Treasury best practice: Bringing sustainability into supply chain finance
Walmart encourages partners to be more ESG aware
10 Aug 2020 | The Asset

While typical supply chain finance programmes ensure that suppliers can receive early payment options from buyers, few programmes go the extra mile to change the habits of their suppliers for the better.

This was the objective, Walmart and HSBC wanted to achieve in 2019, when they both set out to create a sustainable supply chain programme that focused on encouraging suppliers within Walmart’s supplier base, to focus on sustainability, such as reducing the amount of greenhouse gases being emitted.

Under this sustainable supply chain arrangement, a supplier would first request for financing to HSBC based on the credit strength of Walmart. Suppliers are then analyzed on their sustainability performance and given a supplier score by Walmart grounded on social and environmental standards.

Specifically, suppliers need to demonstrate progress in Walmart’s Project Gigaton or Sustainability Index Programme. Suppliers are then placed on separate tiers with each tier having a different rate of pricing. Suppliers which are seen as proactively meeting sustainability goals will be given cheaper financing from HSBC.

It’s considered a win-win for all parties involved as it provides additional liquidity to Walmart’s suppliers while at the same time ensuring that sustainable practices are being upheld.

“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, vice-president, finance, and assistant treasurer at Walmart.

Walmart wins the Best Supply Chain Solution, Regional within the ESG solutions section of The Asset Triple A Treasury, Trade, Sustainable Supply Chain and Risk Management Awards 2020. To see the full list of ESG solution winners please click here.

For more information about the awards please click here.