SUSTAINABLE SUPPLY CHAIN FINANCING: HOW FINANCIAL INSTITUTIONS COULD ENHANCE SUPPLY CHAIN SUSTAINABILITY

Abstract

In the context of the financial crisis, society has increasingly questioned whether the financial industry plays by the code of ethics that can guarantee a sustainable future for generations to come. This thesis explores the role that financial institutions (FIs) could play as responsible global corporate citizens by enhancing sustainability along the corporate supply chain.

The research method relies on an interdisciplinary approach that integrates three distinct but complementary theories: supply chain management, sustainable supply chains and supply chain financing. These three building blocks are derived from different disciplines: supply chain management mainly from management and engineering; sustainable supply chain, from sociology, environmental and political sciences; and supply chain financing, from economics and finance. Each of these three disciplines offers a unique perspective, and complements each other in offering explanations.

The resulting Sustainable Supply Chain Financing (SSCF) framework relies on the hypothesis that: i) FIs have a pivotal position in the supply chain that allows them to have access to relationships, information and financial resources in each link in the chain; ii) large corporates can exert their purchasing power on their suppliers to promote the adoption of more sustainable business practices; iii) suppliers, especially small and medium enterprises (SMEs), have the capacity to adapt quickly to more sustainable business models when the right incentives are provided.

The research concludes that FIs have the potential to become the engine to foster sustainability along the supply chain. The SSCF framework propositions suggest that there is an opportunity for FIs vis-à-vis resource rationalization, information transparency and alignment of incentives to enhance supply chain sustainability, based on the characteristics we have identified as the triple-T of SSCF: Teamwork, Transparency and Traceability. The research portrays an illustrative case of how the resulting SSCF framework could be implemented in an applied context, using Brazil as an example. Finally, this thesis also leads to further areas of research in the new field of sustainable supply chain financing, which might begin to guide future inquiry on this topic.