PUMA’s Sustainable Financing Helps Them Achieve Their ESG Goals
2024-07-12
Sustainable Finance Fuels PUMA's Green Transformation
PUMA, the renowned global sports brand, has embarked on a remarkable journey towards sustainability, leveraging innovative financial solutions to drive its environmental, social, and governance (ESG) initiatives. With a focus on reducing its carbon footprint, promoting ethical labor practices, and fostering transparency, PUMA has positioned itself as a leader in the apparel and footwear industry's sustainability efforts.
Unlocking the Power of Sustainable Finance for a Greener Future
Bridging the Payment Gap with Supply Chain Finance
PUMA's suppliers often face significant payment lags between producing goods and receiving payment, leading to cash flow challenges. To address this, PUMA has embraced supply chain finance, a solution that allows suppliers to receive early payment on their invoices from a finance company, for a fee. This arrangement not only helps suppliers bridge the payment gap but also aligns with PUMA's commitment to supporting its supply chain partners.
Factoring vs. Supply Chain Finance: A Smarter Approach
Compared to traditional factoring, where suppliers seek loans based on their own credit ratings, PUMA's supply chain finance model leverages the company's strong credit standing to offer more favorable terms to its suppliers. By utilizing the Infor Nexus digital platform, PUMA has streamlined the process, reducing manual work and increasing suppliers' banking options. This collaborative network connects buyers, suppliers, manufacturers, carriers, and banks, ensuring a single, accurate record of supply chain activities.
PUMA's sustainable finance journey began in 2015, with the principle of rewarding the best sustainability performers among its suppliers with the most attractive financing terms. This initiative, however, faced initial challenges as banks were hesitant to incorporate sustainability factors into their risk assessments. The International Finance Corporation (IFC), a World Bank subsidiary, played a crucial role in helping PUMA navigate these obstacles by advocating for the inclusion of sustainability considerations in the lending process.
Driving Sustainable Transformation through Collaboration
PUMA's partnership with the IFC and its adoption of the Infor Nexus platform have been instrumental in the success of its sustainable finance program. The platform's ability to provide a transparent record of supply chain activities has helped reduce risks and build trust among participating banks. As a result, PUMA has been able to onboard major European banks, such as BNP Paribas, to offer ESG-linked supply chain finance solutions to its suppliers.
Scaling Up Sustainable Finance: From Invoices to Purchase Orders
The success of PUMA's sustainable finance program has led to a significant increase in supplier participation, with the acceptance rate tripling during the COVID-19 pandemic. PUMA is now exploring ways to further enhance the program, including the possibility of transitioning from invoice factoring to purchase order financing. This would allow suppliers to be paid even earlier, further strengthening their financial resilience and aligning with PUMA's commitment to supporting its supply chain partners.
PUMA's sustainable finance journey has not only transformed its own operations but has also had a ripple effect on the broader industry. By showcasing the benefits of incorporating sustainability into financial decision-making, PUMA has inspired other companies to follow suit. The company's participation in industry events, such as the Infor Nexus European Advisory Customer Council meeting, has provided a platform for PUMA to share its experiences and encourage other organizations to embrace sustainable finance as a powerful tool for driving positive change.
