Supply chain finance is increasingly being promoted as a force for good whether it is being used to support small suppliers in times of crisis, finance vital hospital equipment in a pandemic or attain environmental goals, according to panellists on the opening panel at this year’s SCF Forum Global.
Matthijs Mondria, head of sustainable business development at Rabobank said supplier finance was becoming a “powerful instrument” in encouraging sustainable business practices.
With many corporates setting their own environmental, social and corporate governance (ESG) standards for not only their company activities but the behaviours of their wider supplier ecosystem, sustainability-linking supplier finance is a useful tool to encourage better standards.
Yet, there are challenges, Mondria said. He highlighted the need to figure out how best to measure sustainability whether that is with standardized supplier ratings created by companies such as rating platform EcoVadis or by creating bespoke specific targets for suppliers.
Transparency and trust are essential, he added, explaining that any ESG-compliant certification needs to be traced right back to the original producer. Developments with blockchain technology and other shared ledger tools will help ensure a greater level of transparency, he added.
He outlined projects where consumers could scan a QR code on their products in a supermarket and find out the details of the entire journey of the project and how it was produced.
Fellow panellist Pietro Solazzo, senior manager, corporate finance and treasurer at the German manufacturer Knorr-Bremse outlined another way SCF could be used for the benefit of others.
Solazzo is working on offering its suppliers the chance to receive money after a purchase order is issued rather than waiting for the invoice to be issued.
Knorr-Bremse is one of the companies involved in the newly created Trade Information Network (TIN) – set up last year – which is a multi-bank platform that allows for the uploading of supplier purchase orders for banks to then consider financing them.
This kind of solution aims to help safeguard a company’s supplier network by providing liquidity sooner, Solazzo explained.
Beata Wandachowicz-Krason, director, supplier risk management at the multinational Philips, explained how SCF was of vital importance this year as Covid-19 hit supply chains.
The company provided key medical equipment to hospitals inundated with Covid-19 patients and used supplier finance and dynamic discounting techniques – working with fintech C2F0 – to ensure critical suppliers were able to access much-needed liquidity to fulfil the orders.
Philips harnessed technology to enable to company to track the development of Covid-19 to understand when and where the situation was growing more serious and when the corporate would have to ramp up its financial support for suppliers in that location or change its sourcing to other location.