Similar to taking care of your physical health by following good habits, sustainable practices matters when building a business. Nowadays, investors seek more profound levels of engagement with their portfolio companies. Both to reduce the risk and support their beliefs, many investors balance profits with those adopting the future. Similarly, we both enjoy and choose to finance these businesses as it is the only model for Infidia to become a sustainable business.
In the 21st century and climate change ahead, society should become more aware of the corporation’s impact. An astonishing fact is that 10 corporations control nearly everything we eat that is available at grocery stores. Back in 2013, these companies emitted 263.7 million tons of greenhouse gas. If they were a country, they would be the 25th biggest polluter in the world!
To tackle this, United Nations and developed countries are promoting Sustainable Development Goals (SDG). Moreover, companies embrace Environmental, Social, and Corporate Governance (ESG) goals. Unlike Milton Friedman’s theories, corporations realized that these practices lead to higher ROI in the long run. With Infidia, we support these companies to persist until reaping the reward for their proper behavior. It is because good always prevails, and sustainable businesses become profitable in the long run.
New Era of the Support for Sustainable Businesses
Motivation for starting a business could be intrinsic, but its longevity correlates with profitability. Serving customers, paying salaries and bills means staying in the saddle of your business. In most cases, longevity requires solving the short-term liquidity where Infidia helps.
Moreover, besides solving the liquidity, there is a constant need for reinvestment. It is because of the long-term growth that is not related to profit skimming strategies. The best proof is the failure of maximizing the shareholder value strategy of the previous era. In this case, corporations focused primarily on maximizing the value they create for owners.
However, in a world that is connected more than ever, this behavior can get penalized. Recently, the GameStop example showcased how organized effort can punish the intentions of the profit-oriented group.
It was enough to “spread the word” in the subreddit group about trading, to devastate institutionalized stock traders.
Similarly, social media can propel companies that do good for the world. Starting as support from the community and continued with investors that consider ESG and SDG goals in their investment decisions.
Sustainable Development Goals were adopted by all United Nations Member States back in 2015. These are conceived as a “shared blueprint for peace and prosperity for people and the planet…” Of course, people run businesses, and businesses influence peace and prosperity the most.
If every individual should contribute to SDG, companies should focus on ESG concerns. It is because reality is far from Milton Friedman’s exclusion of the costs incurred by social responsibility. Nowadays, more theories are explaining how these practices are drivers of the company’s profits.
Profitable vs Sustainable Businesses or Both?
There is an array of opinions contrary to Milton Friedman’s argument that ESG type factors reduce financial performance. In a study called “Does it Pay to Be Really Good,” two professors from Oxford and New York University clearly explained the relations between social responsibility and financial performance. Moreover, in a Harvard study, famous Michael Porter claims that “creating shared value” can reinvent capitalism!
As a result of scientific thought, various frameworks came to the light of the day. Sharing focus on the overall wellbeing, many had a concise explanation of the contribution to the business profitability.
The Natural Step Framework (TNS)
In the overview by Stanford University, TNS is a methodology for successful organizational planning. In a simple logic of systems thinking,
TNS recognizes that every part of the system affects another part. Even though the consequences are not immediately visible, one suffering leads to another. For this reason, Jack Dorsey pledged to give away billions with a remark that “If someone is in pain, I am in pain.”
However, TNS also adds commercial benefits to the good cause. Case studies in Canada showcased increased brand loyalty and market share and less impact of government regulations. Followed by many benefits:
- Cost savings by reducing operational costs
- Product and Service Innovation by fostering the revolutionary thinking
- Competitive Advantage due to the ability to quickly respond to change
- Enhanced brand equity and reputation supported by employees’ loyalty
- Increased Shareholder Value
Triple Bottom Line
Usually, economists calculate the bottom line when dealing with profitability. But Triple Bottom Line offers an innovative accounting framework that simply explained includes three aspects in the consideration – three Ps:
- People – fair wages and humane working conditions at supplier factories
- Planet – reducing the ecological footprint as it is possible
- Profit – profit is not opposed to people or “planet
Infidia Supports Ethical and Sustainable Businesses
With Infidia, we aim to build a sustainable business by supporting those that are sustainable. In our epic quest to reduce investors’ risk, we seek metrics to differentiate sustainable businesses from all others. The motivation for this is intrinsic, as we enjoy supporting ethical and sustainable businesses. Moreover, we are helping small and medium-sized companies avoiding the abovementioned top 10.
Simultaneously, we recognized that frameworks that apply to our clients help Infidia as well. Sustainable businesses have sound and transparent business practices. Because of this, making records of these practices in blockchain secures investors even more.
As a result of the increasing access to capital, these companies can further develop their practices. Reducing cost by process efficiency, innovating, and building a brand make these companies attractive for investors. Thus, besides a faster cycle of continuous investments, it is unlocking other types of financing. Probably those that our team of Infidia considers as a way to grow into the sustainable business the future.