Sustainability and ethical business practices are on the rise across the board as the world grapples with the realities of environmental challenges. However, particularly for small businesses, taking the necessary steps to do business in an ethical way and work sustainably is often considered an expense too far.
There’s no denying that not only is it important to customers and clients, but also necessary for everyone’s future given the rate of climate change and measures needed to tackle it.
Small businesses are vital
Becoming sustainable isn’t just for large multinationals. Small businesses have an important part to play too. In 2016, the total turnover for UK SMEs reached £1.8 trillion. This represents 47% of the total private sector turnover in the country. SMEs are likely to continue increasing as we head towards and through Brexit, and the Government is backing their success for the future. All of which means, how small businesses operate matters on a national scale.
A report earlier this year from 18 Feet & Rising shows that an impressive 88% of SMEs say that they value sustainability and would like to work in ways to make it a reality. However, a disturbingly high 70% said they hadn’t been able to take the measures they wanted to.
Given that SMEs have substantially less leverage and resources than big companies, it’s more difficult to opt for sustainable suppliers. In fact, in terms of sustainability, the odds can seem stacked against small businesses.
Increasing expenses
Many small businesses include sustainability, environmental concerns and the need for ethical practice in their very DNA. For example, natural beauty company Faith in Nature include this outlook in every stage of their business, from the ingredients they use in their products to how they make them and the packaging they select.
While sustainability informs everything they do, Faith in Nature have discovered this doesn’t come cheap. CEO Joy Parkinson said: “Ninety-nine per cent of the ingredients we use are of natural origin and these ingredients are more expensive than synthetic. An important part of our brand positioning is that our products are affordable, and we are really proud of this – but we have to work really hard to achieve it.”
And this is the dichotomy facing many small, ethical business brands. How do they maintain sustainable credibility while ensuring their product or service is affordable to their customers?
Costs and benefits
While Faith in Nature finds ways to minimise wasteful business practices, it’s clearly not easy to be sustainable for SMEs. They often struggle with supply chains that offer few sustainable options, and those that do exist are expensive. Huge multinationals, on the other hand, have far more sway and purchasing power to demand what they want
The cost of sustainability might be higher for SMEs, but for the focused brand, the benefits are high too. Building a loyal consumer base and being very clear on their sustainability and ethical credentials helps businesses increase engagement and sales.
Unilever published research in 2017 showing that 33% of consumers now actively choose to buy from brands that they believe are environmentally or socially positive. Just over a fifth would choose a brand with obvious sustainable credentials.
Untapped market
Further data from Europanel and Unilever shows just how much potential this kind of marketing has. The data suggests there is potentially an untapped market of €966bn (£852bn) out of a €2.5 trillion total market for sustainable goods.
Committing to a socially led approach, and a sustainable vision, is arguably easier for small businesses. They’re nimble, reactive and flexible in a way that multinational corporations just aren’t. They need to change less in order to achieve more.
An example of this working well can be seen with Leesa Sleep, a medium-sized mattress company. They donate one mattress for every ten they sell to non-profits that help people who are homeless, victims of human trafficking or in domestic danger. The managing director, Richard Tucker, says that the company measures its success by social impact, rather than money made.
He said: “Our giving-back programme acts as an employee attraction and retention tool. Millennials are particularly driven by working in a purpose-led environment. Their commitment to our cause creates an even deeper connection with the business and our mission. This only fuels our growth and ambition.”
Finding the balance
James Turner, managing director of turnerlittle.com said: “Finding a balance between commercial success and sustainable business practice is the main challenge for any business wanting to improve its ethical credentials.
“Taking steps like minimising waste, shifting to compostable packaging and cutting down on plastic are tangible ways that companies can show customers they are making a difference. There’s no doubt that all companies should be moving towards sustainability, and I think there needs to be increased research by larger businesses in order to increase the affordability of sustainable choices.
“A trickle-down effect would help SMEs to reach the higher costs necessary and encourage a more cohesive move towards sustainability. While SMEs are more flexible in their choices, they need more assistance. Initiative should be introduced specifically to help SMEs along the sustainability path.
About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.
