Four Standard Chartered experts – Pradeep Nair, global head of structured solutions; Roshel Mahabeer, head of clean tech industry and sustainable finance for trade and working capital; Yvonne Wan Ying Tan, executive director, strategic platform partnerships; and Janet Thomas, global head of strategic platform partnerships – explain how, in partnership with banks and best-in-class ESG technology solution providers, corporates can access vital enablers for sustainable trade.
Buyers and suppliers alike want to do better on ESG metrics, but they’re struggling to achieve this
Standard Chartered’s Critical Indicators of Sustainable Supply Chains report, which surveyed almost 1000 corporates across geographies, revealed universal agreement about making supply chains sustainable and resilient, but almost two thirds of respondents admitted to a gap between intention and action.
“Corporates are under increased pressure to report on social issues and Scope 3 emissions within their supply chains, but the web of suppliers for a big retailer or large tech firm can number in the tens if not hundreds of thousands across multiple geographies,” explains Nair. “Each of these has its own nuances around ESG reporting, be that what data points they report or what form they report in. The complexity is such that it is impossible to perform this via manual data collection – particularly when it comes to the deeper tiers of the supply chain.”
“On the supplier side, ESG questionnaires that SMEs are being asked to fill out are not simple documents. Often, they comprise hundreds of questions, and different ones need to be filled in for each buyer, each of which is asking for different information,” says Mahabeer.
And if gathering the requisite data is a tough task, gleaning insights from it is often even harder.
“Everyone has their own logic, and everyone has different outputs. It is difficult to contrast what you're reporting, or the data you’re receiving, versus what you’re seeing from others,” says Nair. “Corporates have no way of benchmarking themselves, or identifying areas of improvement.”
Corporates are collaborating to effect real change…
Despite the difficulties, there are encouraging signs that corporates are determined to make a difference, with a growing number working together to define industry-wide standards to work towards.
“We have seen clients in certain sectors join together in non-competitive forums to start the conversation around how to standardise information,” says Thomas. “One such example is in the retail space, where major brands have come together with ESG solution providers to agree on what good looks like from an environmental and a social point of view. There’s a good level of collaboration taking place in the marketplace.”
… and harnessing the power of digital to make it happen
Overall, four in five companies surveyed by Standard Chartered say they use technology to reduce complexity and create greater visibility and control throughout the supply chain. They report using a range of solutions – from standard process automation solutions to more cutting-edge tools that facilitate tracking and tracing, to financial tools and platforms provided by their banking partners.
“We’re hearing from clients who want to digitise end to end so that they’re not collecting information manually,” says Tan. “Often, they have visibility over tier one and tier two suppliers, but beyond that, it’s a real maze. Getting the transparency to be able to accurately report from an ESG perspective is extremely important for these companies. What's really interesting is that corporates are really questioning the data they're receiving from the supply chain – integrity is extremely important to them.”
“In this regard, ESG technology firms have become an essential part of the ecosystem, bringing their digitisation expertise to help corporates scale right across the supply chain. As ESG-linked financing and ESG reporting requirements continue to grow, adoption of their solutions will increase,” adds Nair. “A lot of bigger brands have already embarked on this journey, and the smaller and mid-sized companies are not far behind them.”
As data collection improves, so too does the opportunity to link the physical and financial supply chains…
To help drive more resilient growth, leading corporates are working with banks that leverage technology to help them continuously monitor their supply chains for ESG weak spots, but also leverage data to drive a more inclusive supply chain with financing, even for the deepest tier suppliers.
“The biggest value that we can bring as a bank is the financing that can drive sustainable supply chains. A lot of the time, suppliers are being told to do better, without having the funding that enables them to do that,” says Tan.
As a bank, we have deep insights about the markets we operate in, and by combining this with the ESG solution providers’ data, we can achieve a 360-degree view of our clients’ supply chains.
“What ESG solution providers bring to the table is deep knowledge of every single challenge that the brands or our customers are going to face in trying to make their supply chains sustainable,” says Thomas. “As a bank, we have deep insights about the markets we operate in, and by combining this with the ESG solution providers’ data, we can achieve a 360-degree view of our clients’ supply chains which enables us to target our sustainable trade finance offering in the most impactful way. It’s really powerful, and a very exciting opportunity.”
“It works both ways,” adds Nair. “Being a regulated entity has taught us to apply an enormous amount of rigour to anything that comes to us. When we look at ESG tech providers, we look at the value they bring in terms of what they can cover, but we also look at how they do it and whether it is going to pass muster in terms of our own data analytics. More importantly, the power of the data that we have, once we feed into the engine of the ESG tech providers, creates an extremely rich and meaningful output, not only for our clients, but for the industry as a whole. There is an enormous amount of value that banks can provide to the tech providers.”
… but there’s no one-size-fits-all approach
However, ESG solutions are still quite disparate, requiring partnerships with numerous fintechs, verifiers, and investors, and there are still no unified standards that enable participants in global trade to easily assess whether or not a transaction is compliant.
“Our clients are looking for tools that they can use more easily at scale where the information is already standardised,” says Mahabeer. “That's the beauty of digitisation: it makes it simple and easy, and as long as you can get it into the hands of everyone, you can drive a standard. But no fintech can do that alone. We need industry bodies, regulators, and all stakeholders to come together and define once and for all what sustainable trade looks like.”
It’s time to scale up so that data can enable sustainable trade
Global trade has an unprecedented opportunity to reach its true potential as an engine for inclusive economic growth and driver of sustainable development – and the tools are available to make this happen. With greater adoption, and a more collaborative approach, data can unlock the power of the world’s supply chains to become a force for good.
“The demand for digital solutions that reduce the cost and complexity of ESG improvements in supply chains is growing at an exponential rate,” says Mahabeer. “We’re seeing real progress in sectors such as apparel, but what we need is a concerted approach across all industries. Some regulators are ahead on this: Singapore, for example, is working with ESG tech providers and making it easier for banks to provide financing to the clients who are sustainable. But sustainability is a global issue, and we need global solutions.”
“This isn’t just talk,” says Nair. “The chance to build a better future for trade is within reach, but to make it work, we need collaboration from all sides. Corporates are working together to agree on sectoral guidelines, ESG solution providers are bringing the digital tools to support them, and banks are developing new ways of providing the finance that will enable ESG improvements. There is work already underway by industry bodies, such as the International Chamber of Commerce, to create standards, and we need to see more of this. Global trade is about the collective, and it is the collective that will bring forth the outcome that we desire.”
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