In these times of innovation and entrepreneurship, we often hear stories or read articles about how some people quit a corporate job to set up their own company. We watch documentaries and see news reports of how corporations are harming family businesses as they greedily seek to gobble up more profits. Or, on the contrary, we hear about how some wonderful corporations are teaming up with governments and non-profits to help overcome the biggest social and environmental challenges on the planet today. In all these cases, the words “corporate” and “corporation” conjure up an image of big business, tall steel-and-glass towers, first class travel, huge profits, and big paychecks.
But, in fact, the word “corporation” was originally used to refer to small business as well. You can’t quit the corporate world to set up your own startup - if your startup is a legal entity, it is a corporation. Somehow, as some companies grew bigger with globalization and gained recognition around the world, they hijacked the word “corporate” to associate it with their side of the business spectrum.
Of course, SMEs are defined differently in different countries. For the purposes of this article, we will focus on companies that have up to 50 employees.
The reason why we’ve begun with some nitpicking on semantics is because this same misconception has also plagued the concept of Corporate Social Responsibility. The “C” in CSR has often led many of us, the private sector and the general public alike, to assume that sustainable business is only something that should concern large companies. After all, many small businesses are in survival mode - they often don’t have big budgets, a large staff, or a huge customer base. Can they afford CSR? In fact, for those very same reasons, the actual question should be - how can they afford not to be sustainable?
The reverse is true as well. With the development of the Sustainable Development Goals (SDGs), the United Nations and other large organizations are seeking to involve big business, in order to make our planet a healthier, safer and more prosperous place to live and work. But with small and medium enterprises (SMEs) making up around 98% of business by quantity, and estimated by the World Bank to contribute around 60% of formal employment and 40% of national income, particularly in developing countries, how can they not be involved in the mission of making our planet more sustainable?
The ISO 26000 standard has taken a positive step in this direction by referring to Social Responsibility, without the “C-word” preceding the term. While many experts say that this was done to make the guideline relevant to non-profits, it also has the effect of promoting the concept of responsibility to small enterprises as well.
Let’s take a closer look at what social responsibility would look like in a small business.
How are small businesses different?
While many CSR/sustainability textbooks fall into this trap of focusing only on big business, Michael Hopkins’ CSR and Sustainability: From the Margins to the Mainstream is an exception. It has a full chapter dedicated to small business social responsibility, authored by Vivek Soundararajan and Laura J. Spence.
The authors review the available literature to first serve up how small businesses operate in a context that is different to large corporations. In most cases, small businesses have a flat organizational hierarchy. That’s actually great news for sustainability, because it means that any employee can potentially come up with an idea to make the business greener, safer and more responsible, and the time needed for this idea to come to fruition is usually much less than in a large corporation.
Small businesses also often have limited resources, so budgets need to be used with high efficiency, and small savings can go a long way. For a small café, for example, reducing food waste by 10% could mean a huge amount of money saved when it comes to using ingredients more efficiently.
Small businesses are very dependent on the values, vision and skills of the individual leading the company. In large corporations, a lot depends on the CEO too, of course, but often there is a set corporate culture, and business units or country offices often have no direct day-to-day dealings with the CEO. So a large company may have a sustainability strategy that has been set as a corporate document and, even if the CEO is not personally interested or engaged, that document will be probably be put into action to some extent or the other. In a small business, if the head of the company is not on board, then there isn’t much hope that sustainability will be on the agenda. Having said this, it is also important to note here that many small businesses don’t use terms like business responsibility or sustainability, but do carry out activities that reflect this thinking. When a small office switches off the lights in an empty room, or asks employees to print on both sides of the paper, they might just be looking to reduce costs. But they are reducing their own environmental footprint along the way.
This means that, when it comes to community action, small businesses are actually better placed to mobilize their stakeholders and have an impact, particularly and emotional or a behavior-changing one, on individuals than large companies. Perhaps large companies would win when it comes to a quantitative indicator, i.e. how many people bought a product bearing the (RED) branding that helps fight AIDS. But small businesses are much better placed when it comes to the quality of impact, i.e. the extent to which people understand how or why they’re supporting a local school through this week’s buy-one-donate-one promotion for books.
There is a lot less role specialization when it comes to small businesses. The guy stocking the shelves in the back room might also have a role when it comes to marketing and events, or the accountant might also serve as the store cashier on some days of the week. In contrast, the person responsible for taking customer complaints in a large company almost never has any input into the wording for the latest advertising campaign, and the department handling financial controlling is often never involved in interviewing new candidates for the sales team. As always, there is a positive side to this “disadvantage” of shared business roles on the small business side. Sustainability is often an interdepartmental concept - you can’t hire a CSR team and expect them to make the business more responsible without leaving their offices and talking to the rest of the company. In small enterprises, each person has a more holistic understanding of the business by default because they each fulfil several roles. There’s no need to write up a document justifying the choice of a more expensive local cheese supplier over a cheaper one from another state - your budget manager has seen how customers prefer the local fare and was helping in the kitchen last winter when all interstate deliveries were delayed for days after a snowstorm. She knows the business case for this decision just as well as you do.
How should an SMEapproach sustainability?
The previous section focused on the differences between small and large businesses, this one will look at their similarities. In reality, if a small enterprise wishes to embrace sustainability and systematically make itself a more responsible business, the steps it needs to go through are very similar to most business processes in corporations both big and small.
Step 1 - Evaluate. The company needs to analyze the way it currently works, its value chain and the context in which it operates. There is more good news here for SMEs - by default, you can involve a larger percentage of your company in this (and each of the following) processes. After all, your company of ten people can sit around a table and every side of your business is instantly represented. Imagine trying to do something similar with 10,000 employees in 20 countries!
During the evaluation step, you can also involve stakeholders such as your customers, suppliers, neighbors, local institutions and so on. The idea is to look at all the aspects of your business operations and see where there is potential to use resources more efficiently, causing less harm to the environment and society. You should also look at local problems and see where there are issues that impact your business negatively. By contributing to the solution of these problems, you’re automatically having a positive impact on your surroundings as well as solving a business issue. Stakeholder dialogue is usually a very structured activity when it comes to large businesses; with a small enterprise, it could just be a few people getting together for several hours of brainstorming around a cup of coffee.
Step 2 - Plan. Some actions that were proposed during the evaluation stage will need a budget, while others will help save or make money. Some will take up valuable time for your small team, others will help you discover new talent in your community and promote volunteerism. In the planning stage, you need to prioritize the issues that will have the biggest positive impact on your work while being conscious of allocating resources in a way that does not harm day-to-day operations. As a small business with a supportive community around you, you may have more resources than you think because your customers often come to you with their hearts as well, not just their wallets.
Step 3 - Execute. Once the plan is set, the time has come for action. Consider ways to make your activities fun and simple while maintaining focus on why you’re doing what you’re doing and how this is going to benefit society as well as your business. Don’t feel like you have to do everything to be a responsible business. Sustainability is not a destination that you can reach quickly – it’s a journey that will take time, reaping various rewards and teaching lessons along the way.
Step 4 - Evaluate and communicate. Find ways to measure and see the impact that your work has had on your company as well as society. Don’t be shy when it comes to talking about your achievements. Put up a poster that all customers can see. Use your social media page to broadcast a message of gratitude to your volunteers. Take your employees out to dinner and celebrate. In all cases, make sure to keep your messages on point, fact-based and positive!
Step 5 - Do it all over again!
Perhaps you no longer need a new in-depth evaluation, but some things have probably changed since your last introspection, so make sure your plans and actions reflect the sustainability issues that are relevant to your context.
At this point in the article, it should be quite clear that there are no unsurmountable obstacles for small businesses when it comes to getting started in sustainability. But just to drive home that argument, let’s look at a couple of real-life examples, working in different sectors and in different parts of the world.
The Farmer’s Place is a business operating in the state of Victoria, Australia. It’s a farm, market and café that grows its own food, serves meals made from those ingredients and then composts all food waste from the café of the business, thus closing the loop. The Farmer’s Place is very efficient when it comes to water use, harvesting rainwater from a roof of several hundred square meters, and then using it in the restaurant and for irrigation. The company also actively engages with the community by running an environmental conservation education program for schools, as well as working with a local expert and residents to plant more indigenous trees on their property. The walls and furniture at The Farmer’s Place are made of reused and recycled material, giving it a rustic and authentic feel, while reducing waste. At the end of the day, The Farmer’s Place is a business. All its sustainability actions are good for the environment and society, but they have a tangible business benefit as well. Composting means that they have a cheap and good quality product that fertilizes their soil, and they can control how it is produced. Harvesting rainwater reduces the amount of money they spend on water, which is a vital input for their business. Environmental education means a greater appreciation in their community for the kind of sustainable farming practices that The Farmer’s Place employs, increasing the proportion of environmentally-minded potential customers in their area. A combination of all these practices led to a new level of recognition for the company – The Farmer’s Place won the 2016 Banksia Sustainability Award in the Small to Medium Business Sustainability Leadership category.
Nairian is a small company in Armenia that is committed to making cosmetic products that are 100% natural. The products are aimed at an upper-middle class income bracket and the company grows locally most of the ingredients that go into its skin and facial creams, shampoos, soaps and other products. Nairian does not use synthetic fertilizers and composts all suitable items, sending them back into the soil in their farm. They introduced the concept of refilling containers, a novel approach in the Armenian market. Customers can bring back an empty container of cream and Nairian will refill it at a discount ranging from 10-40% of the original price. The company saves money by not having to buy more containers, the environment is spared any needless waste and the customer saves money, so everyone is happy. Not all of the ingredients that go into Nairian’s products were grown in Armenia when the company first started operations. Shipping from abroad would have been costly and involve a greater carbon footprint, in addition to being a business risk for a country that is landlocked and has closed borders with half its neighbors. Nairian’s solution was to engage with local farmers and provide them with seeds and support to grow new crops like lemon basil and Thai basil, giving them a fresh source of income while securing a steady supply of an important ingredient. Examples like these clearly demonstrate that win-win sustainable solutions are possible for businesses of all sizes. The company also recently started a partnership with a sustainability-minded café, using their waste coffee grounds as an ingredient in a new coffee-based line of soaps. Originally a family business, Nairian has grown to around 30 employees over five years. The company understands the value of diversity in human resources and is making sure that there are no obstacles for equality in management positions for men and women, as well as hiring people with disabilities and helping them integrate with their fellow members of society. At a public demonstration of the new coffee-based soaps in spring 2017, the staff member of the company who mixed the product in front of the cameras and audiences was deaf and mute, challenging existing stereotypes in the country about the role that people with disabilities can play if society once the opportunities are created. They’ve also worked with a social enterprise in Armenia, which produces a hand-made cosmetics bag for them that serves as a chic and attractive way for customers to store their Nairian products while also having an additional positive impact on society.
There are many other success stories from small businesses out there, but they sometimes get lost because large corporations are louder and more easily recognized. Small businesses are undoubtedly massively important representatives of the sustainability company and, with combined efforts, will play an increasingly recognized role in overcoming the sustainable development challenges that our planet faces. If you represent a small business, the time has come for you to step up to the plate.
Author: Nazareth Seferian
Source: Responsible Business