Sustaining a competitive edge for SMEs

State needs to support SMEs in putting sustainability at the core of their business models

Firms that embed sustainability into their strategies will have a significant business advantage over organisations that are forced into expensive compliance-driven pivots in the not-so-distant future. Image: iStock

Firms that embed sustainability into their strategies will have a significant business advantage over organisations that are forced into expensive compliance-driven pivots in the not-so-distant future. Image: iStock

 

Management teams at SMEs need ongoing support if they are to win contracts and secure finance from large organisations that are placing sustainability at the heart of their business models.

As we speak, companies like An Post are auditing suppliers to align the State organisation with those that share their values and appetite for transformative change in their contribution to the UN’s Sustainable Development Goals (SDGs).

It’s a trend that is becoming apparent across multiple industries. The risk of overlooking sustainability, or simply casting a cursory nod in its direction, will begin to outweigh the advantages for SMEs in the medium term.

This shift represents a significant business risk to time-poor SMEs, that may never have had the opportunity to calculate their carbon emissions or measure the way in which they are contributing to the SDGs.

Already, we are increasingly seeing businesses like Applegreen, Gas Networks Ireland, John Sisk, Kerry Group, CRH and Ryanair voluntarily disclose their environmental impact through organisations like CDP Ireland.

Voluntary disclosures like these pre-empt the introduction of legislation demanding mandatory environmental reporting, akin to what we have seen in the UK, which has been described as a game changer by industry experts.

Consequently, management teams who take the time to develop narratives around sustainability after their business has secured relevant accreditation or certification will gain a competitive advantage over those that don’t.

This creates a challenge for SMEs that have been adversely impacted by the pandemic, or those that might see sustainability as a lingering burden anchored to the bottom of a lengthy action list.

State support

It is also where the State needs to step in and build on the schemes provided by agencies such as Enterprise Ireland (EI).

While welcome, EI’s Climate Action Voucher, for example, provides SMEs with only two days of independent support valued at €1,800. Likewise, the Green for Micro programme, available through the Local Enterprise Office, affords two days of consultancy services to micro businesses or SMEs wishing to avail of advice.

Although EI’s more ambitious Green Start programme does provide €5,000 toward hiring an environmental consultant for a maximum of seven days, little can be achieved outside of measuring a company’s carbon footprint and identifying ways of reducing emissions or improving resource efficiency.

While management teams can get a lot done in a short period, hard-pressed SMEs attempting to provide a quality product or service need ongoing support if they are to leverage sustainability to win contracts from large organisations that are beginning to demand that suppliers share their values.

As a result, SMEs require more than expertise to help them reduce emissions or make energy savings. They need help shaping a narrative around sustainability to engage their employees, suppliers and customers, including those larger organisations that are requesting their credentials.

This can be difficult as it requires management teams to think strategically about sustainability and to consider how it can help their organisations win contracts.

Consultancy

It’s for this reason that it is important for management teams at SMEs to avail of ongoing specialist support from consultancy partners who understand how future regulation and funding opportunities will transform the business landscape in the coming decade.

Managers might need to begin the process of reconstructing existing strategies, or creating new business plans from scratch but the mere fact that “green lending” has become the fastest-growing part of AIB’s loan book is indicative of where investors and financiers see growth opportunities.

As such, those firms that embed sustainability into their strategies will have a significant business advantage over organisations that are forced into expensive compliance-driven pivots in the not-so-distant future.

Fortunately, as SMEs tend to be efficient, agile and embedded within communities, they are generally more sustainable than they realise. More often than not, they will have multiple activities and ways of working that are inherently sustainable, like supporting local communities and providing employment.

To be credible, SMEs also need to honestly expose areas in which they are not currently sustainable and demonstrate how they aim to alleviate those concerns in an incremental and goal-orientated way.

Because this takes time, small, one off-grants and ad hoc consultancy advice won’t suffice. Working with specialist consultants over a longer period will help gain the trust of buyers that, like An Post, want to be satisfied that sustainability is being built into every aspect of a business.

It will also help change the culture within organisations, as people will begin to see the symbiotic relationship between sustainability, employee engagement and business growth.

Dr Tara Shine and Madeleine Murray are co-founders of corporate sustainability consultants, Change by Degrees. Arlene Vithaldas is chief executive of UCC Academy, University College Cork’s inhouse consultancy

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