Sustainable supply chain finance

1. Why is sustainable supply chain finance important to businesses? Supply chain finance, a financing technique that is used to bridge the payment gap between global buyers and their suppliers, is a very crucial and beneficial way to support supply chain sustainability. It can benefit corporates Accounts Receivables and Accounts payable. Typically, corporates can increase their own working capital by selling receivables while enabling financial inclusion to their suppliers by providing pre-payment. With more focus on ESG, sustainable supply chain finance has now become more popular for supplier finance. The global sustainable supply chain finance market is expanding as suppliers and buyers pay more attention to keep their working capital at an optimum level. Global sustainable supply chain finance market was evaluated at $660,22.1 million in 2018 and is anticipated to reach US $ 2,926,758.97 million, increasing at an estimated CAGR of 18.24 percent. Businesses are exploring new ways to ensure sustainability is fully integrated into all aspects of their business. • Investors, regulators, customers, and other stakeholders are beginning to prioritize ESG in the context of sustainable supply chain finance. The focus of sustainable supply chain finance has generally been payables programs, which provide suppliers with financial incentives to raise and maintain social, environmental, and health standards. Usually suppliers are provided with cheaper financing charges if they attain a high sustainability score. Global buyers have the opportunity to include ESG factors in their value chains. By rewarding and motivating sustainable supply chain behaviors at a fair direct cost to the business, sustainable supply chain finance offers a particular way for international buyers to meet their goals for sustainable sourcing, boost supply security, and enhance relationships with suppliers. However, it’s still challenging to track supply chains for ESG scoring and furnish the information to financers for preferential rate. Large corporates are leveraging supply chain finance platforms to include this as a value-added service and integrate into the financing automation. • • A company can actively manage the sustainability levels of their suppliers by driving environmental and/or social improvements in exchange for financial benefits with the help of the Sustainable Supply Chain, which also improves the financial efficiency of a supply chain by reducing working capital for both buyers and suppliers.