Why Forward-thinking SMEs are Using Sustainability for Competitive Advantage
by Dave Westbrook,
Blink and you may have missed the exponential rate at which sustainability has been thrust to the forefront of global industry. For those who've dedicated their careers working in the field, the last couple of years may feel like the long-overdue arrival of a cavalry they've been calling for decades.
The world may now be catching up with the impact of recent climactic events, detailed in the haunting findings of the latest IPCC report. However, with the implementation of government-mandated Greenhouse Gas (GHG) targets years in the making, greater focus on Corporate Social Responsibility (CSR) strategies in modern enterprise, and with investors 'greening' their portfolios, modern commerce continues to evolve and be sculpted by sustainability. Businesses unprepared or unwilling to change and respond to these new demands may soon face the prospect of falling behind the market and doing a Blockbuster if they fail to adapt to this rapid culture shift.
Your drop in the ocean is now less important than your requirement to help clean it
For large companies in the UK it has been apparent for some time that sustainability is more than a social responsibility. Government regulations have held many of these corporations to account, quite literally, for their carbon emissions for some time and at differing levels of detail depending on their environmental impact.
Despite these legislative requirements, 99% of UK businesses have—until very recently—remained largely unburdened by environmental policy and may only need to meet environmental regulations when applying for accreditations specific to their industry.
But what was once a fragmented framework for legislative accountability has been blown wide open, and now includes a requirement for organisations to understand their indirect emissions—those coming from their downstream and upstream supply chains—no matter how big or small. This paradigm shift has started a ripple effect that will disrupt the entire business ecosystem.
Why sustainability is now a bigger commercial responsibility than ever before
In the simplest terms it means that suppliers at the top of the food chain are facing new policy demands which change the way they do business—making public promises and creating social pledges is now commonplace, with sustainability and environmental awareness moving to the forefront of their overall strategy. Those at the top are now stating an intent to work only with partners and suppliers who put sustainability at the centre of their own strategy, no matter their size or environmental impact.
In parallel to this are the hedge funds—drivers of trillions of pounds of investment—who are now reaching a critical tipping point where sustainable portfolios are no longer a badge of honour to entice ecologically-minded investors, but a fiscal no-brainer for weathering the uncertainties of the future.
These factors are creating a compounding effect, whereby businesses of all sizes and across all verticals must meet both a market need and achieve social objectives which, until as little as ten years ago, were solely the concern of large multi-nationals.
Why this matters to the livelihood of your small or medium business
Unless you take it upon yourself to regularly keep up-to-date with the ebb and flow of the intricacies of the government policies which affect large corporations, you would be forgiven for missing the undercurrents of what will be a thunderous change in momentum.
It is a classic trickle-down effect which will come to affect all businesses. The usually somewhat predictable, blue-whale-sized-corporations in our metaphorical ocean are turning towards sustainability en masse and it is extremely unlikely that their wakes will remain unavoidable for long, as the exponential necessity for climate action becomes ever more pressing.
Out of the metaphorical ocean and into real-world data
The Science Based Targets initiative (SBTi) is a partnership between the CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) which increases urgency in the ambition to fight climate change by mobilising the private sector to set science-based emissions reduction targets.
At the time of writing, one-in-five of the Global Fortune 500, alongside over 1,200 other businesses across 60 countries and 50 sectors, have pledged with the SBTi to reduce their emissions at a fast enough pace to prevent the worst effects of climate change. These companies represent a global market cap of approximately £15 trillion GBP, or around 20% of the entire global economy. Even through the COVID-19 pandemic, 370 organisations joined up—at a rate of around 31 companies a month or more than double the average rate between 2015 and 2019.
In other words it's happening now and it's happening fast.
There's always a bigger fish
NETWORK RAIL, OCTOBER 2020
At the time of writing, Network Rail's supplier list includes 4,098 UK companies of all sizes and covering most industries across the UK economy, and their proportion of total spend with SMEs has grown from 15.5% to 35.6% in the last 5 years. Network Rail's SME Action Plan is available here (PDF). This means that if you supply goods and services of any kind to Network Rail, it is highly likely that, in the next 36 months, you will need to have a fully-scoped, science-based plan to help the world achieve Net Zero Carbon (NZC) just to stay on that list. Inevitably, many of those suppliers will lack this deep understanding of how supply chain pressure could affect them, but within a very short space of time they will be forced, through the will of the market's momentum for climate action, to re-evaluate their business model.
Network Rail is just one example of many of large apex corporations realising the competitive advantages of double-bottom-line accountability—where companies meet financial targets alongside achieving social sector objectives. New pledges are added every day and, as we all face the compounding pressure of past inaction, those who are acting now to understand their impact and deliver on sustainability are creating a differentiator that is already separating them from the pack.
Get in touch to find out how we can help you drive long-term success through sustainability.