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Tesco is to become the first UK retailer to offer its suppliers sustainability-linked finance, in a move the supermarket said would encourage more companies to commit to science-based emission reduction targets.

The voluntary programme, which Tesco said it had been developing for 18 months, will launch in September and see annual greenhouse gas emissions data provided by suppliers independently verified and assessed by sustainability expert Anthesis.

Financial giant KPMG has been employed by Tesco to carry out assurance of the programme, which will then see Tesco suppliers offered preferential financing rates via Santander’s market leading supply chain finance platform.

It incentivises companies to make positive changes to their business while tracking performance with rates based on each suppliers’ carbon data disclosure, emissions reduction targets and progress against sustainability goals.

Tesco said it planned to regularly update the scope of the sustainability data requirements in line with market best practice and its own sustainability commitments. It said it hoped the programme would be particularly interesting to small and medium-sized businesses for whom it promised to provide online tools and support to enrol in the scheme.

In 2017, Tesco became the first company globally to set science-based climate targets for its own operations based on the 1.5°C trajectory of the Paris Climate Agreement.

Last year it committed to reach its net zero climate target in the UK by 2035, fifteen years earlier than originally planned.

“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,” said Ashwin Prasad, Tesco’s chief product officer. 

“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.”

Darren Jones, head of Santander Corporate and Investment Bank UK, 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.”

The move was lauded by Sarah Wakefield, WWF’s head of food transformation, who said: “We welcome this latest leadership by Tesco, to be a part of the solution by incentivising their suppliers to report on their emissions and take action to align with 1.5°C climate targets.

“This takes us closer to achieving our shared goal of halving the environmental impact of the average shopping basket.”

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