's sustainability efforts:
"As we continue to progress towards our own decarbonisation and ESG targets, supporting and engaging with suppliers is a crucial step in this journey. Working with HSBC, we're encouraging greater transparency over sustainability data in our supply chain and can use competitive financing to incentivise many suppliers to become more sustainable."
Benefits of Sustainability-Linked Supply Chain Finance
Supply chain finance schemes like Asda's offer several advantages for reducing Scope 3 emissions:
- Incentivising Sustainable Practices: By providing favourable financing terms for suppliers meeting sustainability criteria, the program encourages adopting environmentally friendly practices that could indirectly reduce Scope 3 emissions.
- Enhanced Data Collection: The scheme promotes transparency and data sharing, allowing Asda to track and measure emissions better and enabling more effective reduction strategies.
- Supporting Investments in Sustainability: Suppliers can invest in technologies and processes that enhance efficiency and lower emissions with improved access to capital.
- Promoting Collaboration: The initiative fosters closer cooperation between Asda and its suppliers, driving joint efforts to reduce emissions across the supply chain.
The program's impact on emissions will depend on how each supplier implements and engages with these opportunities.
Long-term partnership with HSBC and additional support from Rabobank
Vivek Ramachandran, Global Head of GTS at HSBC, expressed the bank's enthusiasm for the partnership:
"We're pleased to continue our long-term partnership with Asda to support its sustainability ambitions. By incentivising suppliers to share ESG data and improve their sustainability performance, the financing solution encourages transparency and helps to drive better ESG practices in Asda's global supply chain."
The initiative will not cause operational disruption for current suppliers in the program. Suppliers who opt not to participate will remain on existing payment terms and rates, receiving payment within 14 working days as part of Asda's supply chain finance program. Multiple funding partners, including Rabobank, further support the scheme.
A Commitment to a More Sustainable Supply Chain
The enhancement to Asda's Supply Chain Finance program represents a significant step toward fostering sustainable practices throughout the retailer's supply chain. By leveraging financial incentives and strategic partnerships, Asda aims to create a transparent, collaborative, and sustainable network that supports its long-term environmental goals and ESG targets.
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