Strategy & Finance

SMEs and Sustainability: what’s next?

In a living-with-the pandemic era, has Sustainability become trivialized for SMEs – do they have better things to worry about now, or is the quest for Sustainability still relevant and worthwhile?

Small and medium-sized enterprises (SMEs) play a key role in the economies of every country in the world by their matchless contribution to national economic growth and employment. According to the OECD report from 2018, Enhancing the Contributions of SMEs in a Global and Digitalised Economy, in the OECD area, SMEs account for approximately 99% of all firms. Moreover, they contribute to about 70% of total employment. These facts clearly indicate that the sheer scale and role of  SMEs is such that they should be incredibly important for the Sustainability agenda – pushing it forward, epitomizing its values and making it the ‘new normal’.

Similarly, in a competitive and volatile business environment, it’s absolutely logical that adopting Sustainability principles should be of the utmost importance for SMEs, allowing them to have a steady and profitable growth, enabling them to transition first to Enterprise-level businesses and then to becoming large corporates. 

But unfortunately there’s a problem. Although SMEs comprise an enormous proportion of the national and global economies, their involvement in Sustainability isn’t only unsatisfactory and under-par – it’s abysmal.

According to GRI’s Sustainability Disclosure Database, sustainability reporting by SMEs in 2018 accounted for just 15% of the total number of sustainability reports captured during the year. This figure has remained almost the same for more than seven years. So, there is a question: why isn’t Sustainability entrenched in SMEs? The reasons are numerous and vary by country and sector, but they include:

  • Lack of awareness among employees about the importance of Sustainability
  • Lack of awareness of business owners of the benefits of Sustainability practices
  • No access to affordable financial resources
  • Inadequate and insufficient skills and management development
  • Lack of information how to implement Sustainability
  • Sustainability initiatives interfere with other business initiatives

Sustainability integration: A long journey for SMEs

There is no doubt that in terms of sheer number and the proportion of society engaged with them day-to-day, SMEs have the potential to become the foundation of the domestic and global Sustainability agenda. Yet in order to successfully integrate Sustainability principles and practices within the SME culture, SMEs need to understand the emerging commercial opportunities and the relevance of Sustainability to their business. In many cases, the message and narrative of the Sustainable Development Goals has not penetrated SMEs, and often SMEs are not aware of the Sustainability decisions these Goals have been implementing. Research has pointed out that SMEs struggle to identify how they could use Sustainability as a force for growth and when they are already swamped by megatrends such as increased globalisation, digitisation, the new industrial revolution, the changing nature of work and demographic changes. 

Now in addition, of course, there is going to be further time-lag in any attentiveness to the Sustainability agenda, due to so many SMEs emerging shell-shocked from the coronavirus crisis – and looking, first and foremost, to get a modicum of revenue rolling through again.

Yet once they do, Sustainability is still there – and it still matters. How to start? Well, It’s an agenda that’s best done from the top-down. For example, the 2018 SME Ministerial Conference paper reveals how domestic governments and international bodies can design policies and strategies for effective deployment, measurement and monitoring of Sustainability integration in micro firms, young, innovative and high-growth SMEs. Further work conducted under the local UAE International Society of Sustainability Professionals (ISSP) chapter demonstrated that for the Sustainability agenda to be attained in the next eleven years, communities, countries and regions need to bring SMEs to the centre of the business stage and assure that their growth potential is realised.

Tackling the culture clash – the role of SPRING Singapore

In reality, it’s not too difficult to see why SMEs have been so slow in adopting a Sustainable agenda: they are often caught up in severe challenges of cashflow, lack of investment, lack of sufficient  staff resources, changing market trends and price wars wreaking havoc with margins. It’s all too easy for them to see Sustainable efforts as being the work of a well-funded public sector, emanating from ‘institutions’ and being the progeny of unreal wishful thinking.

To tackle these issues, in 2019, SPRING Singapore decided that there were two root issues – and if these could be tackled, Sustainable agendas could readily become a ‘new normal’ for SMEs. The two issues are:

  • Lack of knowledge of what’s available. Many SMEs simply haven’t explored the ‘green’ or eco-friendly options when it comes to production and manufacture, and not because they didn’t want to, but because they weren’t aware of what actually exists. For example, in sectors such as construction and interior design, the ‘green’ options will often cost exactly the same as the traditional ones, and there might be hundreds of items available – but you have to know where to look. The SPRING solution was to have dedicated teams addressing seven core industry verticals, liaising with procurement specialists at SMEs and ensuring that they knew what the market had to offer and were able to have the Sustainable alternatives readily to hand.
  • Lack of awareness of how investment in a Sustainable solution could help their own businesses – ‘what’s in it for me?’ Many SMEs simply don’t have the luxury of seeing the bigger picture, or don’t have the time to look for it. It’s often hard to see how a Sustainable solution can actually help. Here, the SPRING campaign created a chain of case studies across key industry verticals, showing how Sustainable choices not only nourished the business (ie, helped it ‘one day’), but made it immediately more attractive to certain client prospects and also to would-be investors. Sustainable expertise could often create strength in niche markets that the business simply didn’t have before.

There’s a long road ahead to bring SMEs fully into the Sustainability fold, particularly in largely price-driven markets, such as the GCC. Yet it’s a goal worth striving for, because it is only once SMEs fully subscribe – in large numbers – to the Sustainability agenda that it will leave behind any hint of being exotic, costly or other-worldly and be seen simply as good business sense.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button