Sustainable supply chain management has become an increasing area of focus for large companies (purchasers) as they address competitive pressures arising from new environmental regulations, rising energy costs, workplace standards, and other consumer and government demands. This has led many companies to incorporate eligibility requirements, based on sustainability standards, into contractual relationships with suppliers. By explicitly factoring social, environmental, and governance criteria upstream, where raw materials are processed, and downstream to the consumer, purchasers and their suppliers can reduce operational risks, maintain profitability, and meet the growing demand for organic, certified and sustainably-produced goods.
Suppliers able to meet purchasers’ eligibility requirements are likely to enjoy business growth. However, many are small and medium enterprises (SMEs) that 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.
Technical Assistance Grant Funding:
-Technical assistance is designed strengthen the FI’s credit scoring and due diligence tools through staff training and systems enhancement, including social and environmental compliance.
-IFC can develop programs with the FI to support cash flow-based (against supplier contracts) lending, deal flow, deal preparation, and mentoring to support supply chain development.
-IFC supports capacity building for suppliers through a technical assistance provider to improve social and environmental management and operating standards to enable suppliers to meet purchaser eligibility or certification requirements.
For more information about our work see Sustainable Energy Finance or contact us.