Decarbonization has become a critical focus for organizations globally as they confront the growing impacts of climate change and rising regulatory and stakeholder demands. With supply chains accounting for over 60% of global emissions, they represent a significant opportunity for firms to achieve tangible progress toward net zero targets. However, this progress may not be straightforward: the 2024 Verdantix supply chain decarbonization survey found that 76% of respondents believe poor supplier engagement is in the top three most important challenges to improving supply chain sustainability. Here, we profile an organization that has taken steps to improve its supplier engagement and reduce emissions.
Who?
Asda, the third largest supermarket chain in Britain, in partnership with HSBC UK. Asda operates over 600 stores and had a revenue of over £20 billion in 2023.
What particular challenges do they face?
Asda faces the challenge of decarbonizing its extensive supply chain while ensuring suppliers can meet sustainability goals without financial strain. Scope 3 emissions represent 98% of the organization’s total emissions, with the vast majority of these originating in Asda’s supply chain. Suppliers, particularly smaller firms, often lack the resources or expertise to prioritize decarbonization while balancing operational demands.
What did they do?
To address these challenges, Asda launched a sustainable supply chain finance programme that links suppliers’ financing rates to their ESG performance. This scheme incentivizes suppliers to decarbonize their operations and enhance ESG reporting, while still offering financial support for those not yet able to participate.
How did they do it?
The initiative was executed in partnership with HSBC UK and EcoVadis, a global provider of business sustainability ratings. Suppliers are assessed on criteria such as progress in meeting decarbonization targets and transparency in ESG reporting. The scheme provides access to three tiers of enhanced rates of financing. Those with stronger ESG performance benefit from access to higher tiers that provide more preferential rates, making sustainability efforts financially rewarding. Suppliers who opt out remain on their current financial terms, ensuring the scheme is inclusive and minimally disruptive.
Where you can find out more:
To explore more about this initiative, see the announcements on Asda's newsroom.
