Thought for Food

REWE Supports Supplier Sustainability

With deep roots in the co-operative movement, German supermarket giant REWE has never shied away from its social duties. Having undertaken a sustainability-linked early payment programme, the company shares with TMI the mechanism behind this wide-reaching initiative.

REWE’s 12 million customers today span the broad intersection of retail, wholesale and convenience stores, tourism, and DIY. It may be one of Europe’s largest trade and tourism groups, but its core business lies within the food retail sector in Germany, holding position as the second-largest retailer in the country.

It’s a business line that can trace its roots back to 1927, when a coalition of 17 purchasing co-operatives formed the Audit union for Westkauf-Cooperatives or Revisionsverband der Westkaufgenossenschaften – abbreviated as REWE – to orchestrate the joint procurement of food products. This initiative gave rise to a co-operative conglomerate that has evolved into the broad-based international entity it is today, with a footprint across 21 countries.

Within the food retail sector, REWE boasts a significant presence through its REWE and Nahkauf supermarkets, the Penny discount chain, the REWE To Go convenience stores, and a growing online presence through REWE.de. As a significant player in this space, it remains committed to its ecological and social responsibilities to future generations. But its determination to maintain standards extends to its vast and diverse supplier base.

“Our supply chain is meticulously tailored to cater to the unique requirements of each REWE segment. Consequently, it may differ across segments and regions,” explains Matthias Cork, Director of Working Capital, REWE Group. “For that, we must be perpetually attuned to the needs of our consumers.”

In the ongoing commitment to supporting REWE’s purchasing teams in their supplier relationships, the group has recently taken bold steps to elevate the level of service provided by its central payment entity – and parent company that ensures the financing of the entire group –  REWE Zentralfinanz.

Strength through agility

“Predominantly, our focus lies in fortifying supply chain security and ensuring transparency within a landscape where supply chains are continually subject to pressure and transformation,” notes Cork. “Now, more than ever, delivering solutions that support our partners is of paramount importance. And given the recent rise in inflation, and the resulting raising of interest rates, the need to adeptly manage, navigate, and influence working capital has risen high up the agenda of all supply chain stakeholders.”

To help achieve its working capital goals, REWE Group leverages Taulia as its primary multi-funder early payment platform. The multifunder model – essentially a network of FIs – is designed to support customer resilience through diversified sources, with a wider funding pool encompassing different currencies, geographies, client sizes, and profiles.

REWE’s current focus with Taulia is on its German entities, with payments and regulatory oversight managed accordingly through REWE Zentralfinanz. “This sophisticated platform is pivotal in offering cash flow transparency, while enabling the acceleration of payments, crucial for enhancing the financial agility and robustness of our supply chain,” explains Cork. “These multifunder collaborations also help in distributing financial responsibilities and risks more evenly across the network.”

All aboard

New Taulia customers such as REWE are provided with a streamlined onboarding and implementation process, states Hashemi. This involves a dedicated project team comprising several key Taulia personnel. A project manager ensures adherence to timelines. A technical consultant takes responsibility for the technical implementation and ERP integration. Finally, a customer success manager (CSM) is charged with developing the business programme strategy and, post launch, executes this strategy while managing the ongoing customer relationship.

“The CSM collaborates with clients to ensure all supplier-facing personnel are fully informed about the programme and its supplier benefits,” he explains. Ongoing support, including procurement training, participation in supplier events, and education regarding relevant concepts and advantages, is part of that process.

Efficient supplier onboarding is similarly a key element of programme implementation and success. “REWE primarily communicates with its suppliers via email, with a more personalised approach for strategic partners,” notes Hashemi. “To facilitate a more seamless transition, and to promote greater transparency with suppliers, it employs a range of communication tools, including targeted email campaigns, informative web pages, and interactive enablement sessions.”

These resources are designed to guide participating suppliers through the implementation of all new programme features. They are effective, states Cork. “The fastest onboarding has taken as little as one day – attributed in part to Taulia’s three-step/90-second onboarding process – while the average time ranges between three and five business days until the supplier takes its first early payment. This all makes it fully acceptable and efficient.”

Higher ratings, lower costs

REWE’s long-standing commitment to ESG has brought about notable achievements, such as becoming the first German retailer to issue a sustainability-linked bond, and the development of a comprehensive sustainability-linked bond framework. While the adoption of Taulia for REWE’s German entities underscores its commitment to financial transparency, operational efficiency, and strategic support for its suppliers, Cork reports that REWE’s ambitious ESG agenda also now taps into the platform’s capabilities.

“At the beginning of 2024, we decided to restructure our programme’s pricing proposition, with the aim of incorporating transparency and sustainability equally,” he reveals. Before bringing the supplier strategy to life, internal alignment with REWE’s ESG department was sought.

Having established that the programme’s objectives were indeed consistent with the company’s ESG initiatives, Taulia was able to begin developing an integrated, automated solution. The broad aim was to motivate REWE’s suppliers to improve their sustainability ratings through the offer of early payments at competitive rates.

The solution, incorporating Taulia’s proprietary dynamic margin grid, is integrated into REWE’s SAP ERP environment. This imports ESG ratings data, supplied via a connection to global sustainability intelligence platform, EcoVadis. This approach directly links financial incentives to sustainability performance.

“Suppliers with higher ratings receive better discounts than those with lower ratings,” explains Cork. “The ratings are distributed across seven levels. Additionally, we have an upgrading mechanism that enables suppliers participating in the STBi programme [Science-Based Targets initiative, a corporate climate action organisation] to be upgraded by one level.”

Margin levels undergo annual reviews to ensure alignment with market developments and evolving sustainability targets, adds Hashemi. “This enables the framework to adapt and progressively increase its ambition over time.”

Stronger partnerships

Through Taulia, REWE has now integrated sustainability-linked financial strategies into its supply chain processes. This approach not only incentivises suppliers to enhance their environmental performance, but also engages various internal stakeholders with the process, including procurement, finance, group treasury, shared services, and IT departments.

“The system works seamlessly, integrated into the standard supply chain processes,” confirms Cork. “It is fully automated and designed to achieve maximum convenience, aligning effortlessly with existing procedures. This integration ensures smooth operations and enhances overall efficiency in managing the supply chain.” He adds that supplier interest “remains strong across all segments, underscoring the platform’s broad appeal and effectiveness.”

Currently, REWE’s primary focus lies in the development and expansion of its existing Taulia solution, says Cork. “Our objective is to extend the Taulia early-payment system to all our centrally regulated suppliers in Germany, ensuring they benefit from streamlined financial operations.”

However, he continues: “We’re also committed to continuously seeking out innovative supply chain solutions across the entire REWE Group. This includes exploring all potential opportunities, and experimenting with specific tier-to-tier solutions. By doing so, we aim to enhance efficiency and foster stronger partnerships within our supply chain network.”