Sustainability Linked Supply Chain Finance: A Collaborative Innovation by Henkel and Citigroup

Treasury and Trade Solutions, a division of Citigroup, is proud to present an innovative case study on sustnability-linked supply chn finance SCF for Henkel Corporation in Asia Pacific. This case study highlights how collaboration between a global corporation and its financial partner enabled the development of an industry-first SCF program that balances economic success with environmental and social responsibility.

Henkel's focus on sustnability is deeply rooted, as evident by their 30-year history of producing annual Sustnability Reports. The comp become climate-positive by 2040 and increase its positive impact across its footprint by tripling efficiency compared to 2010 figures by 2030. This ambitious goal necessitates collaboration with the entire supply chn network to ensure suppliers align with these sustnability goals.

The Challenge:

Henkel's regional treasury team in Asia Pacific recognized that an SCF program incorporating environmental and social criteria could significantly enhance supply chn resilience and improve access to liquidity for its extensive supplier base across the region.

The Solution:

Building upon their existing successful SCF program, Henkel med to expand it into a sustnable finance framework. Suppliers who demonstrate strong or improving sustnability performance, as evaluated by an indepent assessment provider, are eligible for financing at preferential rates. These assessments are conducted according to 21 criteria aligned with the United Nations Sustnable Development Goals, tlored based on supplier location, industry type, and size.

Navigating this pioneering program required cooperation between Henkel and Citigroup in defining new data flows for automated financing decisions based on sustnability scores. To facilitate smooth implementation and communication, Citi supported Henkel's efforts to onboard suppliers digitally while building a pricing scheme that was attractive to the supplier community.

The Outcome:

Henkel has witnessed overwhelming interest from potential participants in this sustnable SCF offering, especially small and medium-sized enterprises SMEs who might not have been eligible for SCF previously. The program was initially launched in Australia and New Zealand with major suppliers actively participating. Based on its success, it is being expanded to Henkel's largest supplier base in China and plans to roll out to other countries.

The benefits of this program are multifaceted:

• It strengthens Henkel's reputation as a leader in sustnability.

• The treasury team becomes an innovator and pioneer for sustnable financing practices in Asia Pacific.

• Utilizing financial strength, the program provides suppliers with cost-effective funding options that foster closer relationships and business growth.

• It enhances supply chn resilience by encouraging investments into improving sustnability performance across supplier communities through digitization.

In summary, this partnership between Henkel and Citigroup demonstrates how corporations can create a virtuous cycle of economic, environmental, and social value by leveraging innovative financial solutions like sustnable SCF. This case study serves as an inspiration for other organizations looking to transform their supply chn finance programs while embracing sustnability principles.
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