Sustainable Supply Chain Finance: A Review of Environ-mental Performance Incentives and Supplier Financing

Abstract

Sustainable supply chain finance (SSCF) links the price or availability of supplier financing to environmental and social performance. Programmes in which a large buyer, together with a bank or platform, offers suppliers cheaper reverse factoring when they score well on sustainability audits or ratings have moved from pilots to mainstream offerings since the mid-2010s. Whether these programmes actually improve environmental outcomes, however, remains unclear. This paper examines that question through three dimensions: how incentives are designed, how environmental performance is measured, and who is able to participate. Using an integrative review of 200 conceptual, analytical, empirical and practitioner sources, the paper finds that (1) most programmes rely on modest interest-rate discounts whose value to suppliers depends heavily on prevailing rates, buyer credit quality and supplier liquidity needs; (2) measurement relies largely on self-reported questionnaires, audits and third-party ratings that are costly, inconsistent and vulnerable to gaming, with weak linkage to verified outcomes such as emissions reductions; and (3) small and medium-sized enterprises (SMEs), which face the largest financing gaps, are frequently excluded by onboarding costs, data requirements and programme thresholds, while deeper-tier suppliers where environmental impacts concentrate are rarely reached. The review proposes an integrative framework connecting incentive strength, measurement credibility and participation breadth, advances six propositions, and sets out a research agenda emphasising causal evaluation, outcome-based metrics, multi-tier designs and inclusive digital infrastructure.