Multinational wind turbine maker Vestas was also highly commended in the Best Working Capital Initiative category for the launch in Brazil of its first ever sustainability-linked supply chain finance (SCF) programme. Judges were impressed by the inclusivity of the programme, which is particularly supportive of SMEs, and by Vestas’s commitment to overcoming challenges associated with launching innovative structures in emerging markets.
The challenge
Vestas had been running a successful SCF programme with Santander since 2019, but wanted to bring it into better alignment with the company’s strong sustainability commitments. It identified an opportunity in Brazil, where Vestas relies on an extensive supply chain to operate a plant in Ceará state that is responsible for 80% of the company’s Latin American production by value. It also found policies supporting SME sustainability to be scarce in the country.
Tiered discounts based on EcoVadis rating
So in August 2024 Vestas mandated Santander Brazil to help develop its first sustainability-linked SCF solution. Suppliers who sign up for the voluntary programme are rewarded with tiered financing discounts that increase as their ESG ratings by sustainability rating platform EcoVadis improve.
To provide additional support for SMEs – which represent a significant share of Vestas’ supply chain but often struggle to access affordable credit – any SME that commits to an EcoVadis assessment receives preferential terms, regardless of their initial rating.
To ensure the programme reflects progress over time and Vestas can engage suppliers more strategically based on its own sustainability objectives – such as the reduction of Scope 3 greenhouse gas emissions across its value chain – suppliers’ ESG ratings are reviewed annually.
Promising results
Although early days for the programme, it is starting to deliver tangible results. Vestas says a substantial percentage of the programme’s outstanding volume relates to EcoVadis-rated suppliers, and a material portion of suppliers onboarded are already ESG compliant to some degree.