What controls over half of global economic output, employs over 2/3 of the workforce and has the power to innovate solutions to the world's most pressing problems?
Small and medium size businesses (SMBs).
This is no joke, I'm talking about the world's most overlooked force in sustainable development.
Since the emergence of Corporate Social Responsibility (CSR) in the 70s, the focus has been on large, multinational businesses as the ones with the greatest impact and influence. And much of the big end of town has stepped up to the challenge, with significant commitments and goals coming out of organisations like Unilever, IKEA and Patagonia.
But still this focus leaves a significant contribution to global impacts unchecked, and a significant resource untapped.
While it makes sense to start with the biggest impacts, the impact of small and medium businesses is far from negligible. In Australia, small and medium size businesses (<20 and <200 employees, respectively), together contributed 56% of gross domestic product (GDP) and employed 68% of the workforce (based on 2016 data).
European statistics from 2015 found similar, with businesses with less than 250 employees providing 67% of employment and 56% of gross value added (GVA). These numbers are likely to be even higher in developing countries with a greater number of small businesses.
It is more difficult to estimate the environmental footprint of this segment, but with over half of Australian small and medium size businesses involved in relatively high impact activities such as construction, mining, and manufacture, and with some industries such as agriculture, forestry and fishing being primarily small business, it is clear these impacts cannot be ignored.
A secret weapon
Similarly, small and medium businesses also should not be overlooked when it comes to potential to make change. What they lack in resources and influence, they often make up for in agility and innovation.
They have many advantages over larger businesses in both implementation of internal initiatives and new product development, including:
- Innovative, entrepreneurial thinking and willingness to embark on a new product/direction thanks to employees and management accustomed to trying new things
- Identifying problems and solutions relevant to real life due to the management being closer to community issues and business operations
- Ability to respond quickly to new opportunities and changing circumstances thanks to agile structures and flexible roles
- Better dissemination of information, operational changes and company values due to flat structure and smaller number of employees
- Values-driven business decisions can be made by the owner/manager at operational level because there are frequently no separate owners/shareholder to report to
- Can see benefits of CSR actions faster and evaluate their effectiveness quickly because changes have more immediate impact on the business.
Cle-Anne Gabriel, a lecturer and researcher in sustainable development at the University of Queensland Business School, was quoted last year by SmartCompany on the emerging importance of Australia’s SME community in efforts to transition to a more sustainable society. “We’re expecting small businesses, which are a lot more agile and can change more quickly, will be better at responding to changes in the market."
This has already been demonstrated by the rapid transformation of many small businesses responding to Covid-19, pivoting their businesses to provide for evolving needs like face masks, hand sanitiser, home delivery, digital entertainment, even 3D printing.
More examples pop up every day of small businesses and startups bringing innovative solutions to market that address key environmental and social challenges, and being quite successful in the process. Here are two great examples:
Impossible Foods - this rapidly growing company is tackling the environmental impact of animal agriculture, including deforestation, methane emissions, water use and water pollution, by replicating meat with plant proteins and heme. Their Impossible Burger uses 96% less land, 87% less water and 89% fewer greenhouse gas emissions compared to conventional beef from cows, and in just 3 years is being sold in mainstream food outlets such as Burger King across the US, as well as expanding into Hong Kong, Macau and Singapore
Zero Co - the most funded Australian Kickstarter in 2019 is tackling the piles of single-use plastic waste by recycling it into refillable bottles and refill sachets for its line of cleaning products. The plant-based, palm oil-free products are provided in bottles made of plastic collected from the ocean, and refilled using sachets made of plastic diverted from landfill and sent back to the company for reuse. The bottles even come with a tracking code so buyers can see what part of the oceans the plastic in their bottle was collected from.
The benefits of addressing sustainability are just as significant to a small or medium business as those for a large business, including cost reduction, increased revenue, risk avoidance, reputation building, employee engagement, access to capital, and supply chain improvement. You can read more about each of these benefits here.
In fact, CSR efforts may be even more effective in building a competitive advantage for small businesses than large. For small businesses with limited advertising budgets struggling to stay top of mind with customers, a noteworthy CSR initiative is likely to be more memorable and more effectively contribute to brand strength than traditional marketing.
So what's stopping small businesses?
We often hear the objections a small or medium business has in advancing sustainability and CSR. Lack of time, lack of understanding of how to respond, and lack of budget are regularly noted as barriers anecdotally, and were confirmed in a small business survey published by Australia Post in 2016. Importantly, lack of interest rated far lower.
It has been highlighted by this report and others that there is a major opportunity to provide education and mentoring for small businesses to overcome these barriers.
I have frequently been asked by business people keen on upskilling themselves or their team if I could point them to any resources to learn more about sustainability and the business response. Aside from the Supply Chain Sustainability School, which is specific to the construction industry, and dense pdf guidance documents developed by a few government agencies, I had to say no, there isn't really a good resource.
This is an especially difficult situation for small businesses when their customers are demanding they meet supplier sustainability standards, which are increasingly common among large corporate customers. Their buyers are putting demands on them, but not providing much help.
Meanwhile individual consumers also expect businesses they buy from to do the right thing, but that often isn't as straightforward as it seems.
To address the barriers of time, understanding and budget, there needs to be an engaging, affordable, straightforward resource for small businesses to access. One that breaks down key concepts and approaches into bite size chunks for the busy small business owner or manager and lays out clear steps to take. One that is tailored specifically to the small business context and does not assume a team of CSR professionals with dedicated roles to implement a large change program.
The key difference for SMB's
Small businesses cannot be expected to implement CSR in the same way as a large business. In sustainability as in business, they can't be everything to everyone. They have to prioritise and focus on doing a small number of things well. CSR has to be 'lean', like everything else in the business.
This means getting razor sharp focus on the business' most significant impacts and opportunities for influence. Implement basic impact minimisation activities (energy reduction, waste management) and pick just one or two key initiatives to focus your sustainability contributions on.
Many small businesses actually already do what I've outlined above, but in an ad hoc way, which means they are less effective and achieve fewer benefits for the business. The good news is many small businesses only need to articulate their commitments, tweak their focus into a conscious strategy, review its effectiveness over time, and make sure to communicate it internally and externally.
Sustainability is everyone's business
Over the last 10 years, we have seen large businesses transform from paying lip service to sustainability to taking serious action, and I feel incredibly privileged and proud of being part of that change for a number of Australian businesses.
Now it's time for small and medium businesses to follow.
From my experience, small businesses want to do the right thing, they just need to be given the tools. Entrepreneurs are resourceful problem solvers and I am passionate about their potential to solve the greatest challenges we face with a bit of inspiration and clear direction.
As Covid-19 has shown, this can happen overnight with the right motivation.
With Small Mighty CSR, I'm looking to fill that gap, to provide small businesses with the knowledge and guidance they need to become more sustainable. And I'd love your input below!
Are you in a small or medium business? Let me know what is holding you back in achieving a more sustainable business.
If you're part of a larger business, how do you think your organisation and others could help small businesses on this path? Do you know of any great educational resources specifically for small and medium businesses? I'd love to hear your thoughts on this topic in the comments below. And please pass this article on to any small businesses you think would be interested.
This article part of a series. If you enjoyed it, check out other two:
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