Fair Aisles

Tesco supports sustainability with an innovative supply chain finance programme that keeps suppliers and customers happy

UK retail giant Tesco is directly supporting hundreds of its suppliers in their response to climate change by giving them access to lower-cost funding. In recognition of its work to build a sustainable trading environment, TMI is delighted to present Tesco with the 2021 Treasury4Good Award for Best Sustainable SCF Solution.

“Preserving the environment for future generations is of close personal value to me, so being part of a project that helps to improve the environmental impact throughout the value chain for a company the size of Tesco, is both exciting and rewarding in equal measure,” says Julian Redhead, European Treasury Manager, Tesco. With the level of personal commitment shown by its leaders, it’s no wonder Tesco and its suppliers are at the forefront of sustainable retailing. 

In September 2021, Tesco became the first UK retailer to deliver a sustainability-linked supply chain finance (SCF) solution. This initiative involved enhancing its existing SCF programme with Santander, to incorporate a sustainability-linked element focusing primarily on the environmental pillar of ESG and targeting an ambitious emissions reduction strategy.

Tesco has committed to be net zero across its total value chain, otherwise known as scope 3 emissions. Scope 3 Greenhouse Gas (GHG) protocol includes indirect emissions that occur from production through operations and to consumption and disposal. To meet its target, Tesco’s programme is supporting more than 200 suppliers in their quest to reduce emissions through access to lower funding costs in recognition of their work.

Enrolment in the programme is optional and is initially open to all UK and Republic of Ireland store suppliers, regardless of size, with expansion to buying entities across Europe and Asia in the pipeline. It was designed and implemented in a ‘work-from-home’ environment, over 18 months, launching on 1 September 2021.

Driven by science-based emissions reduction targets for participants, full transparency of the ratings process is provided through a published scoring methodology. Its supporting KPIs are designed to constantly evolve, creating a culture of continuous improvement among suppliers, and ensuring a meaningful and sustainable response is maintained.

The programme leverages Tesco’s existing supplier network technology, provided by sustainability-focused consultancy  Anthesis, which verifies and assesses each supplier’s annual GHG emissions data. As part of its 40-strong programme team, Tesco also partners with WWF to support its suppliers in setting their sustainability targets, and KPMG is on board to carry out assurance over the programme’s whole life cycle.

Programme in action

Ambition

Tesco is committed to reaching a net-zero climate target globally by 2035. It’s aiming for net-zero carbon emissions across its entire operations, together with those generated by the products it sells and its supply chains, by 2050.

Scope 3 emissions are complicated to measure and manage for most retailers – emissions from Tesco’s products and supply chain make up more than 90% of its global emissions footprint. However, by supporting improvements in supplier behaviours, and with regular revisions in line with market best practice planned, this sustainably-linked SCF programme helps influence and reduce this footprint.

The programme is an innovative, ambitious solution that can create real change, by encouraging improved behaviours in the supply chain, but also setting an example for other corporates to follow suit. Tesco has shown leadership and innovation, and by continuing to develop and refine the programme and its underlying KPIs, it will ensure it is consistently raising the bar in the fight against climate change.

This solution is the deserved winner of the 2021 Treasury4Good Awards Best Sustainable SCF Solution because it puts “planet before profits”. As Alex Ashby, Head of Treasury, Tesco, says: “Net zero and the climate emergency needs everyone to play their part – there aren’t always singular right answers or proven paths, but with the great team at Tesco we have managed to innovate and deliver something new that I strongly believe is a benchmark others will follow.”