US supermarket chain Walmart has launched a new supply chain finance programme designed to issue credit based on greenhouse gas (GHG) emissions reductions.
In what the company claims is a world’s first, the supply chain finance programme will use a science-based targeting system to issue credit in line with the United Nations’ goal of limiting global warming to 1.5°C by 2050.
Working alongside HSBC and the Climate Disclosure Project (CDP), a non-governmental organisation (NGO), the programme aims to help Walmart’s private brand suppliers by introducing enhanced standards, tools, and capacity building.
In a press statement, Walmart said the programme will be especially useful for small and medium-sized businesses, and will help to upskill and align their operations with transparent sustainability objectives.
Walmart’s gigatonne journey
The announcement marks a key phase in Walmart’s journey to avoid 1 billion metric tonnes (a gigatonne) of GHG emissions from its global supply chain by 2030.
HSBC has been supporting Walmart’s Sustainable Supply Chain Finance (SCCF) programme since 2019 – encouraging its suppliers through improved financing access and terms – if they reduce GHG emissions in at least one of the six pillars that are a part of Project Gigaton™.
Jane Ewing, senior vice president for sustainability at Walmart, said: “Our work with Project Gigaton™ is purposefully meant to encourage all Walmart suppliers to pursue emission reduction goals across six pillars: Energy, Nature, Waste, Packaging, Transportation, and Product Use & Design.
“That includes creating programmes such as Sustainable Supply Chain Finance with HSBC, so that smaller and medium-sized businesses can also take advantage of special financing to make the necessary investments in their sustainability journeys.
“Now with CDP scoring added to the mix, the program provides suppliers with one more way to take advantage of improved financing through progress and disclosure, and exemplifies how we approach sustainability through a shared value lens.”
Surath Sengupta, global head of financial institutions, portfolio management, and sustainability for global trade and receivables finance at HSBC, added that 80% of a company’s carbon footprint, on average, stems from its supply chain.
“This means that delivering on Scope 3 emissions won’t happen unless more is done to help small and medium-sized suppliers,” he said.
“This programme does just that, and accelerates net zero transition.”
The Project Gigaton™ story
Since 2017, more than 3,100 suppliers have formally signed on to Project Gigaton™.
In 2020, those suppliers collectively reported that they avoided more than 186 million metric tonnes (MMT) of CO2e.
Since the project’s founding, its cumulative total of CO2e avoided stands at more than 416 MMT.
Despite these gains among larger suppliers, research by HSBC and Boston Consulting Group (BCG) has shown that small and medium-sized businesses don’t have the in-house expertise or capital to drive and fund climate transformation.
The research found that large corporations should supplement new standards with efforts to co-invest and provide liquidity through supply chain finance, share transition knowledge and resources, and help propagate innovation and technologies.
Dexter Galvin, global director of corporates and supply chains at CDP, said: “Raising ambitions to reduce Scope 3 emissions is paramount in reaching the Paris Agreement goal – this is only achievable with strong supply chain engagement.
“CDP’s work with suppliers has helped reduce GHG emissions by 619 million metric tonnes in 2020 alone, and we are pleased to deepen our relationship with Walmart and HSBC in providing the support needed to accelerate supply chain action through multi-stakeholder engagement.”