On October 8, 2024, Sustainability Magazine published an article titled “A&M: Trends in Sustainable Supply Chain Financing,” highlighting Alvarez & Marsal’s (A&M) analysis of the rise of sustainable supply chain financing (SCF) in the global banking sector. A&M defines SCF as a set of financing and risk management practices designed to improve working capital and liquidity management. This mechanism allows buyers to extend payment terms without compromising supplier relationships, while suppliers gain quicker access to funds at reduced costs.
Technological advancements have transformed SCF platforms, making them more accessible and efficient, leading to significant cost savings and improved transparency. A&M’s report emphasizes the increasing integration of green strategies into corporate agendas, with a particular focus on selecting suppliers and distributors based on environmental criteria. Financial institutions play a key role by investing in sustainable projects, helping businesses enhance their environmental performance and remain competitive.
A&M Identifies Six Key Elements for Developing Sustainable SCF:
- Business Strategy and Model
Develop objectives and plans aligned with the bank’s sustainability strategies. - Product
Design SCF products linked to ESG criteria to support the transition to sustainable activities. - Client Focus and ESG Awareness
Implement client selection and onboarding approaches using ESG evaluation methodologies, and educate businesses on integrating ESG into their supply chains. - Risk Management and Operational Processes
Embed ESG factors into due diligence, risk assessment, and underwriting processes. - Technology
Automate onboarding and financing processes while ensuring transaction visibility through digital SCF platforms. - Talent Management
Recruit and train specialized talent to support sustainable SCF initiatives.
Adopting sustainable supply chain financing offers financial institutions a competitive edge, improved credit risk management through better visibility, and stronger relationships with corporate clients. Sustainable SCF represents an opportunity for investors to align their portfolios with sustainability objectives while pursuing competitive financial returns. Monitoring banks and companies that adopt sustainable SCF practices is recommended, as they are likely to benefit from enhanced resilience and a stronger reputation in an increasingly sustainability-focused economic landscape.
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