The Supply Chain Solutions Framework from the European Bank for Reconstruction and Development (EBRD) is designed to support SME suppliers in becoming more sustainable. It combines financing, risk-sharing with partner banks, and advisory services to help suppliers access affordable working capital while aligning with ESG standards. The programme provides technical advisory and capacity-building support and facilitates access to dedicated financing instruments for ESG improvements. Advisory services cover environmental and social compliance, decarbonisation planning, monitoring, and reporting. Performance-based incentives encourage suppliers to meet sustainability targets.
European Bank for Reconstruction and Development – Supply Chain Solutions Framework
Abstract
The European Bank for Reconstruction and Development (EBRD) introduced the Supply Chain Solutions Framework in 2022 to enhance supply chain resilience and sustainability across its countries of operation. This initiative primarily supports suppliers, especially SMEs, by improving their access to affordable working capital. Additionally, it promotes collaboration between major buyers and their suppliers to foster compliance with best-practice ESG standards1. The framework also functions as a crisis response tool, enabling the EBRD to provide emergency liquidity to supply chains when needed.
Funding within the framework is allocated to specific facilities, allowing the EBRD to participate in supply chain finance programs through both funded and unfunded risk-sharing arrangements. The total framework availability amounts to EUR 250 million and it connects large corporations, known as aggregators or anchor buyers, with local and global supply chains. The framework spans multiple sectors to enhance supply chain financing across industries. It particularly benefits SME suppliers by providing faster and more affordable access to working capital. Additionally, suppliers can receive advisory support, including through the EBRD’s Advice for Small Businesses programme, to align with best-practice environmental, social, and governance standards.2
The instrument combines concessional financing, risk-sharing mechanisms, and technical assistance to incentivise ESG improvements among suppliers. It launched in Turkey in cooperation with Metso, a Finnish mining multinational, and has since expanded to additional countries. Currently, six programme arrangements are active, including two with Citibank UK, two in Poland, and one each in Turkey and Romania. Further expansion across EBRD countries of operation is ongoing.
The EBRD collaborates with both international and reputable local partner banks through funded and unfunded risk-sharing arrangements to support SCF programmes. The first-stage approach can be either initiated by the banks themselves or by the corporates seeking support as illustrated in the following examples:
Citibank Europe Plc: An uncommitted funded facility with a total limit of up to EUR 75 million. “Funded” here means that the EBRD provides financing resources which are in turn on-lent by Citi under supply chain finance programmes. The facility is uncommitted, i.e. Citi is not contractually obliged to draw on the EBRD’s funds but may do so when needed. The proceeds are used to support SCF programmes arranged by Citibank Europe Plc and Citibank NA London Branch (jointly referred to as “Citi”) for the benefit of Anchor Buyers and their suppliers located in the EBRD’s countries of operations (CoOs).
Santander Factoring Poland (SCSF): An unfunded facility with an overall limit of up to EUR 74 million. ‘’Unfunded” means that EBRD does not provide cash financing but instead shares the risk with Santander, for example by guaranteeing part of Santander’s exposures. This allows Santander to expand its SCF programmes for anchor buyers and their suppliers in the EBRD’s CoOs without directly increasing its risk exposure.
Sustainable Supply Chain Finance in Turkey: The EBRD and Citi launched a sustainable supply chain finance programme for Metso’s Turkey-based SME suppliers. The programme includes outcome-based incentives rewarding suppliers for meeting predefined emissions reduction targets, thereby accelerating their transition to greener operating models. Following its success in Turkey, the project has been extended to suppliers in the Baltic countries in 2024.
The Framework follows a structured three-phase approach:
Phase 1: collaboration with multinational or local buyers and international or local banks to participate in existing supply chain finance programmes or set up a new programme with collective work. Suppliers are onboarded and informed of ESG performance expectations.
Phase 2: advisory services are provided to suppliers. These include support from ESG energy advisors, with structured reporting and sustainability KPIs. These services are often subsidised (EBRD donors typically cover 60-80% of costs, supplier co-finance the remainder)
Phase 3: suppliers that demonstrate need for capital investment can access dedicated financing instruments, such as co-financing via local financial institutions or EBRD direct lending.
The EBRD's Supply Chain Solutions Framework supports both local and international partner banks, subject to due diligence and approval, to finance supply chain transactions involving large anchor buyers.
Eligible buyers are private enterprises – either publicly traded or privately held – that have strong credit ratings or financial and clean integrity backgrounds, based either inside or outside EBRD’s countries of operation. If the buyer is located outside of the countries of operation, suppliers must be within these countries. Conversely, if the buyer is inside the countries of operation, suppliers may be based either within or outside of it.
Eligible suppliers are private enterprises within the buyer’s supply chain, with their location determined by the buyer’s eligibility.
Eligible transactions include invoices with a tenor of up to 270 days. In terms of currencies, EBRD prefers EUR and USD for funded participations and offers unfunded guarantees for local currency transactions.
The programme operates within the EBRD’s broader policy mandate to promote sustainable inclusive private sector development. It uses donor-funded financial support and matches policies aimed at cutting emissions and improving environmental and social standards in supply chains. Its flexible design allows the EBRD to offer either regular or subsidised services, depending on how advanced the buyer is and what the supplier needs.
Combining finance and advisory support to drive ESG adoption: A key success factor of the programme is its dual-structured approach, which blends concessional finance with targeted advisory services. This combination not only lowers financial barriers for suppliers thus improving access to working capital, but it also helps translate ESG standards into practical, actionable steps. For many suppliers, particularly SMEs with limited ESG experience, this hands-on support creates both the capacity and motivation to meaningfully engage with sustainability requirements that they would otherwise find inaccessible.
Strategic integration with multinational buyers’ supply chains: Equally important is the EBRD’s close alignment with multinational anchor buyers. By embedding the programme within existing supply chain finance strategies, ESG improvements are not driven solely by suppliers but also reinforced by buyer procurement and sustainability expectations. This upstream integration ensures that ESG progress becomes a shared objective across the value chain, amplifying its impact and sustainability.
Risk-sharing framework with partner banks to enable scale and reach: The Supply Chain Solutions Framework engages both local and international partner banks, enabling them to finance transactions involving large anchor buyers operating within or sourcing from EBRD countries of operations. While the overarching framework is not classified for environmental or social impact at the programme level, individual transactions are categorised as FI (Financial Intermediary) under EBRD’s 2019 Environmental and Social Policy. This means that the direct responsibility for environmental and social risk management is delegated to the partner banks, which apply EBRD’s requirements to the sub-transactions they finance. In this way, the FI classification explains how the EBRD assumes indirect E&S risk exposure (through reliance on the due diligence and monitoring systems of the partner banks) while enabling the programme to scale participation and financing each.
Embedded ESG risk management to strengthen sustainability integrity: To manage these risks, partner banks must adhere to selected EBRD Performance Requirements. They are required to submit annual environmental and social (E&S) reports, and where appropriate, implement customised ESG risk procedures tailored to the supply chain finance context. Certain sub-deals may include ESG enhancements or contribute to the EBRD’s Green Economy Transition (GET) goals, which are assessed on a case-by-case basis. This embedded risk management ensures that development impact is not diluted as the programme scales.
Performance-based incentives to enhance value for suppliers: Although pricing decisions rest with partner banks, suppliers typically benefit from more favourable financing terms than standard commercial loans. This is because banks base risk assessments on the anchor buyer’s credit profile, which is often more robust than that of the supplier. Additionally, the EBRD introduces performance-based incentives tied to the achievement of predefined ESG targets. While these incentives do not reduce interest rates directly, they can effectively lower the total cost of financing through mechanisms such as rebates or subsidised advisory services, providing a powerful nudge toward sustainability.
Development finance mandate to unlocks market participation: The EBRD’s unique contribution lies in its ability to scale market participation through risk-sharing instruments and asset purchases, while embedding robust environmental and social safeguards. By working through the familiar structure of supply chain finance, where banks provide liquidity and take on credit risk in return for a fee, the Bank adds value by mobilising private capital, expanding SME access, and reinforcing ESG performance at multiple levels of the supply chain.
Donor-funded incentives strengthen SME integration into global value chains: Through its role as a development finance institution, the EBRD leverages donor-funded incentives to support ESG-aligned supplier finance. This targeted use of funds helps lower effective financing costs and enhances SME participation in global value chains, especially for firms that might otherwise struggle to meet evolving sustainability expectations. The strategic use of non-repayable support further complements financing instruments and improves programme inclusivity.
Capacity building is key to long-term uptake: One of the main operational challenges is the time-intensive process of onboarding suppliers, many of whom lack prior experience with either ESG frameworks or structured supply chain finance. Building effective participation requires ongoing engagement, capacity-building, and trust-building efforts, as well as careful alignment with both buyer expectations and supplier capabilities. These relational and educational investments are essential for long-term programme success and lasting behavioural change.
Combining incentives with advisory support to drive ESG adoption: A central success factor of the programme is its ability to simultaneously incentivise and enable SME suppliers to adopt sustainable practices. This is achieved through a deliberate pairing of financial incentives, which lower participation costs, and targeted advisory services, which build the technical capacity of SMEs to meet ESG expectations. This dual approach helps overcome common barriers to entry and ensures that sustainability is both financially feasible and practically implementable.
Leveraging EBRD’s access to Business Advice Platform for delivery: The programme’s advisory component is delivered primarily through the EBRD’s Access to Business Advice initiative, a well-established facility operating across the Bank’s countries of operation. This platform provides SMEs with tailored consulting support aimed at improving productivity, implementing ESG frameworks, and aligning with international buyer standards. Services are typically delivered by vetted local or international consultants and are heavily subsidised by donor funding, with 60–80% of project costs covered, substantially reducing the financial burden for SMEs.
Comprehensive support across key ESG dimensions: The programme supports SME suppliers across a wide range of functional ESG areas, including:
Environmental and social compliance;
ESG baseline assessments;
Development of decarbonisation roadmaps;
Monitoring, reporting, and verification (MRV) systems;
Energy audits and technical assistance, often over multi-year periods (up to five years).
This breadth of support ensures that SMEs receive holistic, long-term guidance, enabling them to implement meaningful and lasting improvements in sustainability performance.
Structured engagement to build resilience and integration: Consultants may also help define pre-agreed emissions reduction targets and provide ongoing support as SMEs refine their ESG practices and report on progress. Embedding this structured advisory within a supply chain finance framework facilitates the gradual integration of SMEs into global value chains, while also enhancing their resilience and long-term competitiveness. This integrated approach reflects EBRD’s unique value beyond financing, bringing institutional, operational, and sustainability expertise to the table.
Bridging the communication gap between buyers and suppliers: The programme has also been successful in addressing communication and capacity gaps between EU-based buyers and SME suppliers in EBRD regions, many of whom had limited prior exposure to ESG frameworks. Early implementation results show strong uptake from both buyers and suppliers, along with rising demand for the expansion of the programme. This demonstrates the relevance and practical utility of the approach in connecting sustainability goals with on-the-ground SME realities.
Proven scalability and operational maturity: Following a successful two-year pilot, the programme’s exposure limit was increased from EUR 150 million to EUR 250 million, alongside revised eligibility criteria to improve operational flexibility. The framework has proven scalable both financially and operationally, with expanded implementation across Turkey, Poland, Greece, and Romania. As a standardised product within EBRD operations, it is now positioned for further replication and scaling across the region.
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