How ESG excellence can work magic for SMEs

Nearly everyone in business today sees the importance of a solid and ambitious environmental, social and governance (ESG) strategy and roadmap. An excellent ESG strategy isn’t just a way to boost company reputation; it’s now also essential for accessing certain kinds of financing.

Businesses of all sizes need to incorporate ESG into their strategy because it is a growing concern for everyone, from consumers and investors to regulators and governments. Now, it’s true that small and medium-sized enterprises (SMEs) may have a harder time developing and maintaining an ESG strategy. However, often their relative youth and size-related flexibility can give them a distinct advantage over larger multinationals.

• Reputation
  Socially and environmentally responsible companies enjoy a significant improvement in brand image. This can in turn improve customer retention and lead to better relationships with like-minded investors and suppliers.

• Profitability
  Better brand awareness, customer loyalty and reputation: these can lead to more sales, revenues and profits. In addition, paperless systems, remote working and other eco-policies can reduce a company’s overheads.

• Durability
  Today’s customers want to buy from green and socially responsible companies, and that trend is set to develop even further in the coming years. Companies that have been proactive in this area for a long time will benefit from their long-standing commitment.

ESG-conscious companies can also use their green and social credentials to their advantage when applying for certain types of financing. Access to green financing is now starting to – and will even more in the future – depend on a company’s ESG approach. Systems such as the EU Taxonomy, a science-based classification system for determining whether an economic activity is environmentally sustainable, are being implemented to screen financing applicants.

ESG integration also plays a part in access to trade credit insurance. Allianz’s own risk rating model takes ESG into account to up- or downgrade a company’s rating. This offers an advantage to companies that have integrated ESG into their strategy. If a company uses a sustainable energy, for example, this will reduce its costs and improve its balance sheet, making it a more favorable TCI candidate.

Allianz Trade is committed both to reducing our environmental impact and helping clients implement their own effective and durable ESG strategies. As an active player in the transition to more responsible business, we conduct credit risk assessments that integrate ESG and help raise its awareness among companies of all sizes. We aim to future-proof both their businesses and our planet! We are proud to partner with our clients in the sustainable transition.