This is why sustainability is a big deal for small businesses

SMEs have a growing role to play in the ESG aspirations of large organisations

SMEs have a growing role to play in the ESG aspirations of large organisations

Published Dec 30, 2022

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By Kyle Durham

There’s a widely held misperception that sustainable development and climate action is the exclusive domain of governments and large businesses. It’s not hard to see why this misperception exists. The sheer enormity of the task of achieving the United Nations Sustainable Development Goals, coupled with budget discussions involving billions, even trillions of dollars, leave most individuals and small businesses doubting the value of any contribution they could make towards building a more sustainable world.

Of course, this thinking is very misguided. In fact, without the commitments of individuals and communities real sustainable development will not be possible. And when you consider that small and medium enterprises (SMEs) make some of the largest contributions to economic growth and job creation in most countries, it’s clear that they have a vital role, and an absolute responsibility, to champion the sustainability cause in all their business dealings.

But for most SMEs, sustainability is not just a responsibility; it’s also a massive opportunity. And failing to recognise and understand both these sides of the sustainability coin could be the downfall of the uninformed SME. Here are just three of the reasons why this is the case:

SMEs have a growing role to play in the ESG aspirations of large organisations

The massive importance of Environmental, Social and Governance (ESG) factors for businesses, especially large and listed organisations, means that most of these companies need to build relationships with suppliers and business partners that support and enable their ESG aspirations. This is having a notable effect on procurement practices, many of which are being transformed to ensure that goods and services are acquired from businesses that can demonstrate a strong sustainability commitment. Much as has been the case with BEE, it’s likely that big businesses are increasingly going to be needing to demonstrate that their supply chains are made up of companies that are as committed as they are to sustainable development. It’s vital for SMEs to get ahead of this trend and establish strong sustainability credentials, not just to avoid the risk of losing business, but also to have access to the growing number of opportunities that a demonstrable sustainability commitment will bring.

More and more customers expect sustainability from your businesses

As Africa’s consumer base becomes steadily younger, it is also becoming increasingly sustainability conscious. Customers are no longer content with simply shopping for the cheapest product or service, they are becoming highly discerning in terms of where they are prepared to spend their money. And they are choosing businesses that demonstrate a sincere commitment to using their resources to build a better world. What’s more, the immediacy of social media, and the growing impact its growing cohort of influencers has on markets, means a business that doesn’t live up to the sustainability commitment expectations of today’s consumers can quickly find itself out in the cold. Of course, the opposite is also true, which is why becoming sustainability minded, irrespective of what line of business you are in, just makes sound business sense.

It’s not a cost, it’s an investment in the future

Many smaller businesses still suffer under the misguided belief that being sustainable is simply too expensive. Unfortunately for them, the real cost of failing to integrate sustainability into their businesses is much higher than the relatively minor investment required to do so. What is needed is a significant paradigm shift. When you consider that your business can only be sustainable if your markets are as well, it becomes clear that sustainability is not a cost, it’s an investment. Without a resilient, inclusive, and self-sufficient society, businesses would quickly run out of customers. So, helping to build that resilient society should be at the heart of every business plan. It’s not a cost centre, it’s a source of value – and every business needs to be tapping into it.

The bottom line is that the achievement of meaningful sustainable development can’t just be left up to large corporates and national governments. It’s a responsibility shared by every citizen in the world, and that definitely includes small and medium businesses. There is no time to lose. SMEs need to act on the imperative to embrace the role they can, and must, play in sustainably transforming our planet and its people. It’s one of the most important investments a business can make today, and the returns are potentially endless.

Kyle Durham is Head of Sustainable Finance and ESG Solutions at FNB

BUSINESS REPORT