Our Take on Financing Sustainability -Part 2

Hello again. Welcome back to the blog.

I hope you like the graphic above (thanks IPCC). It gives a fantastic visualisation of the progress made so far when looking at measuring supply chain emissions, and the key areas that are being missed. There is far more to do, and it starts with data, measurement and taking genuine action.

We've already talked about how finance can be used to drive better behaviour. It's an area often overlooked, but putting your money where your mouth is can have a huge impact on company emissions, new projects, and ultimately the shape of your business. Let's dig a bit deeper.

2. New investment in new projects

Externally financed projects and initiatives are pretty common, particularly with interests rates at historic lows. Supply chain financing as a buffer for cash flow has been around for centuries, but has seen a particular boom since 2008. Now, institutional lenders are already seeing the opportunity in providing supply chain finance based on certification or a commitment to sustainability, and are effectively making investment decisions considering sustainable credit-worthiness. Have a look at Blackrock for a real world example.

At the same time, newer providers are utilising a Greensill shaped gap to take this a step further. Prime Revenue, a financial technology company that specialises in supply chain finance, identifies that new investors are specifically looking for buyer driven initiatives that support the supply chain. New factories, new distribution centres, and analytics initiatives are all within scope, because they offer a clear, defined ROI, and the opportunity to displace institutional backers.

3. Smart contracts

Finally, new technologies like blockchain provide data, governance and action outside of scope 1 and 2 emissions. The Malawi Tea Sector is piloting an innovative solution to bring smaller suppliers onside without hefty regulatory and buyer driven initiatives. In exchange for adding sustainability metrics that can be used for product lifecycle reporting, suppliers gain access to supply chain finance and business support.

These aren’t, and will not be, the end of the options available. Public institutions are already backing supplier finance, in the hope that this will drive new initiatives, and individual organisations are actively gaining accreditation to gain access to a more diverse pool of financing.

Strategically, finance is a key part of delivering action, and serves as a great place to start planning. If you're a small business. and planning scope 3 change, talk to us.