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Webinar: How Levi’s and IFC are Turning Sustainability Compliance into Financial Gains

On November 12th, 2015, The Global Compact Network Canada (GCNC) in partnership with International Finance Corporation (IFC) & Levi Strauss & Co brought to the network the long awaited, informative Webinar on Supplier Sustainability Compliance and its link to Financial Gains.Levis and IFC

Global Compact Network Canada had the pleasure to invite Michael Kobori  –  Vice President, Sustainability, Levi Strauss & Co and Farzin Mirmotahari  – Senior Operations Officer, IFC  to speak about the Global Trade Supplier Finance Program.

Our two expert speakers provided the audience with a comprehensive overview of this first program of its kind that provides financial incentives for apparel suppliers to improve performance on labor and environmental standards. Levis and IFC

The Global Trade Supplier Finance Program

According to Michael, although there have been improvements in sustainability compliance of suppliers, programs were, in general, still ineffective. Overall critique of past programs includes duplication of monitoring, and lack of sufficient incentives for vendors to exceed the minimum social and environmental standards (comply only to avoid penalties and police). levis and ifc are turning sustainability compliance into financial g

In trying to address this challenge, IFC and Levis collaborated to create a Global Trade Supplier Finance Program. The program is the first of its kind to provide suppliers in emerging markets with financing solutions based on the supplier’s sustainability rating. Established in 2010, the program is a $500 million multi-currency investment and advisory program that works with buyers across industries that source goods in emerging markets. levis and ifc are turning sustainability compliance into financial gains
How does the program work?

Once the code of conduct is sent out to the participating supplier, the supplier undergoes an annual third-party assessment that rates the company on a 10-level-scale. This global standard includes assessment of forced labour, child labour, discrimination, harassment, abuse, etc. Depending on the company’s compliance rating, the GTSFP issues loans with different interest rates to suppliers. Hence, the higher the level of compliance, the lower the interest rate. Therefore, the GTSFP gives suppliers a new financial incentive to comply and even succeed the minimum social and environmental standards.
What are the benefits?

The buyer, as well as the supplier, benefit largely from the GTSFP. It can provide suppliers with significant cost savings if they make significant sustainability improvements to their business practices. The supplier is also given access to on-demand liquidity with 100% of the invoice value, which could help free-up existing bank credit lines. Therefore, the program puts sustainability at the top of the agenda for key decision-makers. Furthermore, the program is customized to fit buyer’s specific needs in the supply chain; it can improve working capital for buyers and reduce costs in the supply chain. Levis and IFC
What’s next?

There is an increasing demand for IFC to expand the program to new countries with large concentrations of suppliers and producers. To tackle existing challenges to uptake SMEs, IFC is working together with Financial Institutions in the emerging market to make loans more accessible to smaller suppliers. Levis and IFC

To go above and beyond, level 10 participants can “graduate” from the GTSFP to the Worker Wellbeing Program where vendors identify the needs of its workers and partner with local NGOs to integrate better employee support programs into their businesses. IFC is now exploring possibilities to further combine the two programs. Levis and IFC

After the presentation, the audience showed a high level of interest in the program, as they directed numerous questions to the two speakers. If you want to learn more about the GTSF program, please visit its official website or contact Elisabeth at elisabeth@globalcompact.ca.