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Ethical Banking – What’s it all About?

Last week we took a look at business bank accounts and gave our readers some advice on choosing the right type of business bank account that would satisfy their individual requirements.  Today we’re going to take a look at ethical business banking because we know that the choice of bank for your business doesn’t always depend on the services it provides or the accounts on offer. 

First of all, a quick explanation of ethical banking, which has become more and more popular in recent years as more business owners realise that there are customers for whom ethical shopping and sustainability is a priority. 

An ethical bank (which can also be called a social, civic, alternative or sustainable bank) is a bank that is concerned with the environmental and social impact of its investments and loans and may also be related to the fair trade movement, ethical consumerism and social enterprise.  Ethical banks sometimes operate with narrower profit margins than traditional banks which means that they may have fewer offices or operate mainly by phone, internet or mail. 

Businesses that offer fair trade products, sustainable products and green products will often choose to use an ethical bank as it means that they can offer their customers a comprehensive ethical customer experience in a totally transparent manner.  Ethical banks operate on a day to day basis and will usually offer the same types of services as regular banks, including free service charges, change services, overdraft facilities and loans.  However, those who use ethical banks benefit from the assurance that any investments made by the bank (and using the business’s money) will either be for a worthy cause or will do no harm to society or to the planet we live on. 

The increased level of transparency offered by ethical banks means that bank customers can see where and how their money is being used.  For instance, the bank will usually provide access to policy information and web-based documents about any schemes that they currently support and previous projects that they have backed.  This may include detailed information on the impact their funding has (or has had) on a project together with the wider (non-financial) success of an investment, such as how it has benefited the environment or how it has benefited a particular sector of the population. 

When choosing an ethical bank, you get to consider the projects and schemes that the bank supports and your business will indirectly support these projects and schemes by using that particular bank for your business finances.  You can also align the bank’s ethical policy with your business and its values which means that your business is also associated with these causes and initiatives.   This means that your customers can buy products or services you provide which are aligned with supporting the same projects and schemes as your bank, an increasingly attractive option for so many of the population as we become more aware of the wider impact of our shopping habits.

Advertising your products and/or services as ethical, fair-trade or environmentally conscious can be the USP (unique selling point) that sets you apart from your competitors and attract a specific type of customer.  For environmentally aware and socially conscious customers, the option of purchasing ethical or fair-trade products if very often more important than price and many are willing to pay a little extra for the peace of mind that comes with knowing that their lifestyle is not harming other people or the environment.