Sustainability for Small Businesses: Why It Matters and How to Get Started
January 20, 2022
Collectively, humanity is using 70 percent more resources than the Earth can naturally renew each year. Living beyond our means, which is what we are doing, is inherently unsustainable: Pollution, natural disasters, and generally reduced quality of life for everyone, now and increasingly in the future, are some examples of the fallout.
Small businesses are in the driver’s seat
SMEs have a disproportionate impact on the ecosystem, thanks to their sheer numbers, size, and scope of operations. They contribute 60 to 70 percent of the total industrial pollution, for example. As such, they will play a primary role in shaping humanity’s future, unknowingly or otherwise – the choice being continuing as they are, possibly leading humanity toward possible disaster, or helping correct the imbalance via sustainability.
Sustainability is paramount
As things stand, sustainability has become a primary driving force for small businesses globally in recent years – market conditions and, indeed, the ecosystem itself make it so. You can define sustainability in a business context, says the Harvard Business School, as operating without negatively impacting the environment, community, or society as a whole. It’s being profitable without being exploitative.
If you’re just about to launch a small business, it’s imperative you factor sustainability into your equations. It will affect not only your bottom line but determine your very survival. Here’s why you should sit up and take notice if you aren’t already:
1. Your survival depends on it
At this point, sustainability is non-optional and a “survival imperative,” says the UN. Climate change is expected to cause massive “pandemic-sized” disruptions every decade – such as the recent Covid-19 crisis. Micro and small businesses struggled to weather the impact of the recent economic and social turbulence, being 2.5 times more likely to go under than larger firms (because of how unsustainably they operated). Going green is essential if you want to make your business resilient.
2. Your stakeholders expect it
Increasingly, your reputation will be influenced by the sustainability of your business practices. Stakeholders – employees, investors, vendors, and customers – are more environmentally-conscious than ever. Many are actively getting on the sustainability bandwagon, refusing to support and associate with perceived “non-sustainable” brands. Becoming sustainable can help you score brownie points with them.
3. Compliance may soon be mandatory
The government is stepping up and introducing sustainability regulations to mitigate the impact of climate change. These regulations range from competition law and carbon emissions to waste management and energy taxation. By voluntarily becoming more sustainable now, you can avoid compliance issues down the road.
4. It can benefit your bottom line
Last, but not least, sustainability can make you more profitable, not less. Sendle, a popular courier company, published an interesting survey recently – 56% of its users had somewhat or fully reassessed their purchasing habits because of climate change, and 70% were actively planning to purchase more sustainable products (or support sustainable businesses, in other words). With the way the wind is blowing, sustainability could be very lucrative.
How to get started with sustainability
Sustainability isn’t rocket science, but it can be a little overwhelming when you’re a newly-minted business owner. You can and, ideally, should start by creating a “sustainability plan.” This will allow you to take stock of your existing business processes (a sustainability audit) and replace them with more sustainable alternatives. Here’s an overview of the process:
1. Learn and research: To make your business sustainable, start with understanding how and why your existing processes may be unsustainable first. Next, be clear about what sustainability is all about in a business context. In a nutshell, it’s being neutral or positive socially, environmentally, and economically.
2. Identify unsustainable business processes: Next, perform an audit of your business processes. Some red flags are high carbon emissions, unethical sourcing, and irresponsible resource management. These processes should be transformed. You can consult with experts or fellow business owners to smooth the way.
3. Locate sustainable alternatives or “sustainable possibilities”: Check market trends, research sustainability rules and regulations, and take a look at what competitors are doing for ideas of where you might be falling short and how you can improve. Some high-potential solutions worth researching are digitization (Industry 4.0), renewable energy, and ESG.
4. Come up with a plan: You need to nail down the specifics about the changes you will be making, such as a timeline, your budget and resources used, and your vision. This should be a collective effort, meaning you may need to obtain buy-in from stakeholders.
5. Make the changes and measure the results: Implement your plan. Sweeping changes will take time, and likely won’t be hiccup-free. Don’t be afraid to experiment. Sustainability is a never-ending process, meaning you may need to refine and revamp as you go. Measure key sustainability metrics like emissions, water use, and waste generation for an indicator of how well you’re doing.
Roadblocks on your way to sustainability
Sustainability is an investment and, like every investment, there are associated costs and risks. You will be pouring in significant resources into this initiative in the form of time, money, and labor, on various activities:
● Research, learning, and development
● Retraining and rebuilding processes
● Replacement “green” products and services
● Infrastructure (like computers, apps, and transportation)
● Marketing and sales
The endeavor will come with significant challenges (said challenges being the reason many businesses fail to make this leap altogether). We list the most common ones below:
● Sustainability metrics are too numerous and confusing
● Governmental policies aren’t incentivized enough
● Consumers won’t always consider (or pay for) sustainability
● Organizations fail to communicate sustainability goals
● Companies fail to motivate stakeholders
● Sustainability opens them up to criticism and being upstaged by competitors
These challenges are by no means unnavigable. A common theme is the lack of clarity around sustainability, which can be rectified with research, experimentation, and experience. Furthermore, while sustainability will involve some sacrifices initially, it is, by its very nature, maintainable. Your investment will pay for itself, given time (assuming good execution).
Make your business sustainable from the get-go
If you are yet to launch or have only launched recently, you have an opportunity to build your business as sustainable from the ground up. Instead of following outdated business practices, just take the plunge and be sustainable from the get-go. A good way to start is by registering as an LLC. This makes your business more resilient by offering benefits like tax perks, flexibility, and less paperwork. It also separates your personal assets from your professional ones.
You can file the paperwork yourself or use a formation service to save money (by not roping in an expensive lawyer). States have their own rules and regulations about LLCs. Check the local regulations in CA before making the move.
Toot your own sustainability horn
Being sustainable won’t automatically make you money, nor will it draw in customers or clients (or investors for that matter). You will need to publicize and communicate your green initiatives first to all your stakeholders, both internal and external. Some ways to do so are obtaining certification, being authentic and transparent, partnering with sustainable brands, getting a green visual identity, and drumming up interest with advertisements and marketing campaigns.
Sustainability makes solid business sense. Not only is it beneficial for the environment, but it also makes your company more competitive, innovative, and profitable. While it may be challenging to implement, it’s more than worthwhile and should arguably be at the top of your priority list.