SMEs are the backbone of the UK economy, representing over 90% of all UK businesses.
Therefore, environmental, and social challenges can only be addressed appropriately with the small business sector fully involved. In fact, the role of SMEs in sustainability is of tremendous importance for a sustainability agenda to be realised.
In a continuing complex, competitive and volatile business environment, the adoption of sustainability principles is of utmost importance for SMEs. Given the growing amount of regulatory and business requirements related to sustainable practices and reporting in SME sectors, such as legislation, investors, supply chain, clients, talent etc. It is important to address the topic to help future proof small businesses.
In recent years, SMEs have started to change the way they look towards sustainability. It is not only good for the environment, but also good for business.
We spoke to James Shore, Head of Family Business and Family Office at SME Capital to gain an understanding of some of the benefits of putting in place a sustainability strategy for your business and how debt funding can help.
Sustainability is no longer just a ‘nice to have’ – it’s a business necessity. Businesses that want to stay ahead of the curve are increasingly investing in sustainability, both in terms of their operations and in terms of their products and services. This is good news for the environment, and its’s good news for the economy too.
If you’re a business owner, there are many things you can do to make your business more sustainable, including:
Introducing energy-saving measures in your workplace
Switching to environmentally-friendly products and services
Encouraging your employees to adopt sustainable lifestyles
Communicating your commitment to sustainability to your customers and supplier
Is Sustainability A Mere Goal Or A Broader Strategy?
The challenge for most businesses is not just changing their approach towards sustainability – it’s making the transition from seeing sustainability as a goal, to seeing it as a strategy. This requires a shift in thinking.
The good news is that there are plenty of resources out there to help you make the transition and put in place a sustainable business strategy.
So, what are the core areas businesses need to be most aware of?
The most obvious benefit in an increased focus on sustainability is environmental. In the past, many businesses saw sustainability as a nice to have, but not something that was essential to their operations.
However, this is no longer the case. As more people become aware of the severe environmental problems that we face, they are demanding that businesses do their part to help address these issues.
This increased awareness has led to a change in attitude amongst SMEs, who are now seeing sustainability as an important business goal that can help them connect better with their target audience.
Sustainability Is Good For Businesses
What’s good for the environment is good for business. Many businesses view sustainability as a cost-saving measure. They see it as a way to reduce their environmental impact and save money on resources. However, what they are starting to realise is that sustainability can also have a positive impact on their bottom line.
Sustainability can help businesses attract and retain customers, who are increasingly interested in supporting sustainable businesses. Plus, it can also help businesses reduce their operating costs, by making them more efficient. In other words, sustainability is not just good for the environment – it’s directly good for business too!
In many countries around the world, including the UK, governments are introducing legislation that requires businesses to take steps to improve their environmental performance. This is having a big impact on SMEs, who are now starting to see sustainability as a compliance issue.
It is important to note that these regulations can also be an opportunity for businesses to gain a competitive advantage. Those businesses that are able to comply with the regulations early will be in a strong position to capitalise on the growing demand for sustainable products and services.
The Green Manufacturing Processes
One area that has seen a noticeable change in attitudes is manufacturing, with a shift towards Green Manufacturing Processes.
The Greenhouse gases from industries are one of the main reasons for climate change. These gases come from different sources in an industry like burning fossil fuels, chemical reactions, and other industrial processes.
If the process of creating a product is not sustainable, it can have a negative effect on the environment throughout its life cycle. It is important for businesses to consider the sustainability of their manufacturing processes to help reduce pollution and conserve resources.
There are many ways that businesses can make their manufacturing processes more sustainable. One way is to use green energy sources like solar or wind power. Another way is to use recycled materials instead of virgin materials. And another way is to implement lean manufacturing principles to reduce waste and increase efficiency.
As is the case with most processes, the first step here is to assess the sustainability of your current manufacturing processes. Once you have done this, you can then start to look at ways to improve them. Implementing even a few simple changes can make a big difference to the environmental impact of your business.
How Can Debt Funding Help?
It goes without saying that it’s not just big businesses that need to worry/care about sustainability – it’s important for businesses of all sizes.
SMEs are often in a better position to make the transition to sustainable business practices than larger businesses. This is because they are usually more agile and can respond quickly to changes in the market.
The attitude of SMEs has shifted to taking sustainability as a norm, rather than a good to have. The need for sustainable finance to unlock SME greening is therefore critical.
Access to finance is high among the challenges entrepreneurs face in the journey to net zero. They are less able than larger firms to absorb up-front costs of developing green products or investments, where benefits take time to materialise.
At SME Capital, we can provide specialised, long-term financial alternatives for SMEs looking to invest in, and scale, their sustainability strategy as part of their growth plans. In fact, we exist because we firmly believe that our specifically designed finance solutions for UK companies, which will aid in your growth and success, represent a better option.
We use a cash flow-based approach to lending, offering a multiple of business profitability, specifically EBITDA, as opposed to a loan amount being directly tied to the value of specific assets. We can provide an economic solution to consolidate smaller lenders, or refinance expensive short-term loans, while providing additional working capital for the business.
And we do not ask for personal guarantees or collateral. To learn more about our debt funding solutions, get in touch with us today.