By Anthony Casciano, President & CEO, Siemens Financial Services, Inc.
In our modern business landscape, a company’s emissions output – including Scope 3 emissions that stem from their vendors – is a key indicator of business value and long-term success. As pressure sets in and companies are being held accountable for their carbon footprint, requiring them to decarbonize in order to remain competitive in the market, vendor selection is not only about capital and convenience, but about a company’s sustainability requirements. Many large companies – Siemens included – now require a carbon assessment as part of their vendor selection process.
This shift is a step in the right direction in terms of decarbonization, but what does it mean for smaller and minority-owned companies that may not have the resources, due to societal disparities, to implement greener business practices? I recently discussed this question at the Concordia Americas Summit with Assistant Secretary of Commerce for Economic Development at the U.S. Department of Commerce Alejandra Castillo. It is imperative for humanity and climate action that all business leaders – regardless of their physical characteristics or the size of their company – are enabled to stand in line with a decarbonization strategy to compete in the market.
With small and medium-sized enterprises (SMEs) representing approximately 90% of the world’s businesses and 99% of businesses in the U.S., they serve as a vital pillar in efforts to decarbonize the global economy and implement more sustainable business practices. However, a recent SME Climate Hub survey revealed that only 60% of SME respondents had a long-term emissions reduction plan in place, with 63% lacking the skills and knowledge to develop a plan and 69% lacking the necessary financing.
In parallel, minority-owned businesses also struggle to prioritize decarbonization. Throughout history, minority groups lacked access to resources, education, and human and legal rights needed to start and grow successful businesses and compete in the market. Today, 99.9% of minority-owned businesses are small businesses and according to the U.S. Census, they are still less likely to draw outside funding and investments.
Without equity in the market and an increase in support for SMEs and minority-owned businesses, these groups will not have the means to implement decarbonization strategies, therefore losing their right to compete in the market. That’s where companies like Siemens can help with a turnkey solution that includes consulting, technology, and financing to reduce emissions and improve energy efficiency without interrupting services or cashflow.
At Siemens Financial Services (SFS), we committed $100 million to the decarbonization of SMEs. We recognize that this is just the beginning as there is significant capital required to enable sustainability. We encourage others to join us as we develop an ecosystem to support SMEs. It’s important for financiers to diversify their portfolios and work with smaller and minority-owned businesses that weren’t given the same opportunities as others throughout history. Along with being what’s right for humanity, supporting these businesses is the only way to reach climate goals due to their large share of the market.
The process of decarbonizing SMEs and minority-owned businesses is mutually beneficial for all involved and for the environment. It’s important to remember that what’s good for society can also be good for business – it’s not one or the other. By supporting SMEs and minority-owned businesses to enable a more equitable market, we can enable progress on environmental sustainability goals.