Why sustainable finance is important for SMEs
  • Sustainability
    • Green Banking
    • General Sustainability

Sustainability is good for business

  • Article

Practising sustainability makes economic sense for all businesses — whatever their size. Why is sustainable finance important for SMEs?

Going green is often associated with higher costs. For many small and mid-sized enterprises (SMEs), this can mean automatically relegating sustainability to the back burner as something only larger companies can afford. But becoming sustainable can save SMEs money, with the business benefits far outweighing any initial investment.

Firms that shift to making sustainability a core part of their strategy are finding that it improves the bottom line, reduces risks and increases competitiveness and the number of satisfied customers. Business as usual, on the other hand, can end up costing your company. Here’s how.

Benefit of sustainable finance to SMEs: Cost savings

Cost savings

Every SME wants to reduce costs to improve cash flow, and sustainable practices can do just that. By cutting down on your use of energy, water and paper, you can make significant savings. Replacing your energy supply with renewable power, buying used instead of new furniture, and using recycled materials for your products can further pare down your firm’s business expenses.

Business sustainability case studies

A growing number of large Singapore companies are reporting that they are reducing costs through sustainable practices, providing a potential model for SMEs. CapitaLand, for example, has achieved cumulative utilities cost avoidance of S$320 million, thanks to more efficient use of resources.1 In 2021, it increased its use of renewable energy to about 4.3% (47,800 MWh) of its total electricity consumption and aims to increase its total electricity consumption to 35% by 2030.

At HSBC, we have been cutting our energy use. In October 2020, we announced our ambition to reduce our energy consumption by 50% by 2030, against a 2019 baseline, and in 2022 we achieved 24%.2 We’re also making good progress on our aim of getting 100 per cent of our electricity from renewable sources by 2030.

Benefit of sustainable finance to SMEs: Fewer risks and greater competitiveness

Fewer risks and greater competitiveness

Putting sustainable practices in place and improving your ability to measure and report on your environmental footprint can help you lower your company’s environmental risks. This will give you a stronger competitive edge when trying to win contracts with businesses seeking sustainability in their supply chains.

More businesses are realising that to remain relevant and grow, they need to be more sustainable. HSBC’s Navigator research found that 29 per cent of participating Singapore businesses are motivated to use sustainability to gain a competitive advantage.3

Why being sustainable is key to attracting talent to your business?

Your sustainable practices can also make your company more attractive as a workplace. Many young and discerning employees now pick an employer based on its green track record. A Deloitte survey covering 46 markets, including Asia-Pacific, found that millennials and members of Generation Z4 who are satisfied with their employer’s societal and environmental impact are more likely to want to stay with their employers.5

Benefit of sustainable finance to SMEs: Meeting changing demands

Meeting changing demands

Demand for environmentally responsible products and services has mostly come from customers. But now investors are also demanding that businesses they invest in be sustainable, compelling many SMEs to measure and report their environmental impact.

Attract investors for your business with sustainability efforts

In a HSBC survey, 72% of Asian investors have increased their attention6 to environmental issues, social issues or both in the last 12 month, indicating the strength of momentum supporting sustainable economic change in the region.

SMEs could also miss out on profitable government contracts if they don’t have robust sustainability practices. The Singapore Government, for example, procures only printing paper with the Singapore Green Label.7 This means that only paper suppliers with sustainable land and forestry management practices can win contracts with government agencies.

Three steps to embracing sustainability

Cutting back your business’s environmental footprint need not be difficult or complex. Here are three easy ways you can embrace sustainability and make a difference:

  • Conserve resources that your business uses daily. Trim your energy and water use, go paperless and replace your energy-guzzling appliances with power-efficient options.
  • Consider expanding into eco-friendly products. You can start with one or two product segments that use sustainable materials. Focus on lines where there’s demand for more sustainable options.
  • Transition to net-zero with sustainable financing. You can consider financing sustainable initiatives using solutions such as HSBC’s green loans and Enterprise Financing Scheme – Green*, which are intended to help SMEs on their sustainability journey.
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