Aurélien Viry, CEO, and Gilbert Cordier, head of Supply Chain Finance at Societe Generale Factoring, discuss how fintech partnerships and sustainability-linked supply chain finance help meet their clients’ goals.
Global Finance: Societe General recently established a collaborative relationship with CRX Markets, a German fintech. How does this enhance your supply chain finance (SCF) solutions for clients?
Aurélien Viry: Following the COVID pandemic, some large corporates faced issues with their supply chain, suppliers, and banking partners to fund increased requirements. To help strengthen their supply chain finance programs, some large corporates started looking for bank-agnostic solutions using multiple or successive funding partners.
This is precisely what we are offering through our partnership with CRX Markets. Societe Generale wants to better serve its clients by expanding its product offering and delivering the most suitable working capital solutions for large corporates. This could be either through our in-house or third-party platforms, but in both cases, large corporates can count on Societe Generale as a reliable partner for funding suppliers.
GF: What types of data do you analyze, and how does this analysis help clients optimize their working capital?
Gilbert Cordier: SCF does not only mean looking at days payable outstanding. Societe Generale uses its expertise to provide the best service to its clients regarding working capital advisory. We focus on the entire product lifecycle, including sales, inventory, and trade payables. We make a peer analysis based on available public information in annual reports and from our own receivables and payables programs, which encompasses peers of a particular client. This benchmark is highly appreciated by our clients and allows us to identify the best solution for optimizing working capital for them.
GF: How does your peers comparison feed into your working capital analysis tool, and what kind of competitive advantage does it provide your clients?
Cordier: Little information is publicly available, and SCF programs can be very light on detail. Sharing what peers do—but keeping their names confidential—and the payment term extensions they have been able to negotiate with similar suppliers is a significant input for our clients. Last but not least, having onboarded thousands of suppliers over the past years, our dedicated team has built close relationships with them, which makes it easier to convince an existing supplier to join an SCF program set up for another buyer.
GF: Can you provide an example of how sustainability-linked factoring works in practice, and its benefits?
Viry: Sustainability-linked SCF is a powerful solution for our clients to address their Scope 3 emissions targets. Scope 3 are the most significant emissions for most industry segments and probably the toughest ones for which our clients are trying to achieve some reductions. We apply a sustainability-linked bonus/malus [reward/penalty] mechanism to the funding rate we offer suppliers, creating an incentive for them to reduce emissions. Based on the client’s main ESG [environmental, social, governance] objectives, such as CO2 reduction, our sustainability-linked SCF program sets annual targets for suppliers to get a bonus on the program’s pricing.