New disclosure requirements for supply chain finance (SCF) are the latest advance in the industry’s journey towards greater transparency and resilience. By providing stakeholders with clearer insights on programmes, banks and corporates alike can foster increased trust and confidence, laying the foundation for a more robust and sustainable trade ecosystem.


In recent years, supply chain finance has grown and matured, evolving from a niche strategy to a key component in building resilience across the trade ecosystem. Amid the disruption caused by the pandemic and geopolitical volatility, its role in shoring up suppliers worldwide to promote healthier and more sustainable supply chains has proven invaluable.

Although a growing number of corporates are leveraging SCF to future-proof their supply chains against emerging risks, confidence in this critical financing tool has been impacted of late as troubled companies misused it to distort cashflow cycles and disguise financial performance.

In response, the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have recently issued disclosure requirements to enhance the transparency of SCF arrangements.

While this will mean an additional reporting obligation for corporates, the initial burden of complying with the freshly introduced rules is outweighed by the potential benefits, says Irfan Butt, global head of supplier finance at Standard Chartered.

“The disclosure requirements demand time and resources for corporates, but they also present an opportunity. Greater transparency can lead to more informed decision-making and a stronger, more sustainable SCF market,” he says.

“We believe it will enable the industry to filter out bad actors and promote a better understanding of this vital form of financing.”


Restoring confidence

Issued in September 2022 and May 2023 respectively, the IASB and FASB rules are aimed at preventing a repeat of events such as the 2018 collapse of Carillion, the UK’s second-largest construction company, which involved the exploitation of SCF to hide a worsening financial situation and push payment terms beyond industry standards.

Carillion’s oversized SCF programme was far from typical. Opacity around its financing arrangements obscured the true extent of its liabilities, making it impossible for investors and credit rating agencies to gauge its full financial health – until it was too late.

The requirements from the IASB – which sets the standards used in most European, South American, Middle Eastern and Sub-Saharan African countries, in addition to Australia, Canada and some Asia Pacific nations – and the FASB, its equivalent body in the US, call on corporates to provide qualitative and quantitative information on numerous aspects of their SCF arrangements.

These include the amount of payables already paid to suppliers by a finance provider, and the range of payment terms arranged with suppliers.

“These reforms aim at improving the visibility and thereby the credibility of SCF arrangements. Addressing concerns about hidden risks will fortify the foundation of the industry,” says Butt.

“Corporates will need to ensure they have the data they need to comply with reporting requirements, and it isn’t a one-size-fits-all. However, the new obligations present a chance for corporates to review their existing arrangements and ensure they adhere to industry standards – in particular the Global Supply Chain Finance Forum Payables Finance Technique and the BAFT Global Trade Industry Council Payables Finance Principles.”

A key area of focus for regulators and ratings firms alike is on supplier payment terms, and whether they fall within what is considered typical.

Using data provided by banks such as Standard Chartered, corporates can benchmark the financial resilience and sustainability of their supply chains, based on comparisons with peers across regions and sectors.

“Payment terms for suppliers can vary significantly depending on the industry, and can often be driven by factors like long physical transit times rather than purely financial motives,” says Butt.

“For corporates that ensure their supply chain management processes adhere to best practices, the new disclosures can actually enhance and strengthen their relationships with investors.”


Beyond payment terms

Although the disclosure rules were catalysed by inappropriate usage of SCF, any perception of the product as simply a tool for pushing out payment terms is far from the truth, says Butt.

“SCF should not be miscast as a means of propping up struggling companies. When leveraged strategically, it can drive ESG improvements, resilience, and supply chain stability,” he says. “By embracing transparency and aligning operations with industry standards, corporates and banks alike can tackle the misconceptions head-on, ensuring the product can continue to support global trade in the years to come.”

Today, as corporates seek to de-risk their supply chains to shield themselves from external shocks, SCF can be used to ensure a diverse network of well-financed suppliers – giving them a better chance of weathering future storms.

“SCF is no longer just about working capital management. We’re seeing demand grow for more holistic solutions that provide companies with greater visibility and incorporate features that can mitigate against disruption,” says Butt.

These include digital SCF solutions that enable corporates to achieve an end-to-end overview of their supply chains. According to Future of Trade 2023, a recent report by Standard Chartered, almost one-fifth of corporates have adopted digital SCF solutions – such as those offered by the bank in partnership with third-party technology providers – with a further 44% planning to do so in the next two years.

The evolution of SCF is also being powered by a broader recognition of its ability to cement the financial foundation for sustainability efforts, as uncovered by the bank’s Sustainability Commitment Paradox report.

The report found that as corporates come under increased regulatory pressure to account for the environmental impact of their supply chains, a majority either plan to or are already encouraging and mandating their suppliers to operate more sustainably. However, some suppliers, particularly at the smaller end of the scale, lack the resources to comply.

As such, sustainability linked SCF, which ties financing to performance against ESG metrics, has become an important solution for corporates seeking to help their suppliers shift to more sustainable practices – while digital tools from SCF providers enable them to better collect the data they need to conduct their reporting.

Beyond environmental improvements, SCF can also be leveraged to achieve greater inclusivity in trade. By improving access to liquidity for SMEs, SCF can “improve the prospects for millions of entrepreneurs who are held back by a lack of fixed collateral and limited offerings of appropriate credit products by financial institutions”, according to a 2021 World Bank report.

Corroborating this potential, the future of Trade 2023 report finds that by the end of this decade, digital SCF solutions could unlock an additional US$791bn in exports across 13 markets in Asia, Africa, and the Middle East.

As consumers, investors, and regulatory bodies alike increasingly prioritise ethical and sustainable practices, companies with transparent and responsible SCF programmes will be better positioned to meet these expectations and gain a competitive edge.


A more transparent future

The new disclosure rules represent a transformative step towards a more transparent future, and will impact all stakeholders within the SCF landscape. What’s more, given the interconnected nature of global trade, it is highly likely that other accounting standard-setting bodies will follow suit with similar, if not more comprehensive, disclosure requirements – bringing much-needed clarity and comparability for businesses operating in diverse markets.

“There is a global need for consistency around how SCF programmes are disclosed, and across our footprint we are working with clients through the process,” says Butt, who adds that the implications of the requirements extend far beyond mere regulatory compliance.

“They hold the potential to create a paradigm shift in how SCF programmes are perceived, understood, and integrated into business strategies,” he says.

“With access to more comprehensive and standardised data, corporates can now make informed choices, optimising their supply chain practices for enhanced resilience and sustainability.”

In addition, given greater visibility into SCF programmes, investors and financiers are more likely to view the product favourably. This heightened confidence could attract more capital inflow into the asset class, ensuring yet more finance can get to where it’s needed the most – helping to create a sustainable, resilient global trade ecosystem that works for everyone.