Financing a Small Business in a Sustainable/Circular Economy

In this post:
The world of banking is listening,
Environmental, Social and Governance (ESG),
Keep an Open Mind,
Incentives offered by your Buyers
….a list at the bottom of other posts in this Financing a Small Business series

ESG an important part of Financing a Small Business- Financing a Small Business in a Sustainable/Circular Economy

Financing a Small Business – #1 of a 3 part series

Money Available for Small ECO Businesses? – Ideas when setting up Circular Re-thinking projects

A lot of this is just common business sense, but let us put it in a circular production process / sustainability frame of reference.

Although lending to Small Businesses declined in 2016/17, other finance tools became more widely used. This trend improved the operations of Small Businesses, based on a drop in bankruptcies and payment delays.

As you know and deal with on a daily basis, Small Businesses are plagued by difficult time factors: *No time to keep records, *Surprise changes, *Late paying customers, *Government rulings, *Sudden supply chain delays, and many many more….

The world of banking is listening,

……….if slowly.  Old conservative banking is aware of improved Small Business operations and attracted to them.  They have accelerated their efforts to figure out how they can open up and take more risks with Small Businesses. And…..

The world of banking is changing, becoming very aware of ESG ethical Investing………..

ESG also for Financing a Small Business- Financing a Small Business in a Sustainable/Circular Economy

Environmental, Social and Governance (ESG)

Banks are using ESG now that most companies traded world-wide are subjected to the Dow Jones Sustainability Group index (DJSI) which defines corporate sustainability by risk management of environmental, social (labor, etc.) and governance developments (ESG).  In some cases the banking community is beginning to take drastic steps, such as “World Bank to end financial support for oil and gas extraction”.   On every level, sustainability issues are fast becoming world-wide banking practices.  Look at the Fiduciary (Guardian, Trustee) Responsibility: of environmental, social and governance issues into institutional (funds) investment.   

3:27 min Al Gore – Fiduciary Duty in the 21st century
Al Gore is as much interested in Economic Growth as he is in fixing the Climate

So how can a growing Small Business, use this information to increase financing and grow?

1. Keep an Open Mind – when Financing a Small Business

Keep this “ESG” stuff in mind when looking for funding and try something new – ask ALL questions that come to mind.  Do not start by thinking that the idea in your head will be rejected – ask anyway !

A question not asked is a door not opened.” – Dr. M. Adams

The day before something is truly a breakthrough, it’s a crazy idea.” – Peter H. Diamandis M.D. , Founder and Executive Chairman of XPrize 

Circular operating systems and sustainability issues are changing the way almost everyone is doing business.

Financing a Small Business- Financing a Small Business in a Sustainable/Circular Economy
Photo by rawpixel on Unsplash

2. Incentives offered by your Buyers when looking for ways of Financing a Small Business

Large companies (now subjected to that DJSI/ESG) offer their Small Business suppliers financial rewards in exchange for compliance to the large buyers’ sustainability requirements and policies. You might be able to document and negotiate:

  • better terms
  • higher purchase prices
  • bigger orders or some kind of increased business incentive
  • contributions to your costs if you are willing to improve your product
  • using an online knowledge platform from the big buyer 
  • big buyer advice, case studies and toolkits on how to make practical changes within your factory or farm

For example:
German footwear and clothing manufacturer Puma launched an arrangement with BNP Paribas bank and the (cloud based) fintech supply chain firm GT Nexus :   If suppliers get a high score on Puma’s social and environmental audit, they get a higher share of the invoice upfront, which can cut suppliers financing fees and improve peace of mind.

3:07 minutes – How to Manage Vendors: Getting the Best Results

Sustainability Networks support each other

Sustainability certified suppliers need to monitor their entire supply chain to ensure that the materials they work with are also sustainably compliant. That’s a lot of work, but not if you happen to be one of those suppliers.  It is like reverse logistics.  Being one of those suppliers gives you access to customers that otherwise would not have been interested in your products.

The Power of Connection: A Network of Sustainable Retailers

The new currency of today is connection—a feeling of being genuinely connected to one another. … Companies like Patagonia credit their supply chains for their ability to be fully transparent to consumers.

The modern company is not an island, it’s a network.

*3 part series with suggestions for financing a Small GREEN Business project:
Part #1 – Keep an Open Mind & Incentives offered by your Buyers
Part #2 – Documentation & CE and Sustainability Certificates
Part #3 – Private Funding & Government funding
and now 2 additional post about Waste Commodity tools.
and Waste Online Tools! There Are More Of Them!

The 2 Reports To Help GREEN Small Business Find Money
After COP 26 – Who Says There Was No Progress?
Intense Financial Talks At COP 26
Horrific Disruptive – Economic Opportunity!
Have You Been RE-THINKING Your Business?
How To Finance Your Own “Green” Recovery – 8 Tips For Small Businesses

(Remember our disclaimer: Any company or website mentioned herein are only examples and should NOT be taken as recommendations or endorsements, unless specifically notated as a recommendation.)

On to the next part of Financing a Small Business

2 Replies to “Financing a Small Business in a Sustainable/Circular Economy”

  1. Am passionate about conservation farming, called ‘Farming God’s Way’ it helps small and big farmers care for the environment and sustainably increase their income significantly! It’s a slow start but some partnership it can grow big to reach many. Jmwita – Kenya

    1. Joshua,
      I have to agree with you. Any growing method that considers the environment and sustainability will bring growing food only good things. Maybe you have read this post that touches on what you are talking about in a different way: #4 We Have 12 Years To Cool Off Planet Earth?
      Thank you for your comment!

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