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Climate Business

Climate Business > Sectors  > Greening Supply Chains 

Environmentally friendly upgrades along the value chain can improve productivity, profitability, and regulatory compliance, making a firm more competitive. 

Greening Supply Chains

 

Increasingly firms recognize the need to better understand and address the many risks and untapped opportunities along their entire value chains.  From the producers to the distributors to the national, regional and international buyers, opportunities exist to reduce costs and improve competitiveness and sustainability.

 

Upgrades along the value chain can improve productivity, profitability, and regulatory compliance, making a firm more competitive.  Upgrades may also include renewable energy upgrades and other greening tactics as well as improving health and safety awareness, generating broad financial, social and environmental benefits and demonstrating a commitment to good corporate governance.

 

What We Do

 

From local farmers to global markets, IFC’s aims to reduce national and global value chain risks and increase market access of firms in selected sectors and commodities by helping them reduce costs and risks along the production chain.  In this way, firms can maximize the value of any given product, with the least possible cost to the producer, and the most benefit to the poor.

 

IFC seeks to address the challenges to value chain sustainability upgrades such as limited awareness, access to technology, implementation capacity and lack of long term financing, within the broader framework of meeting climate change and poverty alleviation objectives. 

 

How We Do It

 

IFC develops financial, advisory and capacity building support for value chain sustainability upgrades.  Its approach focuses on providing financial instruments and advice to value chain financial intermediary partners as well as capacity building for value chain companies.

 

The critical path begins with the Lead Company incentivizing its supply chain and distributor partners through stronger contracts, preferred supplier status or better prices.   These suppliers and distributors in turn implement the necessary sustainability upgrades, while financial intermediaries support the Lead Company and supply chain partners with sustainable financial solutions.   IFC is the facilitator bridging the financing gap and providing capacity building and other advisory services, as needed. 

 

Benefits of value chain sustainability are realized in the form of reduced operational and regulatory risks, improved community relations and brand differentiation for Lead Companies.  Meanwhile, supply chain companies stand to improve their profitability and competitiveness, and financial intermediaries are able to introduce new products, gain new clients and reduce their GHG portfolio holdings. By simply reducing transaction costs, companies are able to maximize resources in network and supply chains, increase efficiency and productivity and improve access to global markets, all while enhancing sustainable development.

 

Many small and medium enterprises (SMEs) lack the necessary finance and technical skills to improve social and environmental management and operating performance. In the absence of other lending, some purchasers and brokers have stepped in to provide short-term and pre-export financing to their suppliers. Instead, local financial institutions (FIs) can close this loop and share in this profitable market niche. With IFC’s assistance, FIs can offer financing packages designed to improve supplier business performance and credit risk, while generating attractive portfolio returns from an untapped market.

 

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