24 November 2023
Trends suggest that consumers are adopting various measures to shop and live more sustainably, with Deloitte reporting that four out of five UK consumers adopted a more sustainable lifestyle choice during the COVID-19 pandemic. Research before the COVID-19 pandemic has shown that the announcement of a corporate social responsibility program positively affects brand performance, and consumers are more likely to purchase products from companies that promote sustainability. Consumer brands are increasingly being challenged to make more sustainable choices as customers embrace sustainability. Yet, the cost of producing the right choice for the planet is often proportionally higher than unfriendly planet options.
Whilst the pressure to operate more sustainably mounts, there is an increased cost associated with sustainability standards. The creation of polymers and easy access to low-cost labour due to globalisation has allowed the consumer goods industry to rely on cheap, unsustainable solutions. This challenge increased with the COVID-19 pandemic and global inflation pressures following the pandemic, leading to rising production costs, shipping backlogs, labour shortages and less availability of raw materials. Whilst this might be easier for larger, more established companies to navigate, who can borrow at lower rates and make demands on their suppliers and customers, this is different for early-stage or start-ups. There's a margin sacrifice associated with sustainable choices for early-stage companies, which requires an increase in capital to be able to produce products with impact in mind. A report from HSBC stated that a quarter of small businesses believe that focusing on environmental sustainability will grow their business in the next 12 months but highlighted the cost of funding sustainability plans as a critical barrier. Kikin was built to help companies beat this challenge.
Unlike financial disclosures, which all companies are mandated to report on, there is no legislation for reporting environmental and social impact and no globally recognised standards for measuring impact. Despite the efforts of the European Commission introducing the European Sustainability Reporting Standard (a 245-page report), there’s a long way to go. Subsequently, the access to financing to support sustainability goals for an early-stage business is highly immature compared to traditional funding. Financing for start-ups typically comes from dilutive Venture Capital funding designed to support a company's growth towards profit maximisation and shareholder value. Venture Capital remains crucial to the early-stage ecosystem to fund marketing and expansion strategies. However, by using low-cost cash flow financing to fund product development, start-ups can preserve their equity and invest more in sustainable solutions, growth marketing and building value. While sustainable financial products have boomed since the start of the pandemic (Bloomberg Green reported a record $490 billion in sustainability bonds in 2020), this has yet to be translated into support for impact-driven early-stage start-ups. Research from HSBC found that despite the pressure, only 23% of SMEs are measuring their environmental impact, so accessibility to traditional financing tools will remain a big challenge for conventional banks and lenders of credit. Kikin aims to solve this.
The evolution of financing options has a critical role in the realignment of how a start-up manages its cash flow, which is why we launched Kikin.
Kikin gives start-ups access to instant funding without giving up equity. Our mission is to help good businesses grow, which is why we reward sustainable companies with lower fees, freeing up cash for sustainable choices. Kikin was designed by founders who have built consumer brands, understand the importance of cash conversion cycles and have navigated the challenges of suppliers asking to be paid upfront. Using our proprietary algorithms, artificial intelligence and the latest developments in open banking and risk analysis tools, we can fund businesses at every stage of their growth. Our funding automatically updates as your company grows, so you can always get the right amount of funds to support buying enough products to meet demand whilst not negatively impacting cash conversion.
Choosing sustainable options at a start-up comes at a premium. Yet start-ups can not afford the resources to consistently report on the ESG requirements to access green financing of sustainability-linked loans. At Kikin, we can help solve this problem. Thanks to the introduction of impact and ESG accreditations, many start-ups can certify their ESG credentials. This is why at Kikin, we can discount the cost of funding for companies that are a B-Corp (certified or pending), donate to 1% for the planet, or verify offsetting their carbon footprint. Whilst these accreditations aren't recognised by the traditional banks, the founders of Kikin have certified B-Corps, donated to 1% for the Planet, offset their carbon footprints and know the value this brings in holding start-ups accountable for their impact.
Whilst there are signs of progress for sustainable finance, start-ups are being left behind. Kikin aims to support the flow of capital towards innovators, builders, SMEs, entrepreneurs, founders and change-makers who can own more of their company whilst they attempt to rewire the consumer goods economy and set us on a path towards a healthier planet.
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