A partnership for sustainability

Business PartneringCross-functional Teams
sustainable-partnership

The relationship between a company’s finance team and its banking partners often misses a vital ingredient: procurement. Banks have too often failed to engage procurement leaders, limiting our understanding of supply chain priorities. A regular dialogue between a banking partner and the procurement function can support the priorities of buyers’ procurement teams and promote outcomes relating to agility, sustainability and risk – all of which are interrelated.

 

Sustainability of delivery in a supply chain has always been a priority. Through identifying strategic suppliers, financing can provide support when needed to enable operations to withstand market disruptions. But now this needs to go deeper as global buyers face increasing pressure from end consumers evaluating the wider impacts of their purchasing decisions. That is why environmental, social and corporate governance (ESG) concerns have reached the boardroom.

 

In recent years there has been a paradigm shift in how sustainability is viewed. Rather than altruism, business dynamics drive behavioural change. HSBC’s recent Navigator survey of global businesses revealed ethical and environmental sustainability is important to 81% of companies, with nearly 31% looking to make sustainable changes to their supply chains.

 

International banks play a key role in supporting a company’s transition to becoming more sustainable. If a bank understands the context of a supplier within the overall supply chain ecosystem, it may offer improved financing terms. Support can include green lending, funding for capital investment by key suppliers, or wider supply chain finance programmes that peg suppliers financing rate to their sustainability standards.

 

Sustainability means sustainability of business models. Banks are already looking at this from a risk perspective in decision making, which will influence credit decisions. Initial investment can deliver long-term savings. While improving working conditions or buying more efficient machinery requires upfront investment, businesses will see a long-term reduction in inefficiencies, energy use, and costs.

 

As well as the cost benefits, the increasing importance of ESG factors to customers and shareholders mean businesses could ultimately face revenue or reputational risk. We are already considering transition risk in industries that will have to make sustainability-related changes.

 

Although procurement might not naturally regard banks as being important to realising objectives, in reality, their potential to drive efficiency and liquidity throughout the supply chain makes them both relevant and valuable. That wider conversation between procurement, finance teams and banking partners can accelerate progress towards a more sustainable future for all.

 

Stuart Nivison is the Global Head of Client Network Banking at HSBC. He is responsible for driving new business opportunities linked to the ecosystems of HSBC’s existing clients. Stuart has a personal interest in sustainability; in particular, facilitating the development of sustainable supply chains.

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

Stuart Nivison
Posted by Stuart Nivison

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