Citi Perspectives Spring 2020

28 | Treasury and Trade Solutions The next stage of this evolution of treasurers’ responsibilities is for them to become an ambassador for ESG issues. Treasury is uniquely positioned to play this role because of its connections across various parts of the business that can be critical in delivering ESG-related targets, including procurement, sales, finance, and other functions. Indeed, in some cases, treasury may be the only function capable of helping to enable corporates to achieve their ESG goals. One reason for this may be that while ESG goals may be set at the corporate level, implementation is often the responsibility of suppliers; it is essential to ensure that the entire supply chain is ESG- compliant. Pushing ESG compliance requirements down to suppliers necessarily creates costs for them. Take the example of a target for working standards for suppliers in the clothing sector (which are often located in emerging markets). The suppliers will not only need to invest to improve ESG standards, but must also bear the costs of an ESG audit by a third-party firm. These costs are likely to be passed on to the corporate buyer, which could reduce its competitiveness. However, treasury can deploy financial solutions such as supplier finance to create targeted financial incentives for suppliers to comply with ESG targets. Such solutions may not only mitigate higher costs associated with ESG improvements, but may also deliver additional financial benefits for suppliers (and potential working capital benefits for buyers). To be clear, in such a situation treasury will be in a position to help if it already has a strategic role within a company; in some firms, supplier relations remain the sole responsibility of functions such as procurement. However, given the increasing importance of ESG for both regulatory and commercial reasons — we have seen that many companies accept that the momentum toward a greater prominence for ESG issues is unstoppable and that it is expected to have profound consequences — it could act as a catalyst for treasury to gain greater strategic responsibility within companies. Drawing on support Sustainability and ESG issues cover a huge range of topics: there are 17 UN Sustainable Development Goals alone, each of which addresses dozens of topics. Consequently, almost every part of a company will likely be affected by the decision to embrace ESG issues and pivot toward a more sustainable future. Equally, there are numerous ways in which a corporate will need support to adapt to new ways of working and thinking in relation to ESG issues. Many existing Citi Treasury and Trade Solutions can be adapted to help achieve sustainability goals, relating to supply chains or trade, for instance. Treasury can also help to implement new corporate policies such as a carbon-conscious travel policy that utilizes carbon offsets for business travel. Similarly, treasury can leverage digital tools and processes to help reduce manual, paper-based processes.