Sustainability is becoming as much of an important part of a large company’s annual reporting as their financials. But SMEs are catching up and recognising that acting sustainably brings business benefits.  

Sustainability is an emotive topic, highlighted by recent comments from Chris Hulne, the UK government's Secretary of State for Energy and Climate Change, regarding carbon emissions and human extinction. It is also vital for business performance. Most large companies have teams frantically working to make the organisation more sustainable. 

But we are also now seeing a shift in culture as small and medium-sized enterprises (SMEs) look past simple survival and recognise that successful sustainability practice is essential. It can provide short-term cost efficiencies and translates into long-term business success.

Indeed, smaller companies can become champions of sustainable practice, with the finance function playing a central role. Changes in institutional guidelines and regulation are helping companies address the impact of their activities. FTSE4Good and the Dow Jones Sustainability Index are two prominent schemes that help larger companies, but SMEs are not being left out. There is help available. The Global Reporting Initiative this year developed basic sustainability reporting guidance and a framework for smaller companies. 

Acting in a sustainable manner not only maintains the environment, but creates companies that will thrive. Although compliance with regulatory requirements remains the most common driver of business sustainability, other strategic factors are increasingly significant.

Sustainability appeals to customers’ changing values, strengthens relationships with suppliers and positions a brand as a good corporate citizen. 

Reaping the benefits

SMEs must act now to reap the benefits. Climate change is already having an impact on business. 

Figures from the UK show that the cold snap last December cost the economy about £600m ($934m) per day, with 10% of the workforce absent. Smaller companies that fail to prepare for climate change, leaving it to the big players to manage and mitigate risk, put themselves and their supply-chain in a vulnerable position. 

CIMA has launched an interactive online tool – climate risk – jointly developed with Defra and supported by Business Link, to help SMEs prepare for both climate risks and opportunities. 

Smart businesses that take action will enjoy growth that is sustainable and resilient to a changing climate and changing consumer demands. 

Getting started can be problematic for smaller companies, which often lack dedicated resources and require external help. However a survey CIMA carried out at the end of 2010 revealed 33% of smaller companies had a sustainability strategy in place, and an additional 23% planned to formulate a strategy in the next two years. Sustainability is a growing priority. 

The key is to take a broad view of sustainability and understand the drivers and opportunities for your organisation. Finding innovative ways in which your company can be a good corporate citizen and engaging with all stakeholders, will yield benefits.

 It is evolution, not revolution. Develop clear metrics, review them regularly and, whether progress is fast or slow, set attainable targets. Investors and other stakeholders are wise to ‘greenwashing’, so never make the mistake of seeing sustainability as purely a marketing exercise! 

Using it to your advantage

CIMA recently joined forces with the American Institute of Certified Public Accountants and the Canadian Institute of Chartered Accountants to produce a research report highlighting how smaller companies are using sustainable practices to their advantage. 

The study focused on a 9 case studies that show SMEs in the UK, the US and Canada thriving as a result of embracing sustainability.

Stationery and business supplies provider UKOS is a great success story. Initially sceptical, the company has not only reduced energy costs by an average of 5% year-on-year for the last four years, but has also increased sales and profits by differentiating itself as a sustainable supplier. 

With the right support, finance professionals, and chartered management accountants in particular, are equipped to become the builders of sustainable organisations and guardians of the public interest.

They have the skills and tools required to define the metrics that determine the goals and progress and help foster the vital link between investment in the strategy and the commercial benefit that accrues. 

Supporters of the traditional capitalist model may argue that companies exist to create value for their owners and have no duty to make up for the fact those owners may have a short-term focus. That is the purpose of regulation. 

Others believe the purpose of a company is to serve society. 

Such philosophical differences are hard to reconcile. But there is common ground in these difficult economic times, which is to focus on the value that sustainability can add to business, society and the environment.

(Taken from guest blog I wrote from the Accountant on 25th November 2011)