During the year 1987, the World Commission on Environment and Development (WCED) published a report “Our Common Future”, highlighted the need for sustainable development. Sustainable development is a widely used terminology which refers to the development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It means that the present development should not be achieved through the expenditure of environment or future generation wellbeing. Sustainable development should be the essential priority of individual lives as it improves the quality of life, health and wellbeing, community engagements, economic benefit and many more.
Sustainability constitutes a pivotal facet of corporate operations. We will explore sustainable business practices and integration of sustainability in all the facets of your SME.
Defining Sustainable Business
As depicted in the below picture, Sustainable business is the one which is concerned with the social, economic and environmental impacts associated with its current and future operations and the ability of the business to meet present needs while ensuring long-term survival of the business and others. Ideally, sustainable business seeks to have a positive social impact, environmental impact, and economic impact.
Breaking down sustainability in the context of SMEs. There are three dimensions to a sustainable business: Economy – Social – Environment. These in short are called the triple bottom line.
Triple bottom line is a framework which emphasizes, not only on the financial bottom line (as the traditional businesses used to do), but also focuses on the people (social) and planet (environment).
Understanding the Sustainable business practices Framework
Social –
This is the first dimension of the sustainable business in the performance related to societies and social justice. The factors often relate to employments matters with the business. These cover the policies of hiring diversity, opportunities for advancements for male, female, minorities and special needs, healthcare coverage, lack of discrimination, work environment and culture and other necessary benefits which keep the employees satisfied and motivated with the workplace. Additionally, these social impact factors can cover wages, incentives, trainings and work breaks and other specific labor practices.
Moreover, the social dimension is not limited to the employees and employment-related matters. It also covers engagements with suppliers which share similar values. While sourcing products and vendors, the company should make responsible efforts to make sure that the suppliers are engaged in sustainable practices. Purchases should not be made from suppliers who are engaged in child labor, or activities with human rights abuse issues.
The company should ultimately focus on the business practices which will promote positive social impact on the employees, other stakeholders, and societies.
Environment –
The second dimension of sustainable business relates to the practices which preserve the environment quality. The companies which only focus exclusively on this dimension are known as Green Business. The companies should put responsible efforts into reducing the negative impact on the environment from ways to reduce waste, toxicity and pollution. It is the company’s policy which defines the criteria and responsibility for reducing the negative impact on the environment. Manufacturing companies generally have high amount of responsibility as compared to service organization; However, service organization cannot ignore the environmental impact. Service organizations should also consider efficient energy consumption, efficient water usage, employee travel and commutes.
Apart from the internal efforts, the company should also consider the external factor such as the suppliers sourcing should be performed diligently, to evaluate the whether the products and/or services provided are environmentally friendly for example transportation of products. The company should consider developing a Green Business policy. This will include the principles and criteria of performing green business practices both internally (within the organization) and externally (example suppliers).
Economy –
The third dimension considers the economic impact an organization creates on the communities in the areas where it operates, in terms of job creation, impact on local wages, timely tax payments. Such sustainable practices positively impact on the local areas economic growth while the company maintains its profitability. Similarly, the organization should consider the external stakeholders such as suppliers, who favor and follow the practices of creating a positive impact on the economy.
The Significance of Embracing Sustainable Business Practices in SME Business Operations
SMEs contribute to 90% of the world’s companies and are the major contributors towards the development of this planet covering job creation, economic development, sustainability and many more contributions. As per the Small Business Administration, 99.9% of the businesses in the United States are small business employing around 61.7 million employees where it is 90% in Europe employing 100 million employees. Whereas India, as of May 2023, contains 99.6% of total registered MSMEs, employing around 110 million workers. The global GDP by the SMEs is 70%. With such vast contribution, it is evident that SMEs play a crucial role in the development of each sector with commercial, social, and environmental terms.
By reading the above statistics, you must be contented to understand the significance of sustainability with the SMEs.
Moreover, practicing sustainable business has several current and future benefits to SMEs in terms of growth, reputation, globalization, investor attractions, well-being and many more. We have highlighted some of the benefits below:
Reduced Costs:
Sustainable practices often lead to cost savings for SMEs. By optimizing resource use, reducing waste, and improving energy efficiency, businesses can lower operational expenses. For example, energy-efficient lighting and equipment can reduce electricity bills, while recycling and waste reduction efforts can lead to lower disposal costs.
Improved Reputation:
Implementing sustainability initiatives can enhance the reputation of SMEs. Consumers and stakeholders increasingly value businesses that demonstrate environmental and social responsibility. A strong sustainability track record can attract positive media attention and foster trust among customers, suppliers, and the community.
Increased Employee Morale:
Sustainability efforts can boost employee morale and job satisfaction. Employees often take pride in working for a company that prioritizes ethical and sustainable practices. Moreover, businesses that provide a safe and inclusive work environment tend to have happier and more engaged employees, leading to higher productivity and retention rates.
Increased Customer Loyalty:
Many consumers prefer to support businesses that align with their values, including sustainability. When SMEs adopt environmentally friendly and socially responsible practices, they can attract and retain customers who appreciate these efforts. Customer loyalty can lead to repeat business and positive word-of-mouth marketing.
Access to New Markets:
Sustainable practices can open doors to new markets and customer segments. Some markets, both domestically and internationally, have regulations and preferences that favor sustainable products and services. By meeting these standards and aligning with market demands, SMEs can expand their customer base and increase sales.
Globalization Opportunities:
As businesses aim to operate on a global scale, adhering to sustainability standards becomes increasingly important. Many international markets and trading partners have strict environmental and social regulations. Complying with these standards is often a prerequisite for accessing global supply chains and partnering with multinational corporations.
Well-being and Health Benefits:
Sustainability initiatives that prioritize employee health and well-being can reduce healthcare costs and absenteeism. For example, offering wellness programs, providing ergonomic workstations, and promoting a healthy work-life balance can contribute to a healthier and more productive workforce.
Resilience to Future Challenges:
Sustainable practices often make SMEs more resilient to future challenges, such as regulatory changes, resource scarcity, and climate-related disruptions. By proactively addressing environmental and social issues, businesses can better adapt to changing circumstances and reduce the risks associated with these challenges.
How do we embrace Sustainable Business Practices and who should do this
In short, from the country’s policymakers to the lowest management in the company, all are responsible and play vital roles in embracing sustainable business.
However, many of the SMEs are preoccupied with survival and growth strategies and challenges like the digital transformation and changing nature of work. The current emphasis on sustainability in business is limited but will inevitably regain prominence in the long run.
Based on the benefits highlighted above, sustainable business practices are equally essential for the success and growth of the business. The company’s top management should develop the policies relevant sustainable business practices.
Let’s look into the intention, integration and implementation of sustainable business practices which will thrive businesses impeccably.
Intentions Matter
Initially the intention and decision to transform the business from traditional profit only bottom line to triple bottom line, comes from the strategic direction of the company which also includes the commitment to sustainability. Senior management/CEO strategically integrates sustainability as a fundamental core value within the organization.
However, sustainable business practices come from the true intentions of all the business drivers who are involved majorly into governance and operations to develop a sustainability culture within the organization, also including the external stakeholders like customers, NGO and regulators. The senior management/CEO needs to start by communicating the opportunities of sustainability.
This can be achieved through:
Awareness Programs – The communication by the senior management should include the awareness of social development goals (SDGs) by the UN and the issues of the Environment, social and governance. This awareness can include training of all levels of management, periodic communications including graphical visualization, short messages, and signs with the premises. Also, covering the organizations commitment towards achieving sustainable business.
Survey – Conduct quick surveys, targeting customers, employees, and other stakeholders to explore and identify opportunities to incorporate sustainability within the organization.
Identify Champions – The senior management/CEO should identify sustainability champions who can help drive change and can be the major motivators for the whole population of employees.
Also, management should obtain agreements on major projects and ensure they understand the business case.
Integrating Sustainability
Sustainability in the Governance – The Senior Management/CEO and the board of directors of an SME organization play a very crucial role in developing the sustainable business practices within the organization. The responsibilities include developing the vision and strategy, resource allocation, development of a holistic policy on sustainability and ensuring that all the other company policies are in line with the sustainable business practices, leadership and advocacy, risk assessments on sustainable practices, communication, stakeholders’ engagement, training, and development. All the activities aligned together will be the company’s business model to implement sustainable business practices.
Implementing the Sustainability
Post-development of the model, it is time to implement sustainable business practices in each of the business functions. Although the principles of sustainability have been established through vision, strategy, policies etc. However, each business function should establish functional objectives, procedures in line with the policies, and monitoring mechanism. All of these aligned with the company vision, strategy and policies. The functional areas should monitor the knowledge and competency within the function and support in enhancements via periodic training, awareness, coaching etc.
Delegating employees with projects on sustainability encourages their commitment towards the sustainable business practices.
Monitoring – While the sustainable business practices are being implemented within your SME, there should be monitoring mechanisms which should be in place. The monitoring results will express a viewpoint of the implemented sustainability mechanisms. From the monitoring of the developed policy by the senior management/CEO until the implementation, all of the activities should be monitored. Any changes to the activities can be resolved accordingly.
Here are some of the monitoring mechanisms:
Key Performance Indicators (KPIs):
The organization can define clear and measurable KPIs for each function of the company for measuring sustainability in terms of economy, environment, and social impact. These can include metrics like energy consumption, waste reduction, employee turnover rates, and customer satisfaction scores. Read our article on measuring the KPIs.
Data Collection and Tracking:
The company should establish systems to obtain and track relevant data covering regular data gathering, automated monitoring systems, or employee feedback mechanisms. The company should make sure that the data is accurate and consistent.
Regular Audits:
The company should establish regular sustainability audits or assessments to evaluate your performance against established KPIs.
Benchmarking:
The respective functions should benchmark sustainability performance with the similar industry benchmarks to gain valuable insights into where your SME stands in relation to competitors and industry leaders.
Stakeholder Engagement:
All functions should make sure that key stakeholders are engaged, including employees, customers, suppliers, and local communities, to gather feedback and insights on your sustainable business practices.
The monitoring of sustainable business practices should be effectively carried out by all the levels of management. This will provide insights and improvement opportunities.
Finally, Sustainable business practices include different approaches/frameworks to assess, measure, and report sustainability efforts. Practices should consider the impact on various stakeholders, such as those concerned with Corporate Social Responsibility (CSR), Environment, Social and Governance (ESG), integrated reporting, shared value, and impact investing
Conclusion
In conclusion, Sustainable business practices benefit your SMEs with productivity, reputation, growth, profitability and many more aspects. To achieve sustainability, it is important for the senior management to set the sustainability culture within the organization. Also, all other management levels have the responsibility to accept the sustainability culture and implement in every function of the organization. This will not only support your corporate careers, however this will enhance the quality of your personal life.