What does CSR mean for small business?

Why is sustainability important?

The reason sustainability is such a hot topic is that, basically, our world is not sustainable the way we're currently living. We're using our resources faster than they can regenerate and today humanity uses the equivalent of 1.7 Earths to provide the resources we use and to absorb our waste. As our global population continues to increase and so does our standard of living, our demand on the world's resources grows, while the availability and quality of those resources are declining.

We can also view this as humanity's joint bank account. Currently we are living beyond our means, and this will lead to our funds running out. As a civilization, we face a shared challenge of reducing the damage we do on the environment (withdrawals) and even regenerating its resources (deposits) so we continue to have access to the same abundance and quality of life as past generations have enjoyed.

These resource limitations and large-scale impacts may directly impact some businesses, such as through contaminated land or water, drought impacting production of food ingredients, reduced availability of raw materials, and severe weather events impacting movement of goods, availability of labour or insurance payouts. Even for those that aren't directly impacted, it is everyone and every business' responsibility to do their part in reducing their own impact.

Three pillars

Sustainability is often viewed as addressing three aspects, or pillars - social, environmental and economic (or people, planet and profit) - which are interdependent. The aim is to achieve the best possible outcomes across all three without negatively impacting this others. This is also known as the 'triple bottom line' (coined by John Elkington in 1994).

'CSR'

The term 'corporate social responsibility', or CSR, is more focused on the activities of businesses in the context of sustainability. The European Commission's Communication on CSR (2011) defines CSR as “the responsibility of enterprises for their impacts on society.” It also states that "To fully meet their corporate social responsibility, enterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders, with the aim of:

• maximising the creation of shared value for their owners/ shareholders and for their other stakeholders and society at large; 
• identifying, preventing and mitigating their possible adverse impacts."

It should be noted here that while CSR has in the past been more focused on social issues, society's reliance on environmental resources means damage to the environment is equally
an impact on society.

Unfortunately, CSR has gotten a bad name due to the superficial efforts of many businesses whose CSR program is usually limited to donations to local charities, putting up a sign encouraging recycling and turning the lights off for Earth Hour. But as you can see by the above definition, it should focus on addressing an organisation's impacts and core business.

To review these and other relevant terms' definitions, check out our handy Glossary.

What does it mean to a small business?

All businesses have impacts, even small businesses (yes, even yours), and are therefore responsible for doing their part in minimising impacts in line with sustainability objectives.

I will assume since you have read this far that you have already seen the need to implement sustainability or CSR in your business, either due to personal/employee values or an external push by customers or investors. So what does that look like in practice?

For a small business, no one expects you to implement the same layers of policy, procedures, governance and 100-page sustainability reports as a large corporate. However, your stakeholders are expecting to see evidence that your business is operating responsibly, including that you commit to managing your impacts and take action to do so.

This includes:

1. An understanding of the business' key impacts and risks 
   • Evidence: a brief comment either on the website (e.g. a 'sustainability' or 'responsible business' section) or in response to relevant tender questions outlining the business' activities and relevant environmental and social impacts
2. A commitment to manage those risks and act in accordance with sustainability and ethical principles
   • Evidence: a general commitment on the website or individual policy documents for relevant aspects
3. Actions (controls and initiatives) to manage impacts and improve performance
   • Evidence: description of specific actions such as training program for staff, replacing equipment with energy efficient or low-pollution technology, management systems such as environmental management system (EMS) and health & safety management system (HSMS), and certifications (e.g. ISO 14001, ISO 18001 / ASNZS 4801, Fairtrade, FSC, etc)
4. Reporting on performance
   • Evidence: data compiled on two or three key impact areas such as energy use, greenhouse gas emissions, water use, workplace injury rates, volunteering hours, etc.

Depending who your stakeholders are, these expectations might be more formal and more robust. Large corporate buyers increasingly require suppliers to complete detailed supplier questionnaires and audits. Meanwhile others may simply look through your website and consider recommendations and reviews from others.

Your responsibility

As you can see, this is not about 'being green', but demonstrating that you are a responsible business operator who understands and appropriately manages their impacts and risks including to the environment and to your employees, customers, and community.

A responsible business approach generally covers aspects such as: 

• labour practices (pay, benefits, overtime, non-discrimination, etc)
• health & safety 
• environment 
• community
• anti-bribery and corruption
• sourcing
• product responsibility.

Many small businesses intuitively apply a responsible approach to business based on their own values. So meeting your stakeholders' expectations merely requires articulating this and formalising it into policies and a structured management approach. Aligning with commonly understood standards (e.g. ISO) and frameworks (such as UN Global Compact, Global Reporting Initiative) also improves trust that you are doing the right thing.

Formalising your CSR approach can help you reap the rewards of being a sustainable business. This includes both soft and hard benefits:

• improved reputation by being able to tell your CSR story, leading to improved employee engagement, customer loyalty and regulator and investor trust;
• improved performance through focused management, driving improved efficiency, reduced risk and cost, development of new products and access to new markets.

Growth opportunity

While working to comply with the above expectations is an important first step, there is huge potential for growth and profit by viewing the challenges of sustainable development as a business opportunity.

There are innumerable challenges and unsolved dilemmas in achieving a sustainable world, and many companies and governments who have committed to and are investing money in addressing them. If you are able to provide a solution that meets that need, you will be in high demand. Small businesses have a huge advantage in being innovative, enterprising, and agile to bring new solutions to market. 

Going beyond responsive CSR compliance to offering products and services that provide a positive environmental or social outcome sets you apart in the market. Sustainability can be your differentiator, your blue ocean strategy, your early mover advantage, your foot in the door. Your sustainability superpower!