The benefits of sustainability for SMEs: Adding value and resilience to your business

Most companies agree there is a clear case for sustainability and it’s no longer a meeting topic relegated to ‘Any Other Business’. As the UK strives to reach its net zero targets, operations of all sizes are embedding it in their strategies.

But, beyond meeting targets and potential cost savings, there are many additional benefits to shifting focus. A strong sustainability strategy can inject unexpected value to your business and a unique opportunity to build meaningful relationships with your stakeholders

REDUCE ENERGY COSTS, OPERATIONAL COSTS AND EMISSIONS

Winning internal company support for moving to more sustainable practices can be tough, so it makes sense to initially focus on the so-called ‘low-hanging fruit’. Let’s start with the more obvious benefits of sustainability that translate into long-term cost savings and therefore are an easy win with your finance department: increasing energy efficiency. The average commercial building wastes 20 to 30% of the energy it consumes [1] so addressing energy consumption will save money, reduce operational costs and, of course, reduce carbon emissions.

Also, incorporating sustainability at the design stage of a product offer can lead to cost savings as you think about ways to reduce the amount of raw materials used to produce it and its associated packaging [2].

ATTRACT AND RETAIN YOUR CUSTOMERS

Businesses addressing social and environmental issues are creating value beyond the financial returns of shareholders and standing out from their peers.  

Sustainability offers an opportunity to build a long-term relationship with your stakeholders built on trust and shared values. You want your customers to feel good about buying your products and services rather than contributing to the environmental crisis. Creating that emotional connection enhances your brand reputation and customer loyalty. “Earn a place in a customer’s heart and she will gladly offer you a bigger share of her wallet” [3].

Businesses making sustainability a key strategic priority and incorporating sustainability into their business goals, mission and values are now more likely to generate value [4]. UK accredited B Corps businesses’ average revenue growth is 14% year on year [6]. No wonder the number of accredited B Corps has grown four-fold in the UK in recent years [5].

STAFF PRODUCTIVITY AND ATTRACTING TALENT

Just as sustainability can generate value among external stakeholders, businesses integrating it into their DNA can also strengthen internal culture. This creates a more engaged and motivated workforce.
If employees identify company values and purpose, whilst also feeling that they are respected and supported, there will be a significant positive impact on their job satisfaction. This will lead to better staff retention, making your business more resilient, but also more attractive to prospective talent. This is increasingly important  amongst discerning young professionals, who have high expectations in terms of job satisfaction, and are pressing for greater action on climate change from all quarters – including their employers.

SHORT AND LONG TERM FINANCIAL PERFORMANCE

There is a strong link between sustainability and financial performance too, with growing evidence that businesses considered to be sustainable are performing better financially than their rivals [7].  Investors’ appetite for sustainable assets has accelerated with the pandemic. Investment professionals widely recognise that companies with environmental and social governance (ESG) programs benefit from long-term and short-term value creation [8].

Consider a real estate commercial portfolio and how its energy performance might impact its financial value. For prospective tenants, the benefits of a “greener” building will not only be lower running costs, but also a way to meet their own emissions targets and to contribute to staff well-being. It is, therefore, no surprise that green commercial buildings have higher tenant attraction, rents and sale prices [9]. This correlates directly to short-term financial performance and long-term asset value.

MEETING SHAREHOLDERS EXPECTATIONS

Adopting more sustainable practices can also influence the financial appeal of smaller businesses too. Shareholders are increasingly demanding of companies to address sustainability, as big oil companies like as ExxonMobil have recently found out. Having a solid long term sustainability strategy in place should put you in a better position to secure funds and investors as well as making you more attractive over your competitors.
Just like your customers, shareholders want to feel good when they invest. So appealing to their emotional needs as well as offering them a good return on their investment should enhance your position.

RESILIENT SUPPLY CHAIN

Finally, being a sustainable business means keeping a close eye on your supply chain and ensuring you work with businesses with similar standards to yours. As well as building a strong relationship with suppliers, vetting them carefully will ensure that you have a resilient supply chain, minimising the potential for disruptions, fluctuating operating costs or even reputational damage.

INNOVATION: THINKING OUTSIDE THE BOX

Inevitably, as you embark on your journey to do things more sustainably, you will face challenges and need to come up with creative and practical ways to do things “better”. This offers an opportunity to engage and start interesting discussions with staff, customers and other stakeholders that may lead to thinking in different and innovative ways.
As you unpick your current practices, you may find innovative new revenue streams to satisfy the increasing demand of low carbon products, start a collaboration with another business or even end up completely re-evaluating your business model.

There are many examples of the latter in the fashion industry, which needs to address the effects of fast-fashion on the environment. For example Adidas’ recently launched Ultraloop shoe based on the circular business model [10]. The shoe is “made to be remade”, designed to be recycled back into a running shoe when the customer sends it back at the end of its life. You may not have Adidas’ R&D team at hand, but there is no shortage of innovative ideas and new opportunities when it comes to the sustainable business journey. 

ENJOY THE RIDE…

There is definitely no quick and easy way to transitioning your business into a more sustainable one, but as you reshape your business to be more future-fit, there is an opportunity to make it more resilient, more performant and a more rewarding place to work. And guess what? There’s every chance you’ll enjoy the ride.  

References / further reading

[1] https://www.centricabusinesssolutions.com/practical-ways-measure-and-mitigate-your-carbon-emissions

[2] https://bpf.co.uk/sustainable_manufacturing/design/Designing_Sustainability.aspx

[3] https://www.firmsofendearment.com/

[4] https://www.mckinsey.com/business-functions/sustainability/our-insights/how-companies-capture-the-value-of-sustainability-survey-findings?cid=other-eml-dre-mip-

[5] https://ourstory.bcorporation.uk/?_ga=2.57048617.284812320.1627981871-1689221165.1627209110&_gac=1.47503061.1627209114.Cj0KCQjwl_SHBhCQARIsAFIFRVUtfFi5V0fbprNbnzFgHoFOEajbRoD_U8Ox9Ux_HXblCAn6lNgtRxEaAituEALw_wcB

[6] https://www.pwc.co.uk/industries/retail-consumer/insights/b-corp.html

[7] Business Sustainability Management short course, University of Cambridge

[8] https://www.mckinsey.com/business-functions/sustainability/our-insights/the-esg-premium-new-perspectives-on-value-and-performance

[9] https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-fsi-breakthrough-for-sustainability-in-real-estate-051414.pdf

[10] https://www.boardofinnovation.com/blog/circular-business-model-examples/

Fleur Record Smithhttps://haynehouse.co.uk/
Fleur is the founder of Hayne House, an events venue based in Kent that is passionate about sustainability and driven by Fleur’s determination to bring change to a very wasteful industry. Straight out of business school Fleur pursued an entrepreneurial path gaining experience as a business owner initially in commercial property then in the events industry where she has put in practice her ability to lead, problem solve and implement strategy and processes. She has first-hand experience of the challenges that small businesses face as they transition to a sustainable operating model and wants to put her experience to use by sharing practical resources and tools. Currently undergoing B-Corp certification, graduate of Cambridge Institute for Sustainable Leadership and ambassador for the Sustainable Wedding Alliance, Fleur is keen to include small businesses in the sustainability conversation and is invested in her industry and beyond to encourage other businesses to take action. She has recently taken part in campaigns with the Department for Business Energy and Industrial Strategy and United Nations Global Compact aimed at raising awareness amongst SMEs, and is working on the ground with the Federation of Small Businesses by holding events to support small businesses locally to face these challenges.

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