Asda has launched a new sustainability-linked enhancement to its Supply Chain Finance scheme in partnership with HSBC UK.

The voluntary scheme, which will launch in January 2025, will see the supermarket using financial incentives to encourage better sustainability practices within its supply chain and will offer over 250 of its suppliers who currently use the existing scheme access to three tiers of enhanced rates of financing.

Access to each tier will be based on suppliers disclosing their ESG performance data, setting targets and taking action on shared sustainability goals.

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Performance will be scored by sustainability data platform EcoVadis. Asda said that suppliers that are performing strongly against their ESG KPIs and share their sustainability data are to be rewarded with the most preferential terms.

The scoring will have a particular focus on decarbonisation, but will also extend to other elements of ESG, such as social initiatives, to support embedding strong ESG practices throughout the retailer’s supply chain.

Asda already asks its largest suppliers – those accountable for around 80% of its product carbon emissions – to share sustainability data through the EcoVadis assessment platform.

Suppliers who choose not to engage will remain on current payment terms and default rates and suppliers will continue to receive payment within 14 working days as part.

Asda chief financial officer Michael Gleeson said: “As we continue to drive progress towards our own decarbonisation and ESG targets, supporting and engaging with suppliers forms a crucial step in this journey.

“Working with HSBC, we’re not only encouraging greater transparency over sustainability data in our supply chain, but we are able to use competitive financing to incentivise a significant number of suppliers to become more sustainable.”

HSBC global head of GTS Vivek Ramachandran added: “We’re pleased to continue our long-term partnership with Asda to support its sustainability ambitions.

“By incentivising suppliers to share ESG data and improve their sustainability performance, this financing solution encourages transparency and helps to drive better ESG practices in Asda’s global supply chain.”