HSBC and PVH Corp have developed what they say is the first sustainable supply chain finance (SSCF) programme that is tied to both environmental and social objectives.

Under the programme, suppliers to the American clothing company, which owns brands including Tommy Hilfiger and Calvin Klein, will get access to cheaper funding based on a set of science-based environmental targets as well as a series of social elements – including a healthy and safe working environment, compensation and benefits, and employment issues, such as eradicating forced labour, child labour, and harassment and abuse.

Suppliers’ progress will be measured against PVH’s own human rights and environmental supply chain standards, with performance assessment standards being measured using industry-aligned tools, HSBC says. These include the Social Labor Convergence Program, which measures a facility’s performance against human rights and labour standards, and the Sustainable Apparel Coalition’s (SAC) Higg Facility Environmental Module, which assesses environmental standards.

“With this announcement, HSBC continues to show its leadership in critically needed sustainable supply chain finance to fund the textile, apparel and footwear industry’s transition to net zero,” says Lewis Perkins, president of the Apparel Impact Institute, a collaboration of brands, manufacturers and industry associations – including SAC, PVH Corp and HSBC – that have come together to select, fund and scale high-impact projects that improve the sustainability outcomes of the apparel and footwear industry.

According to recent research conducted by HSBC and Boston Consulting Group, SME suppliers will need up to US$2.8tn a year between now and 2050 in order to bring the carbon footprint of global supply chains down to zero. However, many suppliers are unlikely to have the knowhow and resources to make the transition. In a statement, the bank says that SSCF is one way to help ensure that progress is made on ESG targets and commitments.

“The availability of accessible financing is pivotal to ensuring our suppliers are empowered to invest back into their businesses and people, and contribute to our collective goal of creating an innovative and responsible global supply chain,” adds Sarah Clarke, PVH’s chief supply chain officer.

This is the latest SSCF programme for HSBC, which launched the concept in 2019 with Walmart as part of the retailer’s Project Gigaton scheme, which aims to eliminate one gigaton of greenhouse gas emissions from its global value chain. That programme allowed Walmart suppliers that demonstrated progress in The Sustainability Index, which is run by The Sustainability Consortium’s measurement and reporting system, or through Project Gigaton, to apply for improved financing from HSBC. The rate at which the bank discounted the suppliers’ invoices depended on Walmart’s supplier rating, which was applied after the retailer monitors a supplier’s adherence to various standards.

Last year, the bank revamped the programme to include science-based emissions reduction targets that are in line with what is deemed necessary to meet the goals of the Paris Agreement. Suppliers setting the highest ambition would be able to take advantage of receiving the lowest pricing, while suppliers can also use the financing proceeds to manage their own working capital and their sustainability-linked improvements.