The finance industry is an essential component of the modern economy, yet it poses environmental and financial risks due to its dependence on finite resources such as fossil fuels. As a business owner, sustainability in finance should be a priority for you. This isn’t just about reducing your carbon footprint—sustainability can also help you manage your finances more responsibly.
In this blog article, we’ll look at various ways that businesses can improve their approach to finance by focusing on sustainable practices and investments. We will discuss several strategies available to make sure that your business remains resilient while protecting the environment.
Think About More Than Maximizing Shareholder Value
The main goal of many businesses is to maximize shareholder value. While this has been a gold standard for decades, it has taken a toll on the planet, and consumers are starting to notice and hold these companies accountable. Now, consumers and employees are demanding business strategies that consider environmental, social, and governance (ESG) factors. According to research by Nielsen, 48 percent of U.S. consumers would change their habits to lessen their impact on the environment.
Furthermore, research from BAI shows that 54% of Gen-Z and millennial consumers would consider switching their primary bank based on ESG factors. To compete in the modern world, businesses need to consider the financial impact of their business strategies and the environmental and social impact.
The finance industry uses energy, and its energy consumption has increased. For example, new financial technologies such as bitcoin are often compared to the energy consumed by small countries. Rather than using more energy to be sustainable, the finance industry needs to think about ways to invest in renewable energy and reduce overall energy consumption.
In the finance industry, a paper trail is often part of the requirement for doing business. However, with modern technologies and the ability to e-sign, companies can now switch to paper-saving options.
Furthermore, consumers can switch to paperless statements. In that case, this can save the energy used to print the statements, the paper needed, and the energy used to ship the statements to various consumers. To encourage this behavior, finance companies can offer incentives to their customers for switching to paperless options and even highlight how much their carbon footprint is reduced when they make such changes.
Greenwashing has to do with claiming to be environmentally conscious for marketing purposes without making notable sustainability efforts. While it may be tempting to jump on the “green” bandwagon for marketing purposes, it’s important to be genuine if you take on green initiatives. According to Nielsen, 77% of consumers say they would stop buying products from a company if they found they had been greenwashing. Because data and information travel faster than ever before, trust and transparency are vital. If you take on green and sustainable initiatives, your company must be genuine about them.
Another option to improve sustainability in finance is to provide companies and consumers with tools to measure and mitigate their climate impact. For example, fintech companies can add features that help users understand the impact of their spending on the environment. Sharing important data on how different purchases affect consumers’ carbon footprint can help consumers have the information they need to make better decisions.
The Bottom Line
The role that sustainability plays in finance is crucial and far-reaching. It’s more important than ever to consider the environmental and social impacts of our investment decisions. While it can be difficult to change long-standing behavior, those who are able to adapt and change with the times will be the ones who succeed in the long run.