The challenge

As LDC works to fulfil its mission, the company is guided by their shared purpose, which is to create fair and sustainable value, for the benefit of current and future generations. To this end, the company works with all its stakeholders including its banking partners to ensure the sustainable and traceable product journey.

LDC takes its impact on the environment very seriously, and continually seeks to minimise its environmental footprint. Sustainability is at the heart of its business model, which aims to:

• Increase ESG financing – LDC plan to increase overall financing in India into sustainable financing.
• Expand traceability, verification and monitoring – LDC ensure transparency is a priority, ultimately to trace ESG compliant procurement back to the plantation level.
• Supplier financing – incentivise and collaborate with suppliers to develop a more sustainable ecosystem.

The solution

LDC India is the first company entity in South and South-East Asia to execute a trade ESG financing transaction for cotton procurement and is focused on ensuring proper checks and balances are in place for ESG classification. This would set the benchmark and a precedent for future deals and expand to other businesses complying with ESG guidelines and standards.

LDC collaborated with Citi and explored multiple flows and finally selected sustainable cotton procurement. Both teams performed detailed due diligence to ensure the entire flow and transaction contributes to sustainable development goals (SDG 15 – Life on Land) and the entire financing is being used for a sustainable finance purpose (purchase of BCI certified cotton).

It was important to create a simple and streamlined process with a swift implementation which kept sustainability at its core. LDC and Citi were able to quickly turn around the process, product implementation, ESG classification and disbursal with minimal steps. LDC, in collaboration with the bank, used an end-to-end digital loan disbursement process which helped LDC disburse the loan on the same day of executing the cotton purchase contract.

Best practice and innovation

LDC understand the need for sustainable farming in today’s climate and to address this pressing issue it continues to reinforce the mechanisms, processes and structures that embed sustainability and accountability in all its business activities.

This solution directly promotes BCI’s comprehensive sustainability standards in cotton supply chain and prioritises the purchase of better cotton. With the help of green financing for cotton procurement, LDC can better support the BCI and contribute to a larger target of BCI to achieve improved work conditions, gender equality, greenhouse gas reduction, crop protection and better soil health.

Key benefits

• Directly contributes to supporting LDC’s pillars of sustainability.
• Sets a precedent for other LDC entities across the globe, other commodity players and corporates to further bolster their sustainability agenda and participate in green financing.
• Opens scope for LDC to include procurement of other commodities (palm oil and soy-bean) under green financing.

“As we continue to expand our diverse origination and production operations in India, our focus is on environmental sustainability and positive action in the communities where we operate. LDC’s mission is to keep essential food and feed supply chains moving, leveraging our global network, know-how and risk and compliance management to help keep feeding and clothing millions of people worldwide,” concludes Vinit Mishra, Head Treasury and Trade Finance, India.