PUMA Launches Financing Program to Reward Suppliers for Sustainability Performance
IFC has adopted a financing structure with tiered pricing of short-term working capital, offering lower costs for those suppliers that achieve a high score in PUMA’s supplier rating, which is applied after PUMA has monitored the supplier’s adherence to the company’s social and environmental standards through an auditing process. At the same time, suppliers are able to benefit from PUMA’s strong reputation and financial position to secure affordable financing.
“This is the first program in our industry, which takes into consideration a supplier’s score in PUMA’s environmental and sustainability rating as a bonus or malus on related fees. Thus our supplier’s investments in sustainability are rewarded, which is an additional incentive for them to improve their environmental and social standards,” said Lars Sørensen, PUMA’s Chief Operating Officer.
The new financing structure was recently launched with the support of European bank BNP Paribas and IT platform provider GT Nexus. The first phase of the program is being rolled out in Bangladesh, Cambodia, China, Indonesia, Pakistan, and Vietnam, but the partnership with BNP Paribas is expected to help the program expand.
“With the help of BNP Paribas and their global presence we can offer this innovative program to PUMA suppliers worldwide,” explained Frank Waechter, Senior Director of Treasury and Insurance at PUMA. “This is not only an outstanding cooperation with BNP Paribas but also a great example of cross-functional internal collaboration of PUMA’s Finance functions and Operations, which underlines our ambition to implement fast and efficient processes.”
Ball Planet, a Chinese supplier of soccer balls that has been a business partner of PUMA since 2010, was the first to join the program. Ken Hong, a General Manager for the company, explained that affordable financing has been a challenge to access, adding, “This innovative program will not only help us improve our cash flow, but will also provide us with a financial incentive to improve our environmental, health and safety and social standards, which will ultimately reduce our operating costs and enhance our performance.”
The better a supplier performs on PUMA’s regular audits of social, environmental and health and safety compliance, the better funding conditions they will have access to through the program. BNP Paribas already only funds suppliers (through supplier finance tools) that have successfully passed the bank’s own “Know Your Suppliers” checks, to ensure they meet certain compliance standards. IFC also has a related Global Trade Supplier Finance (GTSF) program, which provides working capital to suppliers backed by receivables from international buyers. PUMA’s program is the first scalable supplier finance program to specifically reward sustainability performance in the apparel industry.
In a separate effort to improve working conditions in its supplier factories in developing countries, PUMA and other major apparel brands including Nike, H&M, Timberland, REI, Levi Strauss & Co. joined the Social and Labor Convergence Project as founding members last year. The project participants are collectively developing an industry-wide, standardize methodology for social and labor performance assessment in apparel and footwear supply chains in an effort to stomp out labor abuses the industries are notorious for.