Photo of Daniel Lopez Wismer, Henkel Algeria.

Sustainable supply chain financing (SSCF) solution delivers in Algeria

The challenge

Henkel employs 634 people in Algeria, and despite the COVID-19 global pandemic, Henkel Algeria managed to increase sales, especially on household products which were directly linked to the changes in consumers’ hygiene habits due to the virus spread. Henkel Algeria’s biggest challenge and ambitions are to keep up with increasing competitiveness on the local market brought by local manufacturers and to contribute to Henkel’s global sustainability ambitions.

The solution

Citi, as a trusted advisor and partner, proposed to support Henkel, both at a regional and country (Algeria) level, regarding its sustainability initiatives, especially during the Covid crisis. There was a strong synergy given the third-party rating agency that Henkel uses for their suppliers is the same one the bank has approved for the sustainable supply chain finance (SSCF) programme. Henkel’s objective with the support of its bank was to achieve several of its sustainability goals:

• Become climate positive by 2030 (100m tons of CO2 saved together with Henkel consumers, customers, and suppliers).
• Foster a circular use of production material waste by 2030 (zero plastic waste into nature).
• Enhance the positive impact on communities (improve 20 million lives worldwide 2010-2025).

The following was rolled out to address Henkel’s needs:

• SSCF programme: a clear method of trade finance to meet and promote sustainability objectives for Henkel.
• Fair and equitable incentives presented to suppliers seeking to achieve lower cost of financing and sustainability.
• Promote continuous improvement from suppliers via a tiered incentive programme and embedding an ongoing environmental, social and governance (ESG) mindset.
• Third-party agency for suppliers’ ESG assessment ratings process and supplier commitment to completing their individual surveys; close coordination between the bank and Henkel teams to ensure completion.

Best practice and innovation

Henkel was looking for innovative ideas to link its existing SCF programme, with the company’s sustainability goals and ESG commitments and, at the same time, reward top performing suppliers. This was especially true in Algeria, where the SCF programme can only be implemented for local suppliers, due to regulatory constraints. Henkel wanted this solution to combine two factors to:

1. Provide innovative ESG linked systems to its local clients.
2. Expand the use of its SSCF programme in the region.

Taking into consideration Henkel’s sustainability focus areas and local constraints from regulatory matters, Henkel Algeria worked extensively for more than a year on identifying SSCF as the right method to integrate their ESG strategy. The firm will not only be able to embed its sustainability objectives into its supply chains by encouraging its suppliers to get rated within an agreed timeframe, but also provide additional incentives via SSCF pricing to maintain and improve their ESG ratings. The innovation in partnership with a third-party agency for suppliers ESG assessment was beyond expectations, and it continues to promote improvement from suppliers via a tiered incentive programme and embedding an ongoing ESG mindset.

The programme provides preferential rates for suppliers with strong ESG performance and helps drive improved scores over time. This method is being implemented for both existing and new suppliers who demonstrate strong or improving sustainability performance.

Key benefits

• Headcount savings.
• Process efficiencies.
• Increased automation.
• Improved visibility.
• Increased system connectivity.
• Exceptional implementation (budget/time).

Other countries will benefit from this success in Algeria, extending to other markets like Tunisia and Turkey, meeting Henkel’s ESG objectives and increasing supplier participation.