Why Is it Useful for SMEs to Be Sustainable?

It was never so true that adding a grain of sand counts, and a lot. Frequently, entrepreneurs wonder why it is important for a small-scale organization to have a sustainable vision for its operations if it’s just beginning its history, and its impact, if it can be measured, will be very low compared to that from other companies with greater track record and experience.

However, virtually no startup company seriously considers the value of following guidelines such as the UN SDGs, and how they could take advantage of building an organization with purposes aligned with social, economic, and environmental trends.

Even the most recent SMEs should operate under a sustainable model, first, because our social and environmental responsibility should not be an option and, second, because it improves the chances of growth and is a factor that could more easily open the door to financing.

What About Financial Organizations?

More and more financial institutions carry out responsible investing, defined by the United Nations as “a strategy and practice to incorporate environmental, social and corporate governance (ASG or ESG) factors in investment decisions, investment and the active exercise of ownership.”

In many cases, it’s investors who are already incorporating sustainable practices into their decision-making, because they understand that the ESG factor is key to financial development. In addition, global and governmental organizations have also become aware of the adoption of sustainability as an essential part of the processes of any organization.

For example, since 2005 we have the six Principles for Responsible Investment, from the United Nations. The first indicates that investors, intergovernmental organizations and civil society will incorporate ESG issues into investment analysis and decision-making.

In the case of financial institutions, just like private initiatives, it’s not enough to think of only large organizations; even considerably smaller fintech or platforms have the capacity to generate actions that become important contributions to the cause of sustainability.

It’s normal to wonder how a company on the scale of a fintech may help the planet.

Let’s take Cumplo as an example. Although it’s true that we are dedicated to financing SMEs – I mean, we’re not a production company like manufacturing plant  – it’s also a reality that a specific effort has been made to digitize all processes and set a specific goal to reduce the carbon footprint by 2030.

Some of the actions we’ve carried out to achieve this reduction is teleworking which, of course, prevents our associates from traveling from home to the office. Besides, we make efficient use of energy and water, and the exchange of digital documents avoids the use of paper; the use of digital signatures has helped us reduce by 71% the amount of paper used in our activities since 2020.

On the other hand, being sustainable also implies Cumplo's social commitment to its employees. We have committed to three of the 17 United Nations SDGs: five on gender equality,eight on decent work and economic growth, and 10 on reducing inequalities.

We couldn’t contribute or be consistent in the search for the reduction of inequality that may exist within an SME that requires financing, for example, if we did not address these issues in our own workspaces.

The Future Reaches Us

Globally, the financing requests of those SMEs attached to sustainability initiatives will be increasingly prioritized, which will be evaluated by specialized internal groups.

For example, the Mexican Stock Exchange Group has analysts with knowledge of ESG who recognize that sustainability is an essential criterion when it comes to investments and purchases of goods and services. According to its Integrated Annual Report, this body finances companies with ESG criteria.

Therefore, it’s possible that we’re moving toward a more demanding environment, so that the financial system can comply with sustainable development. That is natural, given the context of climate change that we live in.

It’s true that a venture has many issues to resolve, even if it’s already operating (one of which is financing; however, it is essential to integrate sustainability from the first steps instead of leaving it as a final pending.

Overall, I can recommend some aspects for SMEs to join a sustainable model with the aim of developing responsible companies and, in turn, for them to obtain benefits such as financial support from a traditional bank or not, as in the case of Cumplo.

In principle, it’s advisable to establish in writing the ESG guidelines with which your company will work and identify any improvements that you can make in the process of your operations, such as reducing the use of paper, changing traditional light bulbs for LED lighting and the implementation of the work at home model for employees. It also tries to develop the purpose, measurable objectives, and goals of those decisions.

Then, document each action you take in favor of social and environmental development. Remember it’s important to keep an account not only of the profits and expenses of the SME, but also of the measures that you are integrating.

Also, try to incorporate diversity and gender equity into your team. This will result in better decision-making and will allow you to stay up to date when it becomes a legal requirement, as it is in many parts of the world.

Finally, direct your efforts to obtain financing to the financial entities that are most similar to your request, and prepare the data that you have previously collected to expose the objectives for which you want to allocate the budget.

It’s important to clarify that financing is not exclusive to sustainable SMEs, but it’s a fact that, gradually, it will make a difference among those that decide to opt for a transparent and responsible model with society and the environment. It will take a few years for all organizations to establish these guidelines in a much more formal way. Let's beat time to time. 

About Cumplo

Cumplo is a platform specialized in factoring solutions for SMEs and large companies. Founded in Chile in 2012 by Nicolás Shea, Cumplo has a presence in Chile, Mexico and Peru, countries in which it has financed more than US$1.5 billio for more than 5,000 companies. Cumplo's objective is to democratize access to financing for Latin American SMEs, without the need to compromise their assets in the process.