Sustainability for SMEs poses many challenges. From the outside, some may argue that focusing on SME sustainability is not worth it, but becoming environmentally friendly has its benefits.
Sustainability is more than just caring for the environment, it has become a strategic growth strategy that also takes into consideration the longevity of the business. The argument is that small businesses that use their resources sparingly have a better chance at survival in comparison to those that don’t. Furthermore, since consumers are increasingly preferring to interact with brands that share their values, SME sustainability is more than an ethical choice: it is the way to go.
Why SME Sustainability is a Must
There are five reasons why SMEs must consider sustainability.
1. Access to Finance
It has become evident that SMEs who prioritise sustainability have improved access to funding. This is because financial institutions, investors, and stakeholders recognise the long-term value of sustainable businesses more and more. These practices demonstrate to them that a business is resilient, innovative, and has risk management capabilities – all reasons to rather fund one business instead of another.
2. Value Chain Partner Requirements
It’s becoming increasingly clear that sustainability is also a competitive advantage. This is because the long-term strategy means that partners in the value chain can align with your goals and vice versa. It is beneficial to have sustainability across this value chain because it has a knock-on effect down the chain.
Most notably, an interesting statistic uncovered was that family businesses are more geared towards social and environmental sustainability. This is due to their mindset of community, making them ideal to partner with.
3. Consumer Expectations
Closely related to the second point, there is an increased demand from consumers that businesses show that they are environmentally and socially responsible. This is especially true for younger generations who take sustainability into account when they intend to spend their money.
Furthermore, it has also been linked to attracting talent. Younger people are more likely to join companies that align with their values like caring for the environment and their community.
4. Legislation
Aligning with ever-evolving legislation, SMEs also need to keep up with the newest laws and regulations regarding sustainable business practices. Some of these include a carbon tax, or implementing ISO standards in your business.
5. Climate Change
Climate change is creating urgency around businesses proving they are environmentally conscious. This touches on water, hygiene, animal welfare, energy efficiency, health and safety, and working conditions. The truth is that SMEs already deal with these issues. What’s more, these concerns tie in with the legislation and regulations mentioned above.
Challenges to SME Sustainability
Challenges include a variety of internal and external factors that prevent small to medium business owners from becoming sustainable. These include:
Limited Control Over Spaces
In cases where a business owner doesn’t own property, they have limited control over the spaces they rent. The difficulty here is that it can be slow to implement certain eco-friendly practices. For instance, reducing water consumption is within the business owner’s control, but transferring the facility to alternative power sources is the landlord’s responsibility.
Resource Constraints
Small and medium businesses can have resource constraints when it comes to human and financial resources. Allocating these resources to increasing sustainability efforts can be costly.
South African SMEs and Sustainability
Globally, many of the reasons to be more sustainable are seen clearly. But how do South Africans feel about it? Retail Capital conducted a survey with a group of 500 SMEs. From the data gathered, they noted the following:
- Prioritising the sustainability of a business is a long-term growth strategy. 41,6% benefited from improved customer relations, 37,8% achieved cost savings, and 30,3% experienced improved brand reputation.
- Environmental practices have helped SMEs improve efficiencies and save money. The practices included recycling waste (34,1%), water conservation (28,1%) and staff training on sustainability practices (26,9%).
- Environmentally sustainable practices included sourcing environmentally friendly materials (40,4%), finding ethical suppliers (40%), reducing reliance on electricity (39,4%) and efforts to recycle (31,5%).
Read about sustainable business practices in our article. To gather insight about funding your green efforts, join us at the SME South Africa Funding Summit.
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