The important link between environmental sustainability and cash flow

The world needs to cut greenhouse gases by half by 2030, and eliminate it completely by 2050 to avoid catastrophic climate change. Large and small companies alike have important roles to play in this fight.

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Larger companies with lots of cash should theoretically have been quicker to adopt green practices. But while many companies continue to make efforts in the right direction, others have opted for greenwashing —making consumers believe that their products or services offer positive environmental benefits while concealing negative information.

For example, SinGas, a Singapore-based power company that promoted gas cooking fuel as “environmentally friendly”, was called out for greenwashing as it ran an advertisement in Singapore that promotes gas cooking fuel as a “clean fuel” which “does not taint our food or the environment”.

Some regulatory agencies have now accelerated the pace of sustainability reforms. For instance, the financial regulator of Singapore, the Monetary Authority of Singapore (MAS), is planning to introduce specific requirements for environmentally focused investment funds.

And the United Nations expects SMEs to play a larger role in reducing carbon emissions. The amount of emissions SMEs are responsible for is small — a study conducted by Singapore’s ISEAS-Yusof Ishak Institute highlights that the carbon emitted by SMEs in Southeast Asia is just 1.8% or 29.7 million tonnes of total annual emissions compared to the 6-24% emitted by SMEs in the United Kingdom However, as SMEs account for an average of 97% of all enterprises, 69% of employment, and 41% of GDP in the ASEAN region, their contribution to fighting climate change is important.

SMEs have limitations in this area, due to their size, and a lack of budget for an army of consultants. More importantly, many have to spend their time chasing down late payments from customers at a time of rising inflation, increasing operating costs, and disrupted supply chains.

Sustainability initiatives are likely to become legally mandated obligations in the near future. To be future-ready, SMEs need to begin with the focus on improving cashflow to get paid on time. This can be done by systematically applying the Virtuous Revenue Cycle to the 20% of customers who represent 80% of sales. That includes communicating clear payment and service expectations, and a carefully maintained process of customer intimacy with early identification of issues and their prompt resolution.

As for large companies, spearheading their own green initiatives are not their only responsibilities when it comes to sustainability. They also have to pay their suppliers on time to help ensure the survival of SMEs, which is in turn the only way SMEs can meet their environmental commitments. That’s why RIABU launched Pledge2Pay — a platform for companies that commit to paying their SME suppliers within 30 days, to help them survive and get their cash flows in order.


Get more tips on effective cash flow management from our book, Let The Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit RIABU.com