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Sustainability - what it means for SMEs now

Updated: Sep 19, 2022

The growing global movement to reduce waste and irresponsible consumption and contribute to a greener economy shows that sustainability is becoming mainstream.

However, a recent survey by YouGov found that almost a third of small and medium businesses in the UK have no plans to implement a sustainability strategy, despite the government commitment to achieving net zero carbon emissions by 2050.

There is a perception by some SMEs that they are too small to make an impact and that changes to their business model would be costly.

Collectively, SMEs represent 99.3% of the private sector in the UK, and it has been estimated that they also account for 45% of the country's business energy use.

As a group, SMEs are crucial to building back better and greener, but sustainability is more than achieving net zero.

What is sustainability?

Three pillars contribute to sustainable development and growth - economic viability, environmental protection and social equity, or the triple bottom line.

For any business, economic viability is a necessity. But making a profit does not need to be done to the detriment of the local and global environment or local and global social considerations.

Most of us believe decent work and economic growth (SDG8) should be a given, but as the pandemic showed, globally 1.6 billion workers in the informal economy risked losing their livelihoods. Not one country was spared.

Focusing on economic, environmental and social sustainability is not a new phenomenon; John Elkington, a business writer in the UK claims to have coined the phrase in 1994. In 1997 when I was working for The Body Shop in New Zealand, I remember the company using the model in its accounting process.

While one-third of SMEs in the UK have no plans for developing sustainability strategies, two-thirds do. However, research suggests over three quarters (77 per cent) are not clear how to measure impact, and 73 per cent were keen for more training and education.

Rather usefully, the UN, along with the agreement of 193 countries, have created a framework - the 17 Sustainable Development Goals - which can be used as a guide to embed and measure sustainability strategies.

"The most valuable aspect of the SDGs is that they are not just for global governments or larger corporations to tackle. They also empower citizens, entrepreneurs, leaders, employees and activists to all come together under a common language and intention with the backdrop of the UN. It is truly an inclusive movement from formation through implementation."

Steve Distante, CEO of Vanderbilt Financial Group

What is a sustainable business model?

As defined by the Brundtland Report back in 1987, a sustainable business model can be defined as a business model that creates, delivers, and captures value for all its stakeholders without depleting the natural, economic, and social capital it relies upon.

With the global challenges of climate change, gender inequality, polluted oceans, loss of biodiversity and the threat of worldwide pandemics, our eyes have been opened to the idea of building back better, and building back greener. Ensuring our communities, towns, and cities are more diverse, inclusive and resilient and that our children are educated, well-fed and have jobs to look forward to in the future.

There are four critical elements to a sustainable business model.

  1. It's commercially profitable - economic prosperity

  2. It can succeed far into the future - sustainable

  3. It uses resources that it can utilise for the long term - the environment and the circular economy

  4. It gives back - social value

Why is sustainability important in business?

In this era of post-Covid-19 recovery and the push for Global Britain, UK based businesses who build trust with their customers based on authentic sustainability credentials are more likely to be more resilient as a result.

Emerging supply chain and investment rules will mean companies small and large will ultimately have to comply with sustainability requirements.

Increasingly, SMEs who want to supply to large corporations will have to compete on sustainability, and even finance providers and investors are increasingly asking for more information on sustainability performance.

The Small Business Report published by NatWest in consultation with the British Chambers of Commerce and the Federation of Small Businesses illustrates the point. The findings point to the fact, growth post Covid-19 could be achieved by:

  • Transforming more SMEs into scale-ups – enterprises that grow by more than 20% year-on-year in turnover &/or employment for at least three years (SDG 9)

  • Increasing female entrepreneurship & productivity of women-led firms (SDG 5)

  • Improving Black, Asian and Minority Ethnic workforce participation and career progression (SDG 10)

  • Driving a shift toward sustainability (SDG 1-17)

While it could be argued that there is a need for some government support to help SMEs develop and implement practical sustainability plans, the perceived barriers to adopting sustainable practices and consequently sustainable development growth is short-sighted. Businesses that aren't proactive on sustainability are in danger of being left behind.

In the face of large-scale global challenges — from poverty and hunger to social justice and the climate crisis — businesses with an eye toward the future can make small changes and collaborate with other organisations to create collective, effective change.

Ultimately, adopting a sustainable business model will help unlock new opportunities for businesses, helping them engage with a new generation of B2B and B2C clients who want products and services that are ethical.

For SMEs considering implementing a sustainable business model, keep in mind there will be short-term costs. However, it is for a better future and a compelling brand value for the increasingly ecologically and socially conscious consumer. In other words, sustainability sells.

Responsible business makes business sense.

About SDG Changemakers

SDG Changemakers works with businesses to accelerate the scale of action to deliver against the UN's 17 Sustainable Development Goals (SDGs).

SDG Changemakers challenge and empower businesses to be purpose-driven, take practical action, and mobilise their collective strength to deliver against the Global Goals.

Using the Sustainable Development Goals as our base, our framework focuses on how companies can bring about lasting social, environmental and economic changes through running their businesses responsibly.

To learn more about what SDG Changemakers do and how we support organisations like yours, get in touch.


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