EcoVadis will be assessing the suppliers’ ESG performance. Credit: Nigel J. Harris via Shutterstock.

UK retail giant Asda has announced a new initiative aimed at driving sustainability within its supply chain. 

In partnership with HSBC UK, the company has launched a sustainability-linked enhancement to its existing Supply Chain Finance programme.

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Starting in January 2025, eligible suppliers will be able to access three tiers of enhanced financing rates based on their performance in environmental, social, and governance (ESG) metrics. 

The higher the supplier’s ESG score, as assessed by third-party entity EcoVadis, the more favourable the financing terms.

The scheme will focus on incentivising suppliers to disclose their ESG data, set sustainability targets, and take concrete steps towards achieving those goals. 

While the primary focus will be on decarbonisation, other ESG elements such as social initiatives will also be considered.

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“As we continue to drive progress towards our own decarbonisation and ESG targets, supporting and engaging with suppliers forms a crucial step in this journey,” said Asda’s CFO Michael Gleeson.

“Working with HSBC, we’re not only encouraging greater transparency over sustainability data in our supply chain, but we are able to use competitive financing to incentivise a significant number of suppliers to become more sustainable.”

“By incentivising suppliers to share ESG data and improve their sustainability performance, this financing solution encourages transparency and helps to drive better ESG practices in Asda’s global supply chain,” added Vivek Ramachandran, global head of Global Trade Solutions at HSBC.

The new sustainability-linked enhancement is a significant step forward for Asda in its efforts to promote sustainable practices throughout its supply chain. 

By offering financial incentives, the company aims to encourage suppliers to adopt more environmentally and socially responsible practices.