Benefits for Small Business
Ethical finance is an investment approach that considers environmental, social, and governance (ESG) factors in addition to financial returns. While it is often associated with large corporations and institutional investors, ethical finance can also offer significant benefits to small businesses.
Attracting socially conscious customers
Small businesses that prioritize ethical and sustainable practices can appeal to customers who prioritize social and environmental responsibility when making purchasing decisions. This can help attract and retain customers who are willing to pay a premium for products and services that align with their values. For example, a study by Accenture found that 62% of consumers globally want companies to take a stand on social, cultural, environmental, and political issues. Another study by Cone Communications found that 71% of millennials are willing to pay more for products and services that come from companies committed to social and environmental responsibility. These consumers are customers of both large and small businesses alike so the brand benefits will resonate regardless of your scale.
By demonstrating a commitment to ethical and sustainable practices, small businesses can differentiate themselves from their competitors and build a loyal customer base driving long-term growth and profitability.
Access to funding
Ethical finance can provide small businesses with access to funding that might not be available through traditional sources. For example, impact investors and social lenders may be more likely to provide funding to businesses that have a positive social or environmental impact, even if they have limited financial track records.
One example of this is Triodos Bank, a European bank that only lends to organizations that have a positive impact on society and the environment. Triodos has provided funding to a range of small businesses, including organic food producers, renewable energy companies, and community-led housing projects.
In addition to providing access to funding, ethical finance can also help small businesses attract investors who share their values. This can help build long-term relationships and provide access to expertise and networks that can help the business grow.
Improved reputation
Ethical and sustainable practices can help small businesses build a positive reputation in their community and beyond. This can lead to increased trust and loyalty from customers, as well as positive word-of-mouth marketing.
For example, a survey by Nielsen found that 66% of consumers globally are willing to pay more for sustainable brands. Another survey by Mintel found that 56% of UK consumers would be more likely to purchase products from a small business that prioritizes ethical and sustainable practices.
Risk management
By prioritizing ethical and sustainable practices, small businesses can reduce their exposure to reputational and regulatory risks. For example, businesses that prioritize environmental sustainability may be less likely to face fines or penalties for non-compliance with environmental regulations.
In addition, ethical and sustainable practices can help small businesses attract and retain employees who are motivated by a sense of purpose and engagement.
Employee engagement
Ethical finance can also help small businesses attract and retain employees who share their values. By demonstrating a commitment to ethical and sustainable practices, small businesses can create a sense of purpose and engagement among their employees. For example, a survey by Deloitte found that 73% of millennials believe that businesses should focus on making a positive impact on society. By prioritizing ethical and sustainable practices, small businesses can attract and retain employees who are motivated by a sense of purpose and engagement.
According to a 2022 survey by Gartner 82% of employees say it’s important for their organization to see them as a person, not just an employee, but only 45% of employees believe their organization actually sees them this way. This indicates an opportunity for businesses that authentically treat their employees as people to gain competitive advantage in related areas such as retention and productivity
Whilst ethical finance is a critical part of the future for all, there are also risks and challenges that small businesses should be aware of. For example, ethical finance can be more expensive than traditional finance, and small businesses may need to invest in new systems or processes to meet ESG reporting requirements (a topic we cover here).
Despite this, in both the short and long term ethical finance provides excellent benefits for small businesses if harnessed in the right way.
Get in touch with us for more advice about how we can help your company grow by developing and activating your brand across all marketing and media channels.
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