It’s no wonder SMEs often struggle with embracing sustainability. The barrage of unfamiliar acronyms aside, sustainability talks often open with the SDGs or IPCC findings, which although rightly relevant and important, may feel distant and intangible to the local business owners who are already grappling with the daily challenges of keeping their businesses afloat. Consequently, sustainability can easily be perceived as an imposition – an unfamiliar and daunting task amid countless other priorities.
Fortunately, with a little bit of reframing, we believe we can help you better understand how to adopt sustainability into your business, or as the Singaporean in me would say, make it less “cheem.”
Here’s how.
It boils down to about how you make decisions
At its core, integrating sustainability into your business does not mean doing something completely different. Often, your day-to-day activities remain the same. The key change is in HOW you make your business decisions. Integrating sustainability means considering the impact of your actions on people and the environment when making your operational and purchasing decisions, in addition to the things you normally consider.
Take for example, the decision of how to package your product. In the past, perhaps you would consider cost, practicality, aesthetics, and operational convenience to select your preferred packaging. Now with the addition of sustainability into your decision-making process, you would still consider the same factors, but you may also consider recyclability of the packaging material, or whether the paper packaging comes from virgin or recycled paper.
Making profits is part of running a sustainable business
If you have attended a couple of sustainability events, you likely have heard the refrain that sustainability is not a cost, but an investment. You probably also have heard the business case for sustainability, that it will be required to stay competitive in the future, that it can help to cut costs in the long run, and that employees are seeking to work for sustainable companies.
Nevertheless, there is another piece of the puzzle that in our opinion is not mentioned enough, which is important to make adopting sustainability more palatable for SMEs. Embracing sustainability does not mean going all out to do good without any consideration of financial costs – this is a fallacy and would mean you are running a charity, not a business. We champion the idea of leveraging sustainability to achieve better business performance and growth (find out more here). As Ms Georgia Elliot-Smith pointed out in her TED speech, financial sustainability (i.e. covering your costs) is separate from growth and profit. Integrating sustainability just mean that growth and profit should no longer be the sole overarching goals for the business. To borrow Ms Elliot-Smith’s words, “growth and profit are important, but they sit alongside other goals” - such as protecting the environment and taking care of the people and communities you work with and in.
When we dine out or shop for groceries, we balance cost considerations (akin to business growth and profit) with nutrition and health considerations for ourselves and our families (akin to taking care of your employees and the other people you work with). Sometimes, we may even willingly pay a little premium now to defer potential health issues down the road. Some of us may also factor in environmental impact in our purchases – like opting for paper products from sustainable forest origins (akin to taking care of the environment in your business operations). In the same way, while businesses are run for profit, maximising short-term profits as the first priority is not always in their best interest. Just as we invest in eating more healthily today to safeguard our future health (and avoid paying large hospital bills), businesses should consider investing in protecting the environment and people they rely on for their own long-term viability.
Think of sustainability as your new product or service feature
If you think about it further, all the above are not new concepts for businesses. Long before ESG gained mainstream attention, businesses have been balancing profit generation with customer satisfaction. For the businessman, it may help to think of sustainability simply as another new feature that your customers (be it larger corporations or individuals) want you to incorporate into your product or services. In addition to more traditional metrics such as cost, ease of use, aesthetics, safety and reliability, customers now want to know whether the production, use or disposal of your product will bring harm to environment and communities.
The good news is that many local SMEs have already been tackling some of these social and environmental impacts of their products and services all along. In Singapore, regulations surrounding pollution control, water conservation, energy efficiency, as well as product and occupational health and safety are not new. Admittedly, the emphasis on corporate carbon footprinting, biodiversity and the scrutiny on supply chains are relatively more recent developments, but it’s comforting to know you are not starting from scratch.
Yes, real changes still need to be made and this will incur costs, but help is available
All that being said, it cannot be denied that SMEs will inevitably need to make some changes and spend additional costs to integrate sustainability into their business. As sustainability becomes an input into decision-making, investment in sustainability data collection becomes inevitable to provide the information needed to make informed decisions.
Depending on the industry, SMEs may also find themselves having to invest capital in equipment, R&D, and upskilling to carry out their activities in a more sustainable way. Ideally, capital replacement can be timed with asset replacement cycles, but this is not always possible. Enterprise Singapore’s sustainability related schemes and grants will go some way to defray the costs of making these changes. Per the recent budget 2024 announcement, the Energy Efficiency Grant and Enterprise Financing Scheme (Green) will be given a boost and extended to help companies decarbonise, develop and adopt green solutions.
Then there is also reporting; while currently reporting is not mandatory for SMEs, some form of disclosure is needed if you are to communicate and account for your progress to customers, suppliers, employees and investors – just like you use financial statements to report your financial health, you use sustainability disclosures to report on your sustainability health. On this front, SMEs are encouraged to start voluntary reporting sooner rather than later with the expected roll out of funding support and basic sustainability reporting packages for small businesses in late 2024. SMEs can also look forward to resources and capacity building help in the near future following the launch of GRI-ISSB’s Sustainability Innovation Lab.
Get your priorities right first
Before you implement any initiative or spend money however, it is critical for you to take the time and effort to do a proper assessment and prioritisation process. At the start of a company’s sustainability journey, a materiality assessment is critical to identify the industry-specific areas where a company truly impact its stakeholders, the environment, and its own financial bottom line. In today’s challenging business environment, a materiality assessment helps to ensure precious time and resources are directed to efforts that will contribute to the business’ sustainability in the long run, and not mere feel-good initiatives that end up being useful only for marketing (that additionally expose the company to greenwashing risks).
If you are committed but unsure when and to what extent you should pour your efforts on sustainability given so many issues to think about, which may or may not be sustainability-related, you’re not alone. And that’s why Upconverge offers a complimentary Growth Navigator workshop to assist SMEs like you in obtaining this clarity. At the workshop, we will help you to figure out your stakeholders’ expectations and requirements alongside your current business needs, as well as to draw a holistic overview of both the sustainability and non-sustainability risks and opportunities facing your business so you can prioritise a roadmap for action.
What matters is taking the first step
At the end of the day, there is no single template when it comes to adopting sustainability for businesses. Mistakes may be made along the way, but what’s important is that we are collectively taking the steps to make progress towards the right direction. Wherever you are along your sustainability journey, we hope this provides the clarity you need as you chart your path towards business growth and resiliency ahead.
What do you think? Do you agree with this perspective? What has been the biggest barrier to you for adopting sustainability into your business? We would love to hear your thoughts and experiences in the comments below.