Supermarket chain Tesco has become the first UK retailer to offer sustainability-linked supply chain finance (SCF) to its supply base, through a new programme with Santander.

The voluntary programme, which has been in development for 18 months and is due to launch in September, will see Tesco’s suppliers get preferential financing rates via Santander’s SCF platform if they meet targets around carbon data disclosure, emissions reduction and progress against sustainability goals.

“In this critical year for climate action, we’re delighted to be able to offer thousands of suppliers access to market-leading SCF linked to sustainability,” says Ashwin Prasad, chief product officer at Tesco. “This programme not only provides suppliers with a real incentive to set science-based emissions reduction targets, but will also help embed sustainability goals throughout our supply chain and support the UK in realising its climate change targets.”

The programme will leverage Tesco’s existing supplier network technology, provided by sustainability-focused tech firm Anthesis, to verify and assess suppliers’ annual greenhouse gas emissions data. Tesco is also partnering with WWF, an environmental NGO, to support its suppliers in setting sustainability targets. KPMG has been engaged to carry out assurance of the programme.

Santander tells GTR that the programme will be open to suppliers of Tesco Stores UK and Tesco Ireland, which includes both domestic and international suppliers. Neither the base pricing for the SCF programme nor the discounts available have been disclosed by Tesco or Santander, but Tesco indicates that there are multiple sustainability tiers for suppliers, which can be ranked as gold, silver and bronze.

Last year, Tesco committed to reach a net zero climate target in the UK by 2035, setting science-based targets across its supply chain. It says that its 70 biggest suppliers have already reported a 12% reduction in manufacturing emissions, exceeding its target of a 7% reduction.

This follows a similar programme set up in the US by Walmart in partnership with HSBC. Speaking to GTR at the time about the attractiveness of such initiatives to retailers, Natalie Blyth, global head of trade and receivables finance at HSBC, said: “In many industries it is a company’s supply chain – rather than the company itself – that is responsible for most of the environmental impact and therefore offers the greatest potential for sustainability improvements.”

Once Tesco’s scheme is in place, the British retailer says that it will regularly update the scope of the sustainability data requirements in line with market best practice and its own sustainability commitments, and will provide online tools and support to help suppliers enrol – with a particular focus on SMEs.