Sustainability: a competitive advantage?

Sustainability: a competitive advantage?

If you thought sustainability was only relevant to big business, think again: not only can a well-conceived sustainability strategy save you money, if well communicated it can also strengthen the relationship between an SME and its customer base.

There is a tendency among businesses to see sustainability as a cost – something extra in which they must invest time and resources – or as an irritant, a bureaucratic series of compliances that have to be met, but which are not core to the business. In fact, sustainability can and should be a way for companies to grow market share while making significant cost savings.

Many large companies make much of – and have been praised for – their sustainability strategies; less well known, perhaps is what smaller companies are doing for their part. Can SMEs commit to sustainability in the same way large companies can, and are there even areas where they might have an advantage over their larger competitors?

Solitaire Townsend, co-founder of Futerra Sustainability Communications, says that, from a strategic point of view, the needs are the same for SMEs as they are for global conglomerates. “Why are we looking at sustainability? What are our targets; what are the key performance indicators; and what will we go away doing differently tomorrow, next week and next year? It sounds bizarre, but a start-up will have exactly the same concerns as a multinational.”

Beyond savings
Where the difference lies is between managerial and entrepreneurial sustainability. For a large firm, commitment to sustainability often doesn’t look past cost savings – principally on energy, waste and efficiency improvements. For an SME, saving money is important, but there can also be a focus on making money by creating competitive advantage from sustainable products and services.

“A sustainability strategy for many SMEs is about building relationships with customers,” Townsend says. “They are closer to the ground in terms of experimentation and moving quickly.” It’s no surprise that, as a result, many large businesses have acquired smaller ones that have a strong emphasis on sustainability: “For example, Unilever acquired Ben & Jerry’s, and L’Oréal acquired The Body Shop.”

This trend will continue. “The entrepreneurialism we see almost all comes from small businesses, and it’s here that there’s real opportunity for SMEs. There is a changing customer base developing. We have millennials who want to buy different kinds of products, care about where things are sourced from and they want to work for more ethically minded companies too. So entrepreneurial sustainability, which was once risky, is now becoming more and more manageable.”

Image and brand building
For Professor Ken Peattie, director of the BRASS (business relationships, accountability, sustainability and society) centre at Cardiff Business School, the challenge for SMEs is understanding that sustainability is for them. “SMEs often don’t think of themselves as ‘corporate’ and relate more to local and community issues than a vision of wider society and a set of responsibilities,” he says.

It may simply be that the ‘CSR’ (corporate social responsibility) tag is off-putting to SMEs. But, says Peattie: “If you think about CSR in terms of making best use of resources; managing social and environmental risks; building good relationships with local communities and workforce; forging a strong reputation and offering customers the reassurance of dealing with a company that does the right thing for people and the environment; then it is just as much for SMEs as for big companies.”

Indeed, a good sustainability performance can help a small company punch well above its weight in terms of image and brand building, “since this creates an additional positive set of issues to communicate with stakeholders about”.

Taking positive steps
In practice, there are several areas where SMEs can move forward more easily than their larger competitors. Matt Sexton, Townsend’s colleague and strategy director at Futerra, outlines three key advantages that SMEs have: “The ability to act quickly is a huge benefit. Compared with the sheer amount of inertia that can happen in tackling issues in large companies, SMEs can make decisions without the committees and layers of management that you often see in big business.”

The second advantage relates to ownership structure. “Take renewables like solar panels. They last 20 years, are paid off after seven years, and so give you free electricity for 13 years. That makes substantial savings so it should be a no-brainer. But large companies will very rarely sign off investment costs like that because they only work to three-year plans. An SME, however, can make the decision to do so, because they’re independent enough to look at long-term value.”

Thirdly, SMEs succeed in the wider sphere by running on innately efficient lines. “Some big companies are very efficient but the reality is that they have large buffers, so they don’t concentrate on savings. When you have a smaller cash profit, there is a disproportionately higher benefit from trimming your waste, fuel and packaging costs.”

Going for certification
Finally, should SMEs look at certification? The answer is a qualified ‘yes’. “Third-party certification schemes such as ISO 14001 or 50001, Investors in People or Carbon Trust Standards can all provide good learning opportunities and create a shared pride,” says Rowland Hill, corporate sustainability manager at Marks and Spencer. “But only pick ones that are relevant to your sector.”

The process of gaining certification will lead to benefits in itself – you will identify areas for improvement. “But select the ones that are going to be valuable to you,” agrees Matt Sexton. “Don’t let the process of going for certification get you bogged down in red tape.”

The basic elements of a sustainability strategy

  • Have a clear business case: Does the leadership know why you are developing a sustainability strategy? What short-, medium- and long-term goals do you want to achieve?
  • Prioritise: See where you can make most impact. Depending on the business, you might make the best savings in energy, waste or water. See where you can make the greatest financial difference, and focus on that.
  • Understand the numbers: “It’s surprising how many companies don’t know how much they actually spend on electricity, water and waste collection,” says Matt Sexton. “Do the sums and you will see where you want to prioritise.”
  • Generate internal support: Embedding sustainability will not work unless it has both top-down and bottom-up commitment – no matter how large or small the company. “The key is to have a plan that engages everyone in the company so it becomes a culture, not just a campaign,” says Rowland Hill. “Some of the best ideas come from employees,” Sexton adds, “and you only find out what they are when the discussions take place.”
  • Engage with the customer: Do you use less carbon than major competitors? Do you source locally, minimise waste and maximise reuse and recycling? If you can make genuine green claims, communicate them to customers.
  • Have an action plan: Audit where you can make changes, and outline a timetable for their implementation. Once you’ve identified three or four actionable issues and discussed them with employees, they will quickly translate into deliverables.

 

 

Take renewables like solar panels. They last 20 years, are paid off after seven years, and so give you free electricity for 13 years. That makes substantial savings so it should be a no-brainer. But large companies will very rarely sign off investment costs like that because they only work to three-year plans. An SME, however, can make the decision to do so, because they’re independent enough to look at long-term value
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