SMEs, the missing link in sustainable business transformation?

<p> Just as important as the risk of greenwashing is the risk of timewashing, i.e. the risk of inaction due to lack of data or incomplete regulation. The key is to start acting and be willing to make an impact on the environment in which you operate.</p>

"There can be no transition towards a sustainable economy and reality without involving small and medium-sized enterprises, which is what makes up the productive fabric in our country (96% of Spanish companies have fewer than 10 employees). If we do not manage to convince SMEs of the opportunity to adapt to climate change, the effort being made by large companies and the financial system will be insufficient. Companies have to jump on the bandwagon and for the moment they are interpreting it as an increase in costs without appreciating, as yet, the benefits of committing to sustainability. "

There is a two-way relationship between companies and financial institutions.  Banks are committed to the transformation required to mitigate the risks derived from climate change through increasingly demanding regulation; they are also assuming a series of very ambitious public commitments such as those derived from the  Principios de Banca Responsable o el Acuerdo Colaborativo de Acción por el Clima( Principles of Responsible Banking or the Collaborative Agreement on Climate Action) signed by 95% of Spanish banks within the framework of COP25, therefore, the most effective thing is to speak the same language among peers. Banks fulfilling their advisory role and providing new financial instruments and products with special financial conditions, and the companies transmitting their willingness to change, offering real data on the projects that support their transformation towards a more environmentally friendly world.

Credibility can also be measured, albeit qualitatively. Having a transformation plan, having the management team and board of directors involved in these issues and demonstrating that you want to make an impact with your actions are signs of a firm commitment. “It is much more important to see a committed team, to see that there are changes in production processes or to have an agenda of actions in favor of your social environment."  It is just as important to demonstrate the will to change as it is to comply with climate regulations.  “The ones with a will to transform show it. There is no doubt that the extraordinary aids coming from Europe will be a great incentive because they require that 37% of them be destined to sustainable projects.  Therefore, if we had not received them, we would be starting a slower adjustment path towards a sustainable economy."

That banks and companies advertise their green side, does not have to have a negative interpretation.  On the contrary, we are in a phase in which awareness and disclosure should be valued very positively.  The transformation towards sustainability is a journey, a process in which there is still a long way to go. For this reason, Juan Carlos Delrieu, as Director of Strategy and Sustainability at the AEB (Spanish Banking Association) and member of the Steering Committee of Finresp (Center for Responsible and Sustainable Finance) vehemently defends the determination of the financial system for this transformation in the course organized by Elkargi on “The impact of sustainability on SMEs. An opportunity for the future" within the UPV/EHU Summer Courses,  

Banks are working proactively, cooperating and exchanging the best practices and assuming a series of very demanding public commitments.  In 2019 the main Spanish banks adhered to the Principles for Responsible Banking, an agreement that undoubtedly represents a turning point between banking, its way of operating and its environment.  In the framework of COP25 95% of Spanish banks signed a Collaborative Climate Action Commitment which, in essence means aligning the banks' portfolio to the 2030 Paris Agreement. And more recently, large banks have signed up to the Glasgow Financial Alliance to Net Zero, which means going one step further and committing to the decarbonization of the system by 2050. 

But this is not the only action the banks are taking to demonstrate their firm commitment to contributing to a low-carbon and more sustainable economy.  In fact, the debate has moved from the CSR areas to the CEO's office and even to the board of directors. This determination is influenced by the regulatory framework and the supervisory expectations of central banks, as well as by the shareholders themselves, as Larry Fink, CEO of BlackRock's investment fund, reminds us every year. 

Another detail that demonstrates the financial sector's conviction to contribute to this transformation was the creation of FinResp (the Center for Responsible and Sustainable Finance) which, under the auspices of the global network FC4S linked to the United Nations, was created with the aim of involving the entire Spanish productive system in a sustainable transformation. To this end, it understands social awareness as a raw material, and its objective is to help the role that the world of finance must play in this transition: pushing SMEs, perhaps the missing link in a society very sensitive to climate change and social donations in our environment. However, Juan Carlos Delrieu points out that beyond awareness and dissemination, Finresp has established that training, the exchange of the best practices among financial institutions, but also with other Centers in the world and the identification of innovative financing formulas, are part of the strategic agenda of the Center in Spain.

Regarding regulation, it is clear that the EU has decided to lead the green bet, although the arrival of Biden as President of the United States reinforces the policies designed in Europe. Of these, Delrieu points outthe Taxonomy Regulation , a regulation that is as necessary as it is, for the moment, complex to apply. However, in its role as a "dictionary" it is already fulfilling its function, which is to transcend the original design linked to financial investments in order to condition any debate within the EU. A compass that has the firm purpose of mobilizing private capital by mitigating the risk of greenwashing.   However, despite the favorable purpose of the regulatory framework that the EU is designing, for Juan Carlos Delrieu it might be good to "slow down a bit on regulatory issues because our economies are under pressure and the difficulties arising from the complexity and ambiguity of the system can tend to paralyze us, with the risk that inaction could end up being as risky as greenwashing.  It might be much more appropriate to clearly delimit a playing field through a set of rules and, once inside, to promote the transformative vocation of companies.  In this sense, the co-responsibility of the public administration is essential to speed up the transformation process.       

 “The design of the green economy we want should not fall on the banks.  Although we are willing to contribute to this productive and social transformation and we are willing to finance it, the design of the country, the path and the speed of change, must be in the hands of the Administration."