UK retailer Asda has launched a new sustainability-linked supply chain finance scheme with Lloyds Bank, incentivising UK-based suppliers to improve their environmental, social, and ethical performance through preferential financing rates tied to sustainability KPIs, advancing its ESG ambitions and supporting decarbonisation efforts.
UK grocery retailer Asda has launched a sustainability-linked supply chain finance scheme in collaboration with Lloyds Bank, marking a strategic step to incentivise and support sustainability improvements among its domestic suppliers. The scheme offers preferential financing rates on a tiered basis, directly tied to suppliers’ environmental, social, and ethical performance, as measured against key performance indicators (KPIs) and transparency in sustainability data sharing.
This latest initiative builds on Asda’s growing commitment to environmental, social, and governance (ESG) principles, as well as its prior steps in integrating sustainability into financial processes. Earlier in 2024, Asda had introduced a similar sustainability-linked enhancement to its Supply Chain Finance programme in partnership with HSBC UK, focusing initially on import suppliers. The new Lloyds-backed programme extends these incentives specifically to UK-based suppliers, broadening Asda’s sustainability impact throughout its domestic value chains.
Asda has appointed EcoVadis, a renowned global sustainability ratings platform, to undertake supplier assessments. This partnership aims to evaluate and enhance suppliers’ ESG performance by providing an independent, rigorous framework for measuring progress. Under the scheme, suppliers meeting the prescribed sustainability standards become eligible for more competitive financing rates and expedited payment terms, with benefits becoming available as soon as October 2024.
Michael Gleeson, Asda’s Chief Financial Officer, highlighted the scheme’s alignment with the retailer’s broader ESG ambitions. Speaking to Retail Insight Network, he said: “Supporting our suppliers in making meaningful, sustainable changes is central to our wider ESG ambitions. Through our new supply chain finance scheme with Lloyds, we’re strengthening that commitment – offering competitive financing that rewards progress and encourages transparency across our supply base. It’s a practical way to support our suppliers in making sustainable changes to their business, while building a more resilient and responsible supply chain for the future.”
Lloyds Bank’s Consumer Managing Director and head of the bank’s ESG initiatives, Aled Patchett, reiterated Lloyds’ commitment to the programme, stating: “We’re proud to have supported Asda for many years in its work to build further resilience in its supply chain. Our existing programme has successfully supported suppliers over the years and converting it to reward sustainability efforts will not only deepen support for British businesses, it will also support Asda in meeting its own ESG ambitions.”
The programme’s design ensures that existing suppliers who choose not to participate will not face operational disruptions and will maintain their current payment terms and rates, protecting business continuity while encouraging voluntary uptake of the new initiative.
This finance scheme falls within the broader context of Asda’s ambitious sustainability framework, which includes a target to achieve end-to-end net-zero carbon emissions by 2040. The retailer has been actively working to reduce its Scope 1 and Scope 2 emissions since 2007, with a reported 40% reduction since its 2015 baseline. Notably, Scope 3 emissions, which account for approximately 98% of the company’s total carbon footprint, are addressed through supplier engagement and collaboration—a vital reason for this new finance scheme’s emphasis on incentivising supplier decarbonisation and social initiatives.
Asda’s sustainability efforts are further supplemented by its use of transparency and ethical sourcing tools such as Sedex, alongside active collaboration with industry bodies including the Ethical Trading Initiative and Stronger Together. These measures focus on labour standards, responsible sourcing, and mitigating supply chain risks, highlighting Asda’s holistic approach to supply chain sustainability beyond carbon metrics alone.
The retailer continues to invest in its broader operations as well, announcing an £11.8 million refurbishment programme for its stores in Yorkshire and surrounding areas, demonstrating a parallel commitment to operational sustainability and customer experience.
In summary, Asda’s evolving supply chain finance schemes represent an innovative approach to leveraging financial incentives as a mechanism for driving sustainability performance among suppliers. By marrying preferential financing with rigorous ESG assessment through platforms like EcoVadis and collaborations with major banking partners like Lloyds and HSBC, Asda aims to nurture a supply chain that is not only more resilient and responsible but also aligned with its overarching net-zero ambitions and wider ESG commitments.
Source: Noah Wire Services
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