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How SMEs can create business value from sustainability

Updated: Oct 25, 2023

Small and medium-sized enterprises (SMEs) are the backbone of the global economy, accounting for more than 90% of businesses worldwide. While SMEs may not have the same level of resources as larger corporations, they have a significant impact on the economy and society. Therefore, sustainability has become a requirement for SMEs to operate responsibly. But can SME's afford sustainability? There is certainly a perception that it is not compatible with business realities. This article will examine the business case for sustainability for SMEs, the challenges they might face, and how to overcome them.

The Business Case for Sustainability for SMEs Sustainability is no longer just a moral obligation; it's a business necessity. Customers, investors, and regulators are increasingly demanding transparency and accountability from businesses in terms of their environmental and social impact. SMEs that prioritize sustainability can reap the following benefits:

  1. Cost savings: Implementing sustainable practices can lead to significant cost savings even in the short term. Reducing energy consumption, optimizing waste management, and minimising water usage can result in lower operational costs quickly. Additionally, by implementing sustainable supply chains, SMEs can reduce the risk of supply chain disruptions and build resilience.

  2. Increased revenue: Customers are more likely to buy products or services from businesses that are environmentally and socially responsible. By emphasizing sustainability, SMEs can attract more customers and increase revenue. In fact, according to a Nielsen study, 81% of global consumers feel strongly that companies should help improve the environment.

  3. Improved reputation: Sustainability can enhance a business's reputation and brand image, leading to increased customer loyalty and retention. It can also attract new customers and investors who value sustainability. Moreover, being recognized for sustainable practices can help SMEs stand out from competitors, potentially resulting in a competitive advantage.

  4. Regulatory compliance: Governments are introducing more regulations around environmental and social issues. By implementing sustainable practices, SMEs can comply with regulations, avoid penalties, and build trust with stakeholders.

  5. Happier employees: Today's workforce is looking for meaning in their jobs and also expects their employer to be a responsible actor in society. Actively engaging employees in sustainability increase loyalty and retention and helps with recruitment.

Challenges SMEs Face to Get Started with Sustainability While the benefits of sustainability for SMEs are clear, getting started can be challenging. Here are some of the challenges that SMEs might face:

  1. Lack of resources: SMEs often have limited resources, both in terms of budget and personnel. Implementing sustainable practices may require upfront investments and specialized expertise that SMEs may not have.

  2. Lack of awareness: Many SMEs may not be aware of the benefits of sustainability or how to implement sustainable practices effectively. Sustainability is a relatively new concept, and SMEs may not have the same level of exposure to it as larger corporations.

  3. Short-term focus: SMEs may have a short-term focus on profitability and survival, which can prevent them from prioritizing long-term sustainability initiatives. SMEs may not see the value of investing in sustainability if the benefits are not immediate or tangible.

  4. Complex regulations: Regulations related to sustainability can be complex and require specialized knowledge and resources, which SMEs may not have. SMEs may not understand what they need to do to comply with regulations or may not have the resources to do so.

How to Overcome These Challenges SMEs can overcome these challenges by taking the following steps:

  1. Start small: Implementing sustainable practices does not require a significant investment or a massive overhaul of business processes. SMEs can start small by identifying specific areas where they can improve their sustainability practices, such as reducing energy consumption, optimizing waste management, or enhancing employee wellbeing. By starting small, SMEs can build momentum and gradually implement more extensive sustainability practices.

  2. Seek external support: SMEs can seek external support from sustainability consultants or government agencies that provide advice and resources on sustainability initiatives.

  3. Engage employees: Engaging employees in sustainability initiatives can help SMEs build a culture of sustainability within their organization. Employees can offer valuable insights and ideas for improving sustainability practices, and they can also help implement and champion these initiatives.

  4. Collaborate with suppliers: SMEs can work with their suppliers to implement sustainable practices throughout their supply chains. By collaborating with suppliers, SMEs can identify areas where they can reduce their environmental impact and promote sustainable practices.

  5. Measure and report progress: SMEs should measure and report their progress on sustainability initiatives to track their impact and demonstrate their commitment to stakeholders. This can also help SMEs identify areas where they need to improve and set goals for the future.

In summary, SMEs may face challenges when it comes to sustainability, but the benefits of sustainable practices cannot be ignored. Implementing sustainable practices can lead to cost savings, increased revenue, improved reputation, and regulatory compliance. SMEs can overcome challenges such as lack of resources, lack of awareness, short-term focus, and complex regulations by starting small, seeking external support, engaging employees, collaborating with suppliers, and measuring and reporting progress. By prioritizing sustainability, SMEs can operate responsibly, enhance their reputation, and build a better future for themselves and their stakeholders.

Photo by Jernej Furman


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