Italian energy giant Eni is offering early payment to suppliers who meet ESG criteria in a programme managed by FinDynamic and funded by Unicredit and Credit Agricole.
The programme will use ESG metrics from Open-es, a Rome-based initiative to share sustainability data, to identify suppliers who qualify for access to early payment.
Eni, which has operations in 69 countries and a market capitalisation of US$54.08 billion, is one of the world's largest oil and energy firms, giving this programme the potential to be among the world's largest.
How Twinco Capital's founders are stretching the boundaries of SCF in developing markets - and where ESG fits in
Unique is a much-abused adjective, but it can justifiably be applied to two former bankers who are on a mission to lengthen the chain of supply chain finance, writes Paul Golden
In a market as large and established as supply chain finance it is hard to imagine how there could be any opportunities yet to be exploited. But six years ago, Sandra Nolasco (former head of structured trade finance at BBVA) and Carmen Marín (a 16-year veteran of Santander) decided that large corporates needed help offering their suppliers access to affordable funding at a much earlier stage of the process.
Despite their banking backgrounds, they are scathing of the approach banks have taken to supply chain finance.
Marco Polo, once a front-runner in the race to move trade finance onto distributed ledger technology, has asked for liquidators to be appointed after running out of cash.
The company, based in Ireland and with subsidiaries in the UK, the US and Singapore, had liabilities of more than €5.2m, exceeding the total value of assets by €2.5m. Ireland's tax authority is the biggest creditor, owed €2.6m.
The company said it had been in talks with Bank of America about a technology partnership, but late last month, Bank of America advised the company that they could not proceed with the commitment, which would have generated $12m in annual revenue.
Liquidators Interpath Advisory now aim to sell all or parts of the business as a going concern.
Stenn secures $200m receivables funding
SCF provider Stenn Technologies has closed a $200 million receivables financing facility, expandable to up to $400 million, with New York-based Crayhill Capital Management. The funding is collateralised by Stenn's portfolio of short-term trade receivables. Goldman Sachs provided a committed senior credit facility against the portfolio in the initial amount of $175 million.
Stenn claims to have financed over $12 billion in invoices to date, with a special focus on SME suppliers in developing economies. Crayhill has been a long-term funder, with a relationship dating back to 2016.
"We are delighted to build upon our successful relationship with Crayhill and Goldman Sachs, " said Chris Rigby, CFO and CIO of Stenn. "We look forward to utilising this capital and Stenn's technology and risk management expertise to provide SMEs around the world with growth solutions."
Saudi Arabian energy and chemicals giant Aramco has signed a Memorandum of Understanding (MoU) with Taulia to investigate providing supplier financing solutions, in conjunction with JP Morgan and Manafa Capital.
The agreement was signed as part of a Saudi initiative known as In-Kingdom Total Value Add (iktva), designed to encourage businesses based within the Kingdom and reduce its reliance on outside firms. The program achieved 63% local content in 2022, up from 35% in 2015, when iktva was originally launched.
Ziad T. Murshed, Executive VP & CFO of Aramco, described the agreement as, "A great step towards enabling local suppliers to access funding options to support the industrial ecosystem and strengthen our local supply chain.”
Aramco, with annual sales of 359.2 billion USD, has the potential to be Taulia's largest ever client by revenue.
The failure of Brazilian retail giant Americanas has once again thrown the spotlight on a lack of transparency around the use of supplier finance by large corporations.
The retailer, which has 1,800 stores across Brazil, went into bankruptcy protection on 19th January after incoming CEO Sergio Rial revealed that he and his team had found 20bn BRL (4bn USD) in previously unreported debt. Rial resigned shortly after.
The newly-disclosed borrowing had previously been obscured within a supplier finance programme under which Americanas engaged with suppliers on 90-day terms and multiple banks offered early payment to those suppliers. Following the revelations, Americanas said that its current cash position stood at only 800m BRL, down from a previously reported 7.8 bn BRL.
As Bloomberg Law reports, Americanas' financial reporting was covered by the accounting standards issued by the International Accounting Standards Board (IASB) which, unlike FASB, has yet to make the reporting of supplier finance mandatory. IASB has postponed a decision on when to take that step until its next meeting.
The Working Capital Forum is hosting a webinar on SCF reporting standards on 16th February.
Supply chain finance provider Twinco Capital has raised $12 million in new funding, raising the prospect of rapid expansion in its core fashion and retail markets.
Sandra Nolasco, CEO, and Carmen Marín, COO (above), founded the company in 2016, and it benefitted from a $3m funding round in 2021. So far it has onboarded more than 100 suppliers in 12 different countries for buyers in Europe and Latin America.
It offers up to 60% or order value at the purchase order stage, especially valuable to smaller suppliers in countries such as Bangladesh, and bases its lending decisions on detailed analysis of the supplier's record with the buyer -including non-financial metrics such as ESG performance.
Working capital finance provider LSQ is to use Calculum's Ada platform to help clients compare their payment terms with their peers, negotiate better payment terms and identify areas for working capital optimisation.
The agreement gives Calculum, founded in 2020 by former Marco Polo Network executive Oliver Belin (right), access to LSQ's substantial client base, built up over 25 years.
Pedro Rojas, VP of Global Sales at Calculum, described the partnership as, 'A vital step in providing tools for companies to maximize efficiency, maximize working capital and succeed in today's complex, technology-driven supply chains.'
'Calculum brings the data insights via AI analytics and LSQ the execution platform and liquidity options,' he added.
While factoring is ubiquitous in the region, there is still work to be done to convince the Baltic market of the benefits of buyer-led supply chain finance, says Uve Poom, COO at SupplierPlus in Talliinn.
By Rebecca Spong
The Baltic states of Estonia, Latvia and Lithuania are still lagging behind other European regions in their awareness and use of supply chain finance (SCF) as a means of improving a company’s working capital position.
While well-versed in the benefits of traditional factoring as a means of suppliers accessing early payment for their goods, the region has not yet been fully embraced the idea of a buyer-led supply chain finance solutions, says Uve Poom (right), chief operating officer at the Tallinn-based Supplier Plus.
Indeed, Estonia has a particularly established factoring market with volumes representing 20 percent of the country’s GDP, whereas the proportion of factoring vs GDP are closer to single digits in the other two nations.
“Factoring is very well-known, but it is seen as a supplier solution,” Poom explains.
When approaching CFOs or treasurers at corporates on the buying side of the equation, you “really need to get them out of the old paradigm and open their eyes a little to reveal what payables finance allows them to accomplish with their working capital,” he says.
While of course there are some CFOs from international companies that are very much aware of payables finance, there are many others – often working in Baltic subsidiaries of larger companies - that have little familiarity with the product, Poom says.
“When you have somebody who has not heard much about this – it tends to take several touchpoints over an extended period to convince them of the benefits. It can easily be a six to 12-month process,” he says.
However, with the increased pace of digitisation globally and within the Baltic region, coupled with the wider economic environment, Poom sees great potential in the future uptake of supply chain finance in the Baltics as well as in Central and Eastern Europe.
A big hike in demand for SCF?
“We are betting on a big hike [in SCF uptake],” he says, remarking that between 2020-21 payables finance globally increased by 38 percent, due in part to the immense pressure supply chains faced during the Covid pandemic and the urgent need for financing.
With the global economy facing fresh challenges, interest in SCF is likely to remain as corporates look to optimise their working capital as well as keep their suppliers in business.
Banks and financial institutions are also likely to retain their enthusiasm for the product, Poom predicts. “At a time when the economy is volatile, for financiers, buyer risk of large corporates is a safe haven as far as lending in concerned,” he says.
“I would forecast explosive growth, rather than something modest,” he adds.
Looking at the potential in individual Baltic states, Poom sees Latvia and Lithuania in a position to “leapfrog” Estonia in the rate of SCF adoption given the fast pace of technological development in the region.
“Estonia has been far ahead in terms of factoring volumes but if you combine the economic situation and you look at digitisation and how APIs are transforming how data is exchanged between ERPs and financiers…in terms of growth rates Latvia and Lithuania will exceed Estonia in the next couple of years,” he says.
Looking beyond the Baltics, Poom sees further growth in Central and Eastern Europe, noting how the European Bank for Reconstruction and Development (EBRD) has stepped up its support for SCF with the launch of its new Supply Chain Solutions Framework in late October to help provide more affordable financing to suppliers.
The first project under this framework took place in Poland with a corporate client of a Santander Bank Poland subsidiary. It supports the supply chain operations of convenience store chain ‘Zabka’ providing its suppliers an opportunity to receive early payment for goods. The EBRD is providing an unfunded risk participation in the project.
Food and Agriculture
Within the Baltics, Poom sees potential in agriculture to help producers optimise their balance sheet. There are many commodity trading companies in this sector in constant need of liquidity – and SCF could fulfil that need. Poom says he would like to provide access to mid-sized buyers within the agricultural sector, and not just work with the large supermarkets.
One example of SupplierPlus’ involvement in the food industry is the launch of a SCF programme for the Latvia-headquartered food producer Food Union last year.
The programme enables payments to be accelerated to the company’s medium and smaller suppliers. Food Union is the leading producer of ice cream in the Baltics and Denmark, with a strong share of the Norwegian and Romanian market too. It has an annual net revenue of €291 million in 2021.
Retail is another sector ripe for the adoption of SCF. It has traditionally been a strong market for factoring, but with a recent drive to automate payment processes and encourage the use of e-invoices in the sector, opportunities for SCF could start to emerge.
With retailers starting to implement automated ERPs (enterprise resource planning), it should make it easier for SCF providers and banks connect into their clients’ systems and set up their programmes.
Yet, there still needs to be a push towards updating the way companies transfer data, which typically relies on importing or exporting invoice data files and uploading them to a system in a xml or CSV file, for example, Poom argues.
“But that works only to a certain scale. If you go into retail for example and want to achieve high degree of automation, API is the only real option,” he says.
SupplierPlus positions itself as a company that could help drive the uptake of SCF and the rate of automation in the region, providing the technological expertise to set up a programme.
“We have one job which is to help supply chain finance develop and buyers to adopt it,” he says. The company was first established in 2015 and launched its SCF platform in 2019.
The company offers a SCF platform based on its own technology for corporate buyers and financial institutions. It is funded by both banks and non-banks such as asset managers and family offices.
“We are in a good position to help these companies whereas if you look at a typical bank SCF provider, their technological expertise may be good enough – but their capacity to deploy it related to all the other priorities that a large bank would have, is low,” he says.
Uve Poom will speak at the Tallinn SCF Summit on 6th and 7th February.
Supply Chain Finance platform Traxpay has become the first provider to start live tests of transferable digital finance instruments, which will be legalised by the UK government’s upcoming Electronic Trade Documents Bill.
The electronic trade documents will be managed through the TradeSecure service from quantum computing specialist Arqit, which uses distributed ledger technology to provide customers with referenceable digital finance instruments in the form of a Digital Promissory Note or Digital Bill of Exchange.
Arqit says its provision of both a provable digital original and a unique identifying stamp means the TradeSecure digital finance instruments cannot be tampered with, creating a safe legal promise to pay for goods or services which all supply chain parties can use to conduct trade.
Markus Wohlgeschaffen (pictured), Traxpay’s MD of markets and sales, described Arqit's technology as, 'Highly compatible with our supply chain finance ecosystem and uniquely capable of delivering clearly identifiable, quantum-safe digital finance instruments which are urgently needed in the digital trade era.'
Citi has joined forces with fintech Stenn to cover the 'last mile' of supply chain finance provision to the very smallest firms in corporate supply chains.
Embedding sustainability targets in working capital solutions was a central theme of this year’s Working Capital Forum Europe held in Amsterdam.
More than 250 Speakers and delegates gathered at the Beurs van Berlage on 1st December, all eager to share their experiences over the last year and listen to the latest market successes and technological advancements.
Ensuring your working capital solutions, including supply chain finance (SCF), are automated is “key” to their successful implementation, according to panellists speaking at the Working Capital Forum Europe in Amsterdam
Pepco looks to SCF to fuel expansion
European discount store operator Pepco is looking to use supply chain finance to support its expansion plans, says Alan Chitty, director of group treasury, tax and risk at the company at the Working Capital Forum Europe on 1st December.
The company is opening at least 550 new stores next year, adding to the existing 3000 shops across Europe, according to an announcement in October.
New regulations requiring greater disclosure of supply chain finance programmes are “unquestionably a good thing,” says Thomas Dunn, chairman at Orbian and panellist at the Working Capital Forum Europe in Amsterdam.
Both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have put together new and much-anticipated regulations in the past few months to help investors and rating agencies better understand why companies are using SCF programmes.
Dunn said the rules reflect a wider trend towards greater corporate disclosure, such as corporates potentially being asked to provide more detailed data on compensation packages or scope 3 carbon emissions.
“It will be more level playing field for disclosure and this level of transparency is beneficial for the market,” added Frederic Gits, group credit officer, corporates at rating agency Fitch Ratings.
Sean Edwards, CEO of the industry body International Trade and Forfaiting Association (ITFA) reflected that “more competent providers of SCF will be at a premium with the amount of reporting and data that will be required by corporates.”
The industry has perhaps taken a collective sigh of relief that the disclosure regulations are so far not calling for the reclassification of debt – which would potentially make SCF programmes less appealing to set up.
However, what the regulations will do, Edwards says, is “put the ball in the ratings agencies’ court” in that they will now have much clearer information to make their own decisions on whether a SCF programme should be considered debt or not.
“Now agencies will be able to look at a programme’s characteristics. Are there any unusual factors? Are DPOs over industry norms,” he explained.
While increased regulation of the SCF market has been in the pipeline for a long time, panellists agreed that their introduction will only help improve transparency in a market that had been threatened by scandal in recent years.
The collapse of supply chain finance firm Greensill Capital last March did have the potential to upset the market. However, panellists agreed that SCF market had swiftly recovered.
“It was a ripple and the waters closed over it extremely quickly,” said Dunn, praising the efforts of some banks and tech firms to “minimise the chaos” around the collapse.
However, panellist Duncan Mavin - the author of The Pyramid of Lies – Lex Greensill and the Billion-Dollar Scandal – warned that future scandal is always a possibility.
“There are still ‘Greensill Capitals’ everywhere - cropping up”.
Mavin’s book was published this year and charts the rise and fall of the company’s founder Lex Greensill.
His investigations into Greensill revealed that while the company was involved in some straightforward legitimate trade or supply chain finance, it had other business that fell out of the scope of SCF.
“The sources I developed said we want you to write about this so supply chain finance isn’t tarred with same brush as Lex,” he explained.
“Some really smart sources on Greensill said they didn’t invest – it was just too complicated – 200 pages of documents for couple of basis points,” he said.
He called on delegates and the wider investment community to remain alert to new and potentially questionable business propositions.
To read more about regulation and Duncan Mavin’s investigations into Greensill Capital – click here.
Focusing on simplicity is key when setting up an in-house supply chain finance (SCF) programme, said Kenneth Kernen, principal business controller for sourcing at Swedish telecoms firm Telia, speaking at the Working Capital Forum Europe in Amsterdam on 1st December.
Kernen chose to create a SCF system entirely built in-house by using its ERP system and without turning to a fintech or bank to take charge.
“[We needed] a highly automated solution where simplicity is preferred,” he said, speaking at the Working Capital Forum Europe in Amsterdam on 1st December.
While Kernan says he may consider adding other tools to the programme, he sees too much choice as unproductive.
“Adding too many options, nothing gets done. We believe less is more,” he adds.
The programme has all its functionality built into Telia’s existing SAP solution which is fully integrated into Telia’s "normal way of working", explains Kernen.
This contrasts with working with a third-party provider that needs to be integrated and create new ways of working, he adds.
The programme has grown substantially since its launch. In 2015 the SCF share of the company’s total accounts payables stood at 1 percent. By 2021 it reached 63 percent of total accounts payables.
Kernan wrapped up his presentation with advice to companies looking to replicate his achievements, saying you don’t need to look for inspiration from the ‘best’ supply chain finance programmes but “think about the best fit for you”.
Supply chain finance can be used as a tool to help optimise bids for windfarm concessions, says Michiel Deurwaarder, senior strategic buyer at European energy company Vattenfall speaking at the Working Capital Forum Europe on 1st December.
Ahead of putting together a bid, the Sweden-based company qualifies its suppliers and offers them opportunity to participate in a SCF programme. It signs memorandums of understanding (MoUs) with top suppliers to consider SCF for any project.
Supplier participation in the programme allows Vattenfall to better manage its cash flow and boost its return on capital employed (ROCE) helping the company put together a competitively priced bid for the concession.
“It delivers a competitive edge for Vattenfall to acquire the strategically important projects to shift energy generation from fossil to renewables,” Deurwaarder’s presentation stated.
Depending how long the windfarm takes to build, what payment terms are achieved with suppliers and the expected payback of a project, the expected ROCE is increased by 0.2 to 0.4 percent. This improvement could be key in winning a concession.
Under the terms of the SCF programme, payment terms could be extended to 120 days.
However, those suppliers on the platform benefit by accessing much earlier payments while Vattenfall enjoys extended payment terms.
Vattenfall first launched its SCF programme in 2017. Since then, it has financed €4,377 million-worth of transactions. It has 95 suppliers live and trading on the platform.
It partnered with tech company CRX Markets to provide the platform and works with banks including ING, Helaba, BNP Paribas, RBS and SEB.
The company is looking at how to add a “real and verifiable” ESG component to the programme.
However, Deurwaarder sees some challenges on horizon. SCF could be undermined by changes in IFRS rules and how SCF is treated on balance sheets. Rising interest rates could threaten the appeal for suppliers to participate in programmes.
Furthermore, governments could decide to ban longer payment terms which would lessen the benefit for Vattenfall.
Growing geopolitical tensions, particularly with China, are likely to encourage companies to diversify where they build their new factories in the coming years, says Menno Middeldorp, head of RaboResearch at Rabobank.
Speaking at The Working Capital Forum Europe in Amsterdam on 1st December, he forecast that China may lose its “lion’s share” of the total volume of new factories and foreign direct investment that it has become use to in recent years.
The lingering aftermath of the covid pandemic coupled with the heightened tensions between the US and China may push many global corporates to consider building factories in new locations or even in their home country.
The trend towards “reshoring” or “nearshoring” is being widely and increasingly discussed and is being reflected in the economic data, Middeldorp remarked.
Manufacturers are beginning to ask themselves where “can I build confidently where it won’t be part of a conflict between my country and another country”.
“As long as you think it is a risk – it makes sense to diversify their manufacturing base,” he said.
India is one country that Middeldorp sees “benefitting from the geopolitical change in direction” – given the country’s friendly relations with the US and its lack of reliance on China among other factors.
Latin America is another region that could benefit from this trend towards diversification, says Middleldorp.
The potential impact of this trend on supply chains could see companies look to have higher inventories to be “robust” in different scenarios, he added.
Middeldorp also outlined his forecasts for inflation and interest rates, painting a relatively gloomy picture of high – although stable – food prices over the next year.
While gas prices in Europe have slightly come down, he forecasts a potential hike in prices once again next year as the region approaches winter 2023.
Europe is currently using up high reserves built with Russian gas, he explained, noting how by next year these reserves would have dwindled, which will inevitably push up prices.
He forecasts that world trade growth will slow in 2023 with recessions expected.
Reflecting on the actions of central banks to try and control inflation, he asks “the real question is how fast will inflation come down” – noting that although inflation is edging down, it is still nowhere near the 2 percent target held by most countries in Western Europe.
A global supply chain finance programme with ESG at its heart won the Gold Award for Coca-Cola Europacific Partners at last night's Working Capital Awards ceremony in Amsterdam, sponsored by American Express. The Rabobank-run project does not include any payment terms extension for CCEP. Instead the aim is to work towards the group's target to reduce greenhouse-gas emissions across its value chain by 30 per cent by 2030.
Anthony Breach, head of procurement at Coca-Cola EuroPacific Partners, accepted the trophy in front of an audience of treasury and procurement leaders at the Amstel Hotel.
Judges were impressed with the company’s use of supply chain finance (SCF) to help encourage sustainable behaviour among its suppliers. The SCF programme works by incentivising suppliers to reduce their carbon emissions in return for more favourable financing rates.
The judging panel also recognised Coca-Cola’s efforts to make the programme as accessible as possible, with suppliers of all sizes invited to join. They also praised the soft drink producer’s decision not to link any extension in payment terms to the SCF programme.
The winning programme reflects a wider industry trend among multinational corporates to look at how they can reduce the carbon footprint across their entire value chain.
Many of this year’s award entries had a sustainability angle to them, with corporates looking at how SCF and other working capital solutions can be part of a broader strategy to reduce carbon emissions and encourage other sustainable practices among their suppliers.
Other winners and those awarded Highly Commended this year include global discount store brand Pepco who uses SCF to maintain its market position as a low-cost retailer; the Swiss chocolate producer Barry Callebaut who turned to SCF to meet certain ESG goals, and Arçelik, a Turkish household appliance manufacturer who is using SCF to help its suppliers tackle high inflation. The full list of awards is below.
Best Integrated Working Capital project
Winner: Teva Pharmacueticals
Highly Commended: Arcelik
Best use of Supply Chain Finance
Winner: Pepco Group
Highly Commended: Pick n Pay
Best ESG Working Capital Initiative
Winner: Coca-Cola Europacific Partners
Highly Commended: Barry Callebaut, Pick n Pay
Best use of Receivables Finance
Highly Commended: Krispy Kreme
Best use of Payables Finance
Highly Commended: Coca-Cola Europacific Partners, Henkel
Best Cash Forecasting Initiative
Best Working Capital Funding Solution
Winner: Pick n Pay
Highly Commended: Arçelik, Kellogg's
Best use of Technology for a Working Capital Project
Highly Commended: Arçelik, Coca-Cola Europacific Partners
Working Capital Champion: Thomas Dunn, Orbian
Working Capital Startup of the year: WeFi
Working Capital Innovation Award: Calculum
WHY SUPPLY CHAIN FINANCE PROVIDERS ARE RELAXED ABOUT REGULATION - DESPITE CONTINUING FALLOUT FROM GREENSILL