San Francisco-based fintech Taulia has entered into a partnership with business sustainability rating provider EcoVadis to link supply chain finance to environmental, social and governance (ESG) performance.

The tie-up will see EcoVadis provide ESG ratings for Taulia’s sustainable supplier finance solution, allowing businesses to identify the most responsible and sustainable suppliers while encouraging suppliers to improve ESG performance with financial incentives.

Speaking to GTR, a Taulia spokesperson says that the EcoVadis ratings will be used to create a tiered financing structure based on supplier scores, which are calculated using seven management indicators across 21 sustainable criteria in four themes: environment, labour and human risks, ethics, and sustainable procurement.

The use of third-party ESG ratings organisations in sustainable trade and supply chain finance is a growing trend, as banks and corporates seek to avoid claims of greenwashing by removing subjectivity from ESG scores.

“Until now, lack of transparency in supply chain reporting and comparability has been responsible for a large number of ESG issues within businesses,” says Cedric Bru, Taulia CEO. “However, now business leaders have the opportunity to build on their own proactive ESG efforts by encouraging suppliers and partners to report reliably, consistently and comparably against globally recognised benchmarks. Through this partnership we are committing to help customers more easily evaluate the ESG metrics and credentials of trading partners and ultimately create a more sustainable world for future generations.”

Taulia tells GTR that businesses on its network will only need to share their EcoVadis score once. “What’s more, their score will also apply across other offerings, including dynamic discounting, receivables financing and inventory solutions, meaning ethical and sustainable companies can qualify for lower rates on all their working capital financing,” the spokesperson adds.

Although this partnership has only been announced this week, Taulia has been running pilot ESG-linked supply chain finance programmes with EcoVadis for some time. In 2020, for example, Taulia worked with the company to design a sustainable supply chain finance solution for JP Morgan client Bridgestone, which utilises ESG-linked pricing to provide preferential discounts to suppliers who can demonstrate high EcoVadis ratings.

The Taulia spokesperson says that the company will now “significantly expand” its sustainable supplier finance solution in partnership with EcoVadis, making a bigger push to promote it with the introduction of some new features, including an ESG performance dashboard.