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In your Ability: Sustainability | SME’s and SMP’s

March 23, 2015 | By | One Comment

When it comes to environmental impacts from energy use, small and medium enterprises (SMEs) contradict their size. Some major international research estimate that globally they are responsible for 70 per cent of anthropogenic pollution from industrial greenhouse gases such as carbon, sulphur and nitrogen dioxides, as well as carcinogenic heavy metals and solvents. In this respect they dwarf the environmental impact of big corporate businesses.

So why is it a hard sell getting SMEs to embrace sustainability?

There are two simple explanation to this and as uncomplicated the answers get, the more relentless the implementation of the solutions become.  The first, in the main, SME’s are often not on the regulatory radar, partly because their sheer numbers make enforcement a problem. Secondly, small- and medium-sized entities generally dwell in an impending notion, that sustainability is only apropos to large companies. This thinking generally pervades due to the competitive nature of the business environment and the cost of environmental initiatives could not be passed on to the customer by SMEs because it is seen as a business cost. SMEs at large presume they cannot afford to be sustainable, that measuring and managing environmental performance amounts to an expensive and sometimes a redundant cause. However, its a known, tried and tested fact, that SMEs that integrate sustainability into their core business strategy can benefit from lower costs, reduced risk, and increased opportunities.

In a paper by Parisa Salimzadeh, she says “Brouwers (2010) believes that there are three key barriers to SME adoption of environmental practices. The first one is SMEs’ perception that they have little individual impact on the environment. Also, the lack of expertise and understanding of strategies to address environmental issues is the second barrier. Finally, cost is a major barrier to more proactive environmental oriented behaviour in SMEs, with their managers perceiving little financial benefit from environmental investments.

According to IFAC, SMEs are crucially important to the health and stability of the global economy: they account for over 95% of all businesses and for the majority of private sector gross domestic product (GDP), wealth and employment creation, and social and environmental impacts. in the mean time, there is a convoluted and inexplicable burden on the natural biodiversity and an acceptance that non-renewable energy sources are fast dissipating. In addition, certain finite resources are becoming harder to acquire or expensive to get, causing prices to rise and a mushrooming black market of metal recycling to develop (eg. the disappearance of manhole covers from streets, or theft of copper wiring from train tracks). Interwoven with this is the trends related to energy sources and human-induced climate change and the amounts of waste that is ending up in landfill, or being sent abroad or islands (Watch the great pacific garbage patch) or dumped illegally for others to deal with (such as e-waste).

In another report, ACCA global says, today, SMEs are progressively being faced with pressure to measure and manage their environmental impact and also maintain their managed footprint. They are an integral part of the supply chain where there is a growing demand for sustainability management both from customers and suppliers, especially for those SMEs seeking to secure contracts with governments or larger corporations. On a larger level SMEs need to safeguard their access to those resources which they need to sustain themselves in order to offer their products and services in the future.

CPA Australia, has marked down some opportunities for SMEs to integrate sustainability practices in their day-to-day business. Some of them are as under:

1. Differentiating from competitors : Many SMEs globally have successfully used demonstrably sustainable business practices and products as a point of differentiation from their competitors.

2. Telling an already positive story : SMEs often operate in a sustainable way: they are embedded in their communities, and sustainable business practices, such as minimising wastage, are often “business as usual” procedures. Sustainability reporting provides a credible way to present this information to stakeholders.

3. Funding and markets : A greater range of markets and sources of finance are accessible to businesses that operate sustainably and can credibly demonstrate this through sustainability reporting. This is a growing trend, particularly with benchmarks being drawn around sustainable finance globally, and an increasing consciousness from consumers and businesses.

4. Building internal capabilities : The process of sustainability reporting unlocks a range of internal advantages including staff engagement, risk management opportunities and product and process improvement.

5. Sustainability Reporting Frameworks: A framework is required for credible and objective reporting. A framework provides guidelines on what measures should be reported, materiality considerations, how information is presented and other aspects of reporting that need to be taken into account. A comprehensive framework is important to enable you to reach an opinion on sustainability reports.

Dr Factor says, It requires government to stimulate change with policy and incentives. And if SMEs are appropriately resourced for change, they could reap benefits by producing less waste and using less energy – gaining cost savings and marketplace advantage. Legislation alone will not be effective in driving change, he says. It needs to be supported by local government providing improved infrastructure to support recycling, for example, while state and federal governments provide the overarching policies, financial incentives, rebates and education programs.

Comments

  1. Abhilash Mishra

    Hi Ayona,

    I liked your article. It was well written.
    However, may i suggest putting in links to your references.
    It would help a SME owner reading your article to then go directly to the link to help them further understand how to obtain grants, etc.

    Thank you,
    Abhilash Mishra

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