In sustainability, too often small businesses fall into one of two camps:
“This doesn’t apply to us, we’re too small to matter.”
Or
“We have a few efforts in place but we’re not really sure if we’re focusing on the right things and so we’re not confident enough to talk about them.”
Unfortunately, both get about the same benefit out of CSR. If your approach isn’t designed with your business goals in mind, you may be wasting all that well-intentioned effort.
Yes, understanding why sustainability matters in general is a good starting point. But the more important question is: what does it mean for your business specifically and how can you be smart about your response?
Sustainability shouldn’t be just ‘a nice to have’. Done well, it can reduce costs, bring in new customers, attract better staff, and open doors to new opportunities. But unfocused efforts rarely deliver those results.
The HERO Method
This is why at Small Mighty CSR we advocate a simple 4 step sustainability framework built for small businesses:
‘Know Why’ is step 1 for a reason.
It’s the driving force behind your sustainability approach. Without it you’ll waste time on the wrong things.
Your why creates a north star to work toward instead of shiny object syndrome. Being clear on it helps you proactively get in front of opportunity and convert action into momentum.
To understand your why, there are three key questions:
- What are your personal motivations?
- What are the business drivers?
- What specific environmental and social issues are most relevant?
This article will focus on understanding the business drivers. For help with the relevant ESG issues, check out this handy tool we created with Sustainability Tracker and Xero.
Understanding the business drivers
One question I hear repeatedly from small businesses is ‘But does ESG really apply to us?’ The answer is almost always yes, but the reasons why depend.
And they don’t just depend on your size, though that’s a factor. They depend on your sector, your region, who you sell to, the interest from employees, and your growth plans.
In my experience, they largely fall into five main drivers:
- Regulatory Compliance – If you operate in certain regions or above certain size thresholds, mandatory ESG reporting may already apply to you, be soon to phase in, or will if you plan to grow.
- Tenders and Procurement – Larger businesses and governments are increasingly prioritising ESG criteria in their procurement policies and evaluations.
- Conscious Consumers – Depending on the sector, many consumers prioritise brands and products that demonstrate commitment to society or the environment.
- Employee Purpose – Employees want to work for a business whose values align with their own and this can make a significant difference in attracting, retaining and getting the best out of talented people.
- Finance – If you’re seeking investment or financing, ESG performance is increasingly factoring into the terms you’re offered.
Notice in the above that the term ‘ESG’ shows up specifically for regulatory compliance, tenders and procurement and finance. Those are the key drivers of that particular systematic approach to sustainability, while consumers and employees are more interested in seeing you act responsibly (CSR) or have a positive impact. See our jargon buster here.
Your future success at stake
Not understanding and acting on these drivers comes with real risks to your business, like being caught unprepared on a mandatory disclosure or procurement questions and not having much to offer, leading to damaged relationships or lost contracts.
Not meeting the expectations of consumers and employees can result in a stealthier damage to your business, quietly affecting the perception of your business or brand. Customers and employees may not even raise the issue with you, but simply choose your competition.
It’s possible the driver isn’t hitting you YET – but it likely will in the near future. It’s much better to get ahead of your peers and be prepared instead of having to scramble to react.
By the time the question is asked in a tender or due diligence questionnaire (or the customer or prospective employee is researching your website), you want to have something to show to grasp that opportunity, rather than ‘we’re working on it’.
Different driver, different response
Once you understand your driver, you can respond directly to it. A business trying to win procurement contracts needs a completely different approach to one that’s trying to attract and retain the best employees.
What does that look like? Here are the key strategies for each driver:
- Regulations -> Comply and disclose. Know what you need to report on and get actions in place to show you’re doing the right things.
- Tenders -> Policies and systems. Document your commitments and how you’re putting them in practice.
- Consumers -> Tell your story. Customers buy into supporting a positive difference – tell them why yours matters.
- Employees -> Get them involved. Employees want to feel actively part of a purpose they align with, so let them help design it.
- Finance -> Manage risks. Show lenders and insurers that their money isn’t exposed to climate or supply chain shocks.
What if more than one driver is relevant?
Incorporate each of the relevant responses into your strategy, prioritising the most pressing ones first. Look at where the responses actually overlap and prioritise those actions to tick multiple boxes!
What if none of the drivers are relevant?
Many small businesses still take action on sustainability because it’s important to the values of the owner or management to do the right thing. Every business has an impact, so personal motivations can be just as strong of a why as business outcomes.
CSR is not one size fits all
Your sustainability approach works best when it’s built around your business, not someone else’s checklist.
Understanding what makes ESG relevant to your business is a key part of that picture. Your personal motivations and the specific environmental and social issues most material to your operations matter too – but those are topics for another post.
Knowing your ESG drivers means you can build a response that actually supports your business success, whether that’s winning more contracts, building loyalty with conscious consumers, or holding on to your best staff.
That’s why I created the ‘Is ESG relevant to my business?’ quiz.
In two minutes and seven questions, you’ll get a clear picture on what actually makes ESG relevant to you (or not), plus:
- A personalised breakdown of your top drivers
- Practical guidance on how to respond
- Specific resources to help.