Currently, over $22 trillion worth of goods move annually across borders, oceans, and digital networks. But with global trade expanding, so does their environmental impact, as global supply chains are responsible for nearly 80% of the world’s carbon emissions. However, the conversation around green financing remains limited. It often stops at boardrooms and billion-dollar companies. Smaller businesses, which are the pillar of these chains, are often left out. They are held back by limited access to funds, high interest rates, and low awareness of available financial tools.
NBFCs and fintechs can change that. They are well-positioned to push ESG-linked supply chain finance to these underserved layers, embedding sustainability into financial frameworks that reward eco-conscious practices and drive lasting impact. At first glance, the incentives are attractive. Suppliers get quicker payment timelines, lower financing costs, and better market reputation with compliance, while buyers establish and strengthen resilient, compliant supply chains.
Manufacturers and retailers benefit through enhanced investor confidence and cost efficiencies, while distributors profit from greener logistics and deepening of ESG-friendly partners.
Green Goals to Ground-level Actions
India has set bold climate targets, aiming for 500 GW of non-fossil fuel energy capacity by 2030 and achieving net-zero emissions by 2070. However, to turn these targets into tangible progress, India is looking at an investment need of over $10 trillion. That’s not a small task that can be fulfilled by building solar parks or electrifying transport; it needs to rewire how our industries and supply chains function fundamentally. Here, green financing is becoming key in sustainable economic transformation, decarbonising heavy industries, retrofitting infrastructure, or scaling up clean tech. With this, ESG-linked SCF quietly steps into the spotlight.
SCF introduces environmental incentives into financial system elements, such as product-as-a-service, take-back (or buy-back) schemes, and re-manufacturing, through circular strategies. This allows businesses to shift towards circular models and make sustainability a source of economic opportunity rather than a cost, while creating long-term value as a result of resource efficiency and waste minimisation.
Green financing contributes to the financial feasibility (or at least reduced risk) of circular practices, especially for MSMEs who may lack sufficient funds to make the shift, effectively allowing them to de-risk their transitional period and reduce the financial pressures that currently hinder their exploration of alternative processes to linear options.
In addition, geopolitical events and changing policy landscapes are actively redefining the global trade landscape. A clear illustration is the EU’s Carbon Border Adjustment Mechanism (CBAM). This is a tax on carbon-based imports, and it is already affecting Indian steel, aluminum, and fertiliser exporters through increased costs and new documentation requirements to even access the market. This isn’t a future concern, as the pressure is only going to intensify as more markets adopt carbon-related import regulations. As banks and fintechs have opportunities to reward better green behaviours, MSMEs can receive lower interest rates, faster access to capital, and better trade terms.
A Funded Vision
Governments and regulators face rising pressure on ESG compliance, while banks and fintechs integrate responsible investing into funding to strengthen business resilience and open trade opportunities. MSMEs struggle with limited capital and technology, making it difficult to invest in cleaner production, ethical sourcing, or tracking systems. The bigger obstacle is fragmented supply chain data, gaps in emissions, raw material carbon profiles, and labor reporting that prevent accurate sustainability assessments. Closing this requires a coordinated ecosystem like financial institutions offering sustainable lending, governments providing subsidies and tax incentives, and large companies supporting MSME suppliers with scale, funding, and training.
The urgency for companies to transition to accountable, sustainable practices cannot be overstated, as long-term trade relationships are increasingly tied to sustainable performance, and sustainable SCF is projected to grow at a CAGR of 17.47% from 2024 to 2032. The transition from climate ambition to climate action is inevitable. The most pressing question is not whether businesses will adopt responsible supply chain finance, but rather how deeply they will adopt it. Will companies be able to look beyond the ESG checklist and back-to-back training programs, and move sustainability into the DNA of their supply chains?
