10 October 2018

Sustainability trends Canadian businesses need to embrace

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Customer demand for products and services produced in an environmentally friendly way is changing how businesses use their supply chains to cut costs, promote efficiencies and become more sustainable. They know that balancing social, environmental and economic considerations is good for the planet, and for profits.

Whatever sector you operate in, the sustainability of your supply chain will have an impact, even indirectly, on your business. To help you navigate the opportunities and challenges, we take a look at the current sustainability trends and how Canadian businesses can benefit.

Creating a more efficient and reliable supply chain

It’s thought that around 80% of global trade passes through networks of customers and suppliers who deliver products and services to market. This is an area where even small changes can make a big difference. For many businesses, it is their supply chain that contributes most to greenhouse gas emissions. With 72%1 of greenhouse gases coming from carbon dioxide, reducing these emissions is one of the most effective ways of tackling climate change.

Andrew Skinner, HSBC’s Head of Global Trade and Receivables Finance in Canada, believes that sustainability begins with the supply chain. ‘We’ve noticed that Canadian companies are beginning to introduce greater efficiencies into their businesses which save them time and money as well as helping to reduce their environmental footprint.

‘For instance, we’re seeing logistics companies converting their trucking fleets from diesel to LPG and embedding GPS systems to save time and cut costs. Rail car numbers are increasing per journey and loading times reducing with investments in technology and process. In agriculture, farmers are also using the latest technology to make a difference. Farmers are minimizing use of heavy machinery such as tractors, by using science, technology and scale to reduce the impact on the soil, covering large areas of land more efficiently, reducing the amount of chemicals and pesticides they need to use, while also reducing the risk of seasonal factors such as rainfall levels and impact of spoilage.’

Skinner added that he’s encouraged by how many Canadian companies are interested in HSBC’s supply chain programs. ‘We have the technology and product policies, we are now working on ensuring the CSR and procurement teams are aligned with finance/treasury teams within our customers to take advantage of the material visibility, working capital and efficiency benefits these solutions provide. We’ve seen how these tools can make a huge difference elsewhere, especially in the retail sector where they need a reliable supply chain to reduce costs and remain competitive. Companies need to get their product or services to market when they’re required and offer competitive terms - they can’t afford to miss the key seasonal cycles.’

Being sustainable is also profitable

These days it’s no longer a choice of whether a company invests in sustainability or becomes profitable, businesses can do both. Indeed, introducing sustainable practices can boost profits. One study showed an 18% increase in profitability amongst S&P 500 business leaders investing in climate change management practice, as compared with those not investing2.

And by improving corporate culture as part of a sustainability plan, businesses are more likely to keep their talent. Research found that employee churn rates are minimized by between 25% and 50%3 and customers are more attracted, and loyal, to sustainable brands. According to a major study, 33% of consumers are now choosing to buy from brands they believe are doing social or environmental good4.

Companies adopting sustainability practices now will be ahead of the curve as governments increasingly bring in policies to make businesses more compliant, such as mandatory greenhouse gas accounting and reporting. Many regions also offer incentives such as tax credits to help businesses become more sustainable.

The Canadian Government’s BIOFOR initiative to deliver bio-based energy to rural and remote communities is a good example. Forestry companies are reducing their reliance on diesel by recycling biofuel to power their plants and it’s likely that more investment will be going into energy-efficient plants, especially in more environmentally challenged locations.

In addition, the government’s Forest Bioeconomy Framework means the country is well-placed to lead the world’s bioeconomy revolution. According to the OECD, this market sector could be worth around five trillion dollars globally by 2030. And the International Energy Agency predicts that by 2050 biofuels will account for 30%5 of all transportation fuels.

Getting from A to B in a smarter way

As well as the fuel used to power vehicles, how people move around in them is likely to be transformed in the next decade, thanks to smarter transportation systems in cities. This is known as Smart Mobility which happens when information technology and connectivity combine to create greater value. This can include self-driving cars, optimized traffic control, ride-sharing apps, a demand-responsive public transit system, bicycle-sharing schemes and seamless connections between different transport services.

Cross-sector collaboration between business leaders and other stakeholders can help drive this shift. With its advanced software solutions, Smart Mobility will give everyone access to city transportation services.

In turn, the social and environmental data gathered from this transformative transport process could be worth up to USD2 trillion globally in the next six years. It’s also predicted that around 60% of revenues in the automobile sector will be up for grabs with the growth of digital apps6.

This opens up new opportunities for companies to not only invest in the infrastructure needed to drive the Smart Mobility and Smart City agendas, but enjoy the benefits. Profits can be boosted as the cost of moving products comes down as transportation becomes quicker and more efficient.

To find out more about Smart Mobility click here

We’re here to help

In Canada we have a number of tools and programs we can offer you, especially around supply chain and working capital efficiencies.

Globally, we will provide USD 100 billion towards sustainable financing and investment by 2025. And as part of improving the efficiency of our own operations, we’re aiming to get 100% of our electricity from renewable sources by 2030.

We also work in partnership with charities such as WWF (World Wildlife Fund) and WaterAid to improve supply chain sustainability. Already 1.6 million people have gained access to fresh water since 2012 through our Water Program.

The world is rapidly changing. Driven by regulation, customer demand and technological innovation pursuit of profit and sustainability in tandem is becoming not just easier, but also critical for business success.

1. Time for Change. https://timeforchange.org/CO2-cause-of-global-warming

2. CDP, 2014

3. Capturing the value of sustainability: identifying the links between sustainability and business value. 2018

4. Unilever. 2017

5. https://www.iea.org/weo2017/

6. Smart Cities World. https://www.smartcitiesworld.net/news/news/smart-cities-market-to-be-worth-over-2-trillion-by-2025-2785

Disclaimer

The information presented is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this document without first obtaining specific professional advice. While reasonable care has been taken in preparing this document, HSBC does not make any guarantee, representation or warranty (express or implied) as to its accuracy or completeness. The information presented in this document is subject to change without notice. Certain of the products and services offered by HSBC and its subsidiaries and affiliates are subject to credit adjudication and approval. This document does not constitute an offer to provide the services and products described and the provision of such services and products remains subject to contract.

Issued by HSBC Bank Canada (“HSBC”) © Copyright HSBC Bank Canada 2018. ALL RIGHTS RESERVED.

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