Our take on financing sustainability - part 1

The supply chain is in the spotlight. Global networks are stretched and scrutiny is higher than at any other time in the last 10 years. Future concerns about operating licenses, cost reduction and ratcheting customer and media expectation mean that accountability for ESG has reached the board. Surveys suggests this won’t be going anywhere anytime soon.

Some companies are taking action. In 2019 Danone saved EUR 700m by implementing the UN’s Sustainable Development goals, in part by focusing on the supply chain to achieve tough targets. Danone has now committed EUR 2.5 billion over the next two years to invest in climate action and a changed business model.

Here’s the problem. Most companies aren’t Danone, and they don’t plan to be. It takes time to even decide where investment will make the biggest impact. New initiatives cost money, and require support from buyers, investors, supplier and distributor.

As ever, meaningful change only happens when it is both on a global level, and is made real on a micro, product level.

At Do It Properly, we believe finance plays a huge part in driving change. This 3 part series will cover the major solutions... starting with:

1) What we're doing right now...

From September, Tesco will be offering grants and better payment terms for suppliers with good ESG credentials. The buyer driven approach appears particularly attractive for purchasers who don’t want to look outside of their existing supplier and distribution models.

This is something most SMEs in particular will be more comfortable with, and is an increasingly popular approach. Suppliers and buyers are able to communally offer more flexible payment terms, better credit, and lower fees to companies that align with their goals. There are other benefits too. Scott Galloway, an investor, professor and entrepreneur, notes that verticalisation and localised distribution have a huge role to play in differentiating competitors as we come out of the pandemic. It looks like having the ‘finger on the pulse’ of how you supply and distribute will generate more value and make a bigger difference to the planet. We're going to cover this in much more depth in the next few weeks.

Financing better behaviour could just be a first step.