Money makes the world go round

Tesco’s recent announcement connecting supply chain finance incentives with sustainability goals is potentially a game changer. By linking annual greenhouse gas emissions data provided by suppliers - independently verified and assessed by sustainability experts - to lower financing rates provided by their banking partner, Santander, creates a win-win scenario. Suppliers have another reason to invest in a green supply chain and, with Tesco’s weight, they can refer to their customer calling for action.

Consumers are demanding change and regulators may soon follow. To speed up permanent changes to operational practices and behavior, both a commercial incentive and practical implementation are required.

Tracking products across their entire supply chains needs a digital solution that is easy and straightforward to implement yet provides the tamperproof auditability that can be transparent to ensure trust in the data. Without transparency, the Tesco programme risks being more style than substance.

Blockchain can hold the answer: data collected in the blockchain network is automatically stored in a database that is constantly updated, providing a reliable and immutable record of all participants in the chain. This results in a visual and digital representation of the whole supply chain, which not only facilitates traceability and product assurance, but also helps organisations to drive behavioural change and build trust across the whole ecosystem. 

Setting carbon emission goals is one part; measuring them and monitoring them is arguably more important. In Tesco’s case there are a multiple supply chains across the world and each participant has different levels of digitalisation. Consider a farmer at one end using paper based systems to tier 1 suppliers at the other which have managed to invest in digital tools.

What is required is a common digital bridge that can connect across all types of digital capability from the lowest point, a connected device such as a smartphone, to a full digital ERP system like SAP. Data capture needs to be easy to setup, implement and operate seamlessly from end to end across a supply chain in order to be effective and reliably record the product journey.

Incorporating blockchain within value and supply chains enables companies to bring traceability, transparency and compliance which, in turn, helps them meet sustainability and ESG requirements while also increasing operational efficiency.  

Setting arbitrary ESG goals is no longer sufficient as we move into a world where regulators and, more importantly, consumers are demanding proof. Ultimately, the latter group will decide, using their purchasing power, whether a business model is sustainable over the long term, so it is certainly not in a company’s interests to fall short of their expectations.

Over US$1 trillion of financial assets are now tracking ESG parameters (source: Morningstar). All companies need access to capital and, as this pool grows, it won’t be long before ESG becomes a reporting line in financial statements. Using blockchain to verify ESG metrics will ultimately lead to a fairer, more resilient and robust corporate model for the future. Tesco’s combination of financial benefits with carbon goals makes for a win-win scenario providing it is baked by trusted data.