Family businesses may be reluctant to pursue sustainability initiatives because of the current economic environment and lingering misconceptions about their perceived costs and benefits. The reality is that as we start the new year, the topic of sustainability is going nowhere and business leaders need to get ahead of the curve.
The impact of climate change is continuing unabated, and Singapore and Southeast Asia stand at the point end of its impact. HSBC Global Research recently reported that of the 20 global cities most vulnerable to rising sea levels, 15 are in Asia including 5 in ASEAN.1
Another World Bank study estimates that a 1-meter rise in sea levels would affect 37 million people in East Asia and Southeast Asia. If the level rises by 5 meters, the population figure increases to over 160 million.2 Nothing can make this more real than the next time you walk along the Singapore coastline, imagine the waves coming in at that height.
Climate change is real and presents family businesses with a fresh set of challenges, as well as significant opportunities – to innovate in the short-term, plan for the longer term and adopt a more globally minded approach to wealth creation.
Small and mid-sized enterprises (SME), quite often run and managed by families, employ 72% of the workforce and contribute 44% to the economy.3 They are certainly a drumbeat to the economy. With an outsized impact family business can have in ushering the brave new world of sustainability, the collective responsibility is just as great as any MNC footprint.
Perhaps that responsibility is felt even greater by family businesses with a special importance on sustaining the business for future generations. Their emphasis on continuity and family values helps to make the issue more tangible to them. Oftentimes when a business involves multi-generational family members, rallying behind a shared purpose can bind everyone closer together. Without a doubt for any material change to happen, SMEs need to be part of the solution – family owned or not.
Whilst being more sustainable is now becoming a question of corporate reputation, many businesses are also discovering the potential profitability, cost savings and value creation offered by associating themselves with positive environmental approaches.
Firms that shift to making sustainability a core part of their strategy are finding that it improves the bottom line, reduces risks, increases competitiveness, and the number of satisfied customers.
Transitioning to a more sustainable business model also presents opportunities for innovation, and new product launches. As you look at your existing revenue streams, consider what new sales you could deliver, by launching new, more sustainable products or services.
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, retrofitting buildings to make them more efficient, buying used instead of new furniture, and using recycled materials for your products can further pare down your firm’s business expenses.
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, as well as with retail consumers.
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.4
Once you have defined your plan to become a more sustainable business, the final step is to consider greening your brand – obtaining awards and certifications, to distinguish you as a truly sustainable leader in your industry. Business as usual, on the other hand, can end up costing your company.
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, report and reduce their environmental impact.
About 86 per cent of Asian investors surveyed in a recent HSBC report consider environmental issues important.5 Almost a third (31 per cent) always look at environmental, social and governance (ESG) considerations when they invest.
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.6 This means that only paper suppliers with sustainable land and forestry management practices can win contracts with government agencies. Future initiatives focused on reducing plastic in the economy, will only accelerate this trend.
Whilst SMEs may have wanted to change, it is often the perception of cost, competing priorities and complexity that has made green finance inaccessible – until now.
The Singapore government, regulatory, industry bodies and financial sector have been coordinated and single minded in ensuring SMEs can have access to green financing tools.
And we’re starting to see the results with a myriad of green financing instruments being specifically designed with them in mind. For example, HSBC has done away with the complexities associated with the traditional green loan process. It is the first bank in Singapore to offer green loans designed specifically for SMEs, by accepting applications based on existing market-leading ‘green’ certifications awarded to the business by Singapore industry authorities such as the Singapore Environment Council, the Building & Construction Authority and the Singapore Green Building Council. This reduces time and cost for the SME, allowing green funds to flow more quickly to projects that support the sustainable revolution.
SMEs can also now access green deposits too, designed to help businesses align their surplus capital and yield requirements, with their green aspirations.
In a world where sustainability and profitability go hand in hand, a clearly outlined plan can amplify the change you make in the world, and bring your family’s vision and values to fruition.
A contribution piece by Philip Kunz, Head of Global Private Banking, Southeast Asia, HSBC Private Banking and Li Lian Ng, Head of Business Banking, HSBC Singapore, was first published in The Business Times on 24th February 2021.
1 HSBC Global Research: Tackling the next crisis, 23 September 2020
2 World Bank Blogs: Risk of sea-level rise: high stakes for East Asia & Pacific region countries, 9 March 2018
4 HSBC, Navigator 2019, Singapore.
5 HSBC, Sustainable Financing and Investing Survey 2019.
6 Singapore Ministry of the Environment and Water Resources, Public Sector Sustainability Plan 2017–2020.