Socially responsible investing is the key to a better future for businesses, individuals and society as a whole. Humanity and industry’s impact on climate change is backed by science, and people around the world are joining arms and working hard to make the necessary changes toward a more sustainable future. Whether you’re looking to incorporate more environmentally friendly practices into your business plan, invest in sustainable companies or attract those who are investing in green companies, you’ve come to the right place.
In this article, you’ll find out why sustainable practices are so important and learn how to implement them into your business plan. It also includes a guide to the financial benefits of becoming more sustainable, including tax breaks for green companies and information about sustainable investment funds.
What Is Sustainability?
If you haven’t delved deep and looked into the impact of sustainable business practices, now is the time. As attitudes quickly shift and younger demographics place more and more importance on global issues, such as climate change, companies that don’t invest in sustainability risk getting left behind.
Even if your business doesn’t distribute globally or work with nonrenewable materials, there are steps you should take to become more environmentally friendly. Investing in eco-friendly business practices might have some hefty costs associated with it upfront, but the long-term gains make investment more than worthwhile. In the long run, energy bills and tax bills will be reduced, and you can attract a new customer demographic, increasing profits.
With tax breaks and other incentives to go green, it makes sense to take the plunge and invest in being more socially responsible as soon as possible.
How to Make Your Business More Sustainable
Making sustainability part of your brand story is a smart move on a number of levels, but you need to make an effort and be authentic about your practices. Socially responsible investing could attract a new client base to your company and encourage current customers to stick around. In some cases, it might make you eligible for tax deductions and tax credits, in addition to making your business more attractive to potential investors.
Keep reading to learn how to take a strategic approach to make your company more sustainable.
1. Conduct a Thorough Sustainability Audit
You might be surprised by how many small, simple changes you can make that have a major impact on sustainability. While upfront costs associated with equipment, such as solar panels, eco-friendly packaging and services, such as waste disposal, might be expensive upfront, some sustainability efforts actually save you money. With sustainability-linked loans, you can spread the initial costs of going green over months or years to ease the financial burden.
The first step to becoming sustainable is to create a blueprint for your entire supply chain cycle. From this point, you can highlight areas where it’s possible to reduce environmental impact, replace elements within your business and offset damage in areas where changes aren’t possible. Let’s take a look at some examples of socially responsible investing for positive change:
- Aim to offset the carbon that enters the atmosphere during manufacturing while you work to eliminate emissions entirely. Partnering with tree planting initiatives and eliminating paper usage are a couple of ways you can do this.
- Use organic produce where possible to eliminate phosphorus and nitrogen runoff.
- Switch over to sustainable packaging and eliminate plastic use where possible. Keep in mind that Eco-friendly packaging costs more, but consumers are also often willing to pay a premium for products that align with their ethical beliefs.
- Provide incentives for employees to take public transport to work and ensure management leads from the front when it comes to sustainable practices.
- Research sustainability in your specific industry and consider making the recommended changes.
2. Aim for Net Zero Carbon Emissions
Carbon emission is one of the biggest drivers of environmental damage, and it’s one of the hardest to account for. However, with conglomerates, such as Nestle, leading the way and making their blueprints public, it’s easier for smaller companies to follow suit. What’s more, these larger companies create the demand for more sustainability across the entire supply chain, facilitating change for organizations of all sizes.
3. Use KPIs to Set Goals and Measure Success
A strategy is nothing without a plan, so you need to be sure to outline a strategy in writing and analyze it using measurable KPIs. Simply stating that you’re going to be more green in your marketing output isn’t enough in today’s market of savvy consumers. Start out by tackling the issues you can deal with sooner rather than later, such as installing solar panels by the end of the year or eliminating plastic use within two years.
If you have a goal to eliminate waste by 50%, outline a strategy and put a decision-maker in charge of overseeing the transformation. By setting KPIs and making specific managers accountable, you give yourself the best chance of delivering on your promises.
4. Be Transparent
Ethically-minded people who are interested in the environment are some of the most likely to conduct research into your supply chain. If you’re making claims that you can’t back up with evidence, or worse, you lie to make your company look good, you’ll do more hard than good. Transparency is absolutely crucial when it comes to moving toward a more sustainable future.
Making your sustainable performance targets known publicly is a great idea for attracting customers. Including information about your supply chain on your website lets the world know you’re serious about sustainability and working hard to make a difference.
5. Continually Reassess and Refine
The effort doesn’t stop once you’ve reached your initial sustainability goals. Consumer attitudes and expectations are changing faster than ever, as information is easier to access than ever. The best way for businesses to thrive in the future is to embrace ethical practices and aim to give back to society.
After all, why shouldn’t a company leave the world better off than it was at formation? When you reach your sustainability targets, consider charities you can partner with and practices you can implement to actively contribute to improving the environment for everyone.
Tax Breaks for Sustainable Businesses
The federal government offers a range of perks to encourage socially responsible investing in the future of your business. Tax credits and tax deductions are two distinct types of tax relief, with the former applying credit against gross income for dollar-for-dollar reductions in your tax bill, and the latter coming into play after gross income is calculated.
Here are a few of the tax credit incentives you could benefit from if you implement greener business practices.
Sustainable Vehicle Tax Credit
If you purchase and use eco-friendly vehicles or refueling properties for your business, you could benefit from the following:
- Complete Form 8864 to receive a tax credit for companies that sell or use biodiesel, biodiesel mixture, renewable diesel mixture, renewable diesel or small agri-biodiesel products.
- Complete Form 8911 for the Alternative Fuel Vehicle Refueling Property Credit, available to companies purchasing refueling properties, such as gas pumps.
Form 8910 for Alternative Motor Vehicle Credit, which offsets the costs of servicing alternative vehicles.
Green Investment Tax Credits
Most tax credits for general socially responsible investing are covered in Form 3468. If you’re planning on building a property or properties in your company’s name, you can get tax credits for the following green investments:
- Solar energy and solar illumination
- Qualified small wind energy
- Qualified fuel cell
To be eligible for the above credits, your business should:
- Be operational the year the tax credit is claimed in
- Have built or own the equipment
- Have equipment that adheres to performance and quality standards
How to Claim Sustainable Tax Credits
If you’re a small business owner filing business taxes with your personal tax return:
- Complete the credit application form for the specific tax credit.
- Add the necessary information from Form 3800.
- Include the information from Form 3800 on your tax return.
Keep in mind that the IRS is complicated, and laws and regulations might be different in your state. Always speak to a qualified financial expert before making big decisions about taxes.
What Is Sustainable Investing?
There’s another side to socially responsible investing that you can benefit from as a business owner — the stock market. Being more sustainable doesn’t only attract consumers to your business, it can also make you more appealing to investors if you’re a public company or want to become one. If you have no desire to raise capital from investors, you could consider investing in sustainable funds yourself.
Put simply, sustainable investing means investing in funds and organizations that have green credentials. Going green is one of the fastest growing market trends and looks set to continue growing at an exponential rate, as consumers become more conscious of humanity’s impact on the environment.
Sustainable Investment Strategies
As investment practices continue intertwining with the values and social goals of investors, a more sustainable future is taking shape. Most funds in this category fall into the environmental, social and corporate governance category, but there are also sustainable ETFs, sustainable investment groups and other more general types of sustainable companies to invest in.
Socially Responsible Mutual Funds
According to U.S. News and World Report, the top seven sustainable investment funds are:
- Vanguard FTSE Social Index Fund Admiral Shares
- Parnassus Endeavor Fund
- Pax Ellevate Global Women’s Leadership Fund
- Calvert Bond Fund
- Calvert International Opportunities Fund
- Fidelity U.S. Sustainability Index Fund
- Ave Maria Bond Funds
Exchange-traded funds offer additional security because companies are prescreened to ensure they’re adhering to best practices. Some of the most popular sustainable ETFs include:
- ISHARES MSCI ACWI LOW CARBON TARGET
- ISHARES GLOBAL GREEN BOND
- THE U.S. VEGAN CLIMATE
- ISHARES MSCI KLD 400 SOCIAL
Sustainable Investment Groups
An investment group is a small group of individuals who combine resources in view of investing as a team. It opens investors up to new opportunities by giving them access to various networks of like-minded individuals and organizations.
You should take your time when choosing a sustainable investment group to join, paying particular attention to those that can open you up to investment opportunities that aren’t easily accessible to the public. Examples of green investment groups include:
- Sustainable Investment Group
- The Sustainability Investment Group
- The Sustainability Group
- Sustainable Tourism Investment Group
- The Forum for Sustainable and Responsible Investment
Sustainable Companies to Invest In
Investing in sustainable companies is something many financiers are turning to, including amateur and expert investors. According to Nasdaq, in 2021, the top three sustainable stocks to invest in are:
- Orbital Energy Group
- VivoPower International
Let Us Help You With Sustainability
Socially responsible investments in your company can quickly add up, but Lendzi can help you spread the cost over time. Get in touch online or call us at (877) 453-6394 to find out how we can help you secure financing for sustainability endeavors.