Tesco is offering preferential financing rates for suppliers that address their environmental impacts, under a new voluntary programme supported by Anthesis, KPMG and Santander.
Tesco’s supply chain programme will provide finance linked to the sustainability performance of companies located in its supply chain.
Launching in September, the programme is voluntary and has been in development for 18 months. Suppliers enrolled in the programme will provide annual greenhouse gas emissions data which will be verified by sustainability consultants Anthesis. KPMG will carry out assurance of the programme.
Suppliers that lead on decarbonisation will be offered preferential financing rates via Santander.
Tesco’s chief product officer Ashwin Prasad said: “In this critical year for climate action, we’re delighted to be able to offer thousands of suppliers access to market-leading supply chain finance linked to sustainability.
“This programme not only provides suppliers with a real incentive to set science-based emissions reduction targets, it will help embed sustainability goals throughout our supply chain and support the UK in realising its climate change targets.”
The initiative builds on the Tesco Supplier Network, an online platform giving more than 10,000 suppliers guidance on methods to improve sustainability.
On the emissions piece, Tesco was one of the first businesses in the world to have its targets approved in line with 1.5C by the Science-Based Targets initiative. It is aiming to reduce operational emissions by 60% by 2025, against a 2015-2016 baseline, and to reach net-zero by 2050.
Last year, Tesco established a £2.5bn revolving credit facility whereby rates and interest are tied to progress against the company’s key environmental targets.
Under the terms of the agreement, facilitated by BNP Paribas and NatWest, Tesco will benefit from a lower interest rate loan margin if it meets its commitments to reduce Scope 1 (direct) and Scope 2 (power-related) emissions; to source renewable electricity through on-site generation and power purchase agreements (PPAs); and to redistribute surplus food.
Santander Corporate and Investment Bank’s head Darren Jones said: “Action on climate change is crucial and from individuals to corporates, we all have a part to play. Supply Chain Finance can be an effective tool for influencing positive change by linking sustainability achievements with competitive financing.
“Santander recently announced its ambition to achieve net-zero carbon emissions across the group by 2050, and we are committed to supporting our clients in their transition to a low-carbon economy. We look forward to working in partnership with Tesco to provide this innovative solution.”
The news comes as NGOs Mighty Earth and Greenpeace UK launch a campaign against Tesco urging it to cut ties with supplier companies that are driving the destruction of Brazil’s Amazon and Cerrado.
A survey of Tesco customers from the two NGOs found that 88% believe supermarkets should do more to combat deforestation. The survey of more than 2,000 people (of which more than 800 shopped at Tesco) was issued after findings that retailers are failing to cut ties with suppliers linked to deforestation.
New data from Mighty Earth’s Soy and Cattle Deforestation Tracker, published this week, found that subsidiaries of JBS, the world’s largest beef company, and Cargill and Bunge, the two biggest soy traders globally – which manufacture animal feed ingredients – are heavily linked to deforestation of the Cerrado region.
Tesco has committed £10m over the next five years to fund a new initiative to transition to producing deforestation-free soy in the Cerrado region in Brazil.
Tesco, along with animal nutrition business, Nutreco, and Grieg Seafood have pledged to support soy farmers in the region, where around 50% of the natural landscape is believed to have been lost since 2000.
However, research from the NGOs found that twice as much deforestation in the supply chains of these soy traders and meatpackers in the past year compared to the year before. Traders linked to deforestation supply to the UK’s biggest supermarkets, including Tesco, Sainsbury’s and Morrisons.
Cargill, which has a zero deforestation policy, is linked to more than 66,000 hectares of clearance, while Bunge, which has pledged to end deforestation by 2025, is associated with almost 60,000 hectares of deforestation in just two years – an area larger than the New Forest – according to the report.
Mighty Earth’s UK director Robin Willoughby said: “Forest destruction in Brazil driven by supermarket meat is getting worse every year. This is accelerating climate change and wiping out the home of the jaguar. Tesco customers are crystal clear, they do not want their supermarket to do business with the companies involved in this destruction.
“It’s high time Tesco listens to its customers and drop the worst-performing companies driving the destruction of Brazilian forests – JBS, Cargill and Bunge.”
Tesco has previously committed to achieving net-zero deforestation for its soya and beef supply chains by 2020, as part of the Consumer Goods Forum. However, the company’s policy was tweaked in 2018 to move the date for soya to 2025. The NGOs claim that Tesco is yet to publish a credible plan outlining steps to achieve this goal.
Last year, Tesco spearheaded a call to action involving 160 of the world’s leading food companies to end deforestation arising from soy farming in the Cerrado Savannah. In 2018, a string of big-name investment corporations including Legal and General Investment Management (LGIM), APG and Robeco joined dozens of large corporate buyers such as Unilever, Tesco and Marks and Spencer (M&S) in signing the Cerrado Manifesto to protect the area from biodiversity loss.
A Tesco Spokesperson said: “Clearing forest land for crops must stop – we are committed to fully playing our part to prevent deforestation and have met our commitments including our 2020 industry-wide target of certified ‘zero net deforestation’ for our own direct soy sourcing a year early. Recognising there is more to do, we were the first UK retailer to set an additional industry-leading target for the soy we use in the UK to be from entire areas that are verified deforestation-free by 2025, as well as a roadmap to reach this.
“Tesco sources a very small proportion of global soy and so we can’t transform the system alone, but we are working hard with other signatories of the Statement of Support (SoS) for the Cerrado Manifesto, through industry forums like the CGF and with the WWF to build the industry-wide support needed to deliver this. We’re playing a leading role in convening industry and government to protect the Cerrado but we need our suppliers, industry, NGOs and governments to work with us to end deforestation and protect our natural environment. Recognising our leading position in fighting deforestation, Mighty Earth ranked us top in their recent scorecard which evaluates the beef sourcing practices of the world’s largest grocery and fast-food companies.”
Additionally, Tesco informed edie that all its suppliers must meet environmental and zero-deforestation standards. Working with suppliers, Tesco met the 2020 industry-wide target of certified ‘zero net deforestation’ for its own direct soy sourcing a year early.