The finance programme aims to improve compliance at Levis supplier factories

The finance programme aims to improve compliance at Levi's supplier factories

Jeans giant Levi Strauss & Co is to provide low-cost loans to help its garment suppliers in developing countries to upgrade environmental, health, safety and labour standards - with better terms available to those who perform well on sustainability metrics.

The new supplier finance programme has been launched with the World Bank Group's International Finance Corporation (IFC) - and is a "first of its kind", according to both companies.

IFC's global trade supplier finance programme (GTSF) offers tiered pricing of short-term financing for garment suppliers. Lower cost rates will be offered to those borrowers who have the highest scores on LS&Co’s Terms of Engagement (TOE) assessments, which measure labour, health and safety, and environmental performance.

"The higher the vendor’s TOE score, the more they will save," the IFC says.

“Levi Strauss & Co believes vendors that score highly on our strict standards should be recognised and rewarded in ways that allow them to reinvest in their business and improve their sustainability performance," explains chief supply chain officer David Love. "This innovative programme provides financial incentives to our vendors who perform well on sustainability metrics.”

Specifically, the "pioneering" US$500m multi-currency investment and advisory programme will reward suppliers that score higher on Levi's Terms of Engagement (TOE) assessments, offering them lower cost rates on working capital financing.

Established in 2010, the $500m GTSF programme provides working capital to ready-made garment suppliers backed by receivables from international buyers.

"Levi Strauss & Co is the first major international buyer to partner with a financial institution to offer its suppliers a direct financial incentive to improve compliance," says Alzbeta Klein, director of manufacturing, agribusiness and services at IFC, adding: "Our experience shows that strong environment and social management correlates with stronger financial performance."

The scheme will be administered through GT Nexus, a cloud-based trade and supply chain management platform.