Green banking: how eco-driven banks can win small businesses

As the climate crisis grows ever more urgent, every industry is being charged with finding ways to become part of the solution. But for the small business community, that’s not a simple matter. Persistent barriers like a lack of funding or access to the right resources often keep small business owners back from taking part in the fight.

But that problem can be an opportunity for the banking sector. Banks have their own environmental targets to hit – whether that’s shrinking downstream emissions, investing in more eco-friendly ventures, or folding climate impact into financial risk assessments. There’s no reason their small business customers can’t be part of that.

For one, supporting small businesses to reach their climate goals is part of modifying your business model for the better. But beyond that it can also be a new way for banks to grow – to weather the advance of fintech, protect their customers for the future, and stand out to the small business world as a partner who truly shares their values.

Small businesses already want to be green

Going green is already high on the agenda for small businesses. According to research by the UN-backed SME Climate Hub, half of small businesses are already keeping track of their carbon emissions, and 60% are actively planning to reduce their environmental impact.

But unfortunately, eagerness isn’t enough to take action. The most impactful changes are often the most costly – like developing new eco-conscious products, upgrading inefficient equipment, or installing solar panels to cut energy consumption. And while large companies can afford to take those steps, small businesses rarely have the same luxury.

In fact, a lack of funding was given as the second biggest reason for small businesses delaying their climate actions. While 70% of SMEs in the survey said they needed financing to undertake their planned changes, only 8% said they’d been able to get that support from their bank.

For banks, this should be a major opportunity. There’s a vast small business community – one that accounts for more than 90% of companies worldwide – looking for a chance to improve their impact on the world, and they will flock to the partners who can open that door.

What’s good for small business customers is also good for banks. Helping them to fund their climate action not only makes financial services more appealing, but it also makes the banks themselves greener as a result. The small businesses you support are all part of your downstream Scope 3 emissions, and doing more to reduce their footprint also helps you to meet your own environmental commitments.

The value of green banking

If small businesses are looking for help in going green, it makes sense for banks to offer this. Not just by extending more financial support, but also by providing better access to tools and resources.

Small business owners are incredibly busy. Our own research into UK small businesses found that spare time – or rather, the lack of it – is one of the biggest barriers to adopting new technology. If they can find that tech within easy reach, offered by a partner they already know and trust, that convenience represents huge value.

Every small business owner will have a relationship of some kind with a bank. Introducing more green products is an easy link to make, because it’s a case of adding value to services they already use rather than trying to win them over to something new. Expanding your services can be as simple as packaging a carbon footprint tracker with their digital banking, or offering essential digital business tools through green tech partners.

Some banks are already taking steps to do this. For instance, Lloyds Bank in the UK offers a Green Buildings Tool, giving small business owners a way to assess and monitor the energy efficiency of their premises.

Others are rethinking their business models in creative ways that reward committed green businesses. In Brazil, Banco Votorantim has tweaked its lending model – scoring potential borrowers based on their environmental and labour standards, and offering better terms to the businesses that score the highest.

The greener small businesses are, the longer they’ll last

The future of business is in the hands of entrepreneurs launching companies today. But if small businesses can’t afford to make green changes, or aren’t able to access the tools and resources to do so, it’s a risk to their longevity.

The pressure to be more environmentally responsible is coming from all sides – from consumers and business customers choosing more eco-conscious brands, and from governments enforcing change through legislation. But if small businesses can’t keep up with that demand, they’ll swiftly be left behind.

Helping them implement the changes they need to make means protecting them for the long term – not to mention safeguarding your own customer base. When so many new businesses close their doors each year, any chance to buck that trend while building greener business models is one that should be grasped.

We’re on a mission for tech democracy for small businesses – are you in? Request a demo of our software, or get in touch to see how we could collaborate.