The standout deal in this year’s ESG Finance category – which was also chosen by the judges as this year’s Overall Deal of the Year – was a sustainability-linked supply-chain finance (SCF) solution by Tesco. Demonstrating significant innovation, this highly impressive project was the first such solution to be delivered by a UK corporate and retailer.
Delivered by a cross-functional project team of around 40 people, the project involved enhancing Tesco’s existing SCF programme to incorporate a sustainability-linked element, thereby targeting an ambitious emissions-reduction strategy. With emissions from products and the supply chain accounting for 90% of Tesco’s global emissions footprint, the programme aims to accelerate improvements in supplier behaviour and emissions footprints.
The resulting programme supports more than 200 of Tesco’s suppliers and is directly linked to the company’s sustainability goals. As a result, suppliers that demonstrate they are tackling climate change are able to access lower funding costs in recognition of their work in this area. While the initial focus is on the ‘E’ element of ESG, the programme’s supporting KPIs are intended to evolve in the coming years and broaden into S and G, particularly when the sourcing for Tesco’s clothing brand comes into scope.
The project team opted to create an in-house proprietary solution for climate-focused ESG ratings, aligned with the objectives of Tesco’s ‘Little Helps Plan’. Supplier assessments are renewed annually via an online questionnaire and supporting evidence from suppliers.
The resulting programme was launched at Tesco’s largest supplier conference in April 2021 to more than 1,400 suppliers. To date, 83% of suppliers by spend have achieved an ESG award tier, accounting for £2bn of the £2.4bn financed per annum. With £5bn of capacity through 10 supporting relationship banks, the programme is expected to double in size over the next 12 months.
Provider: Santander, Anthesis, KPMG and the WWF.
Structure: Sustainability-linked SCF solution.
“While there were many strong submissions in this category, Tesco’s SCF programme really stood out – the solution featured some innovative new concepts, with tangible economic benefits for suppliers. With a strong innovation angle – and reflecting the strong focus on ESG in the markets today – Tesco had to be this year’s overall winner.”