SMEs and the sustainability push

Is sustainability a concern primarily for the largest organisations only? While it is true that the activities of the world’s biggest companies have a significant impact on the environment and society as a whole, it is the huge community of small and medium-sized enterprises (SMEs) across the globe that collectively dominate economies. If we are to tackle the world’s challenges through sustainable business practices, then it is SMEs that will make the difference.

As we celebrate the United Nations’ Micro, Small and Medium-Sized Enterprises (MSMEs) Day on 27 June, it’s a good time to remember that taking action on sustainability can be a significant challenge for MSMEs, as they tend to have fewer resources and more restricted access to capital than their larger counterparts. But as a recent webinar and panel discussion organised by the ASEAN Federation of Accountants (AFA) and ACCA highlighted, sustainable business practices can bring real benefits to smaller businesses, and professional accountants are ideally placed to support them on their sustainability journey.

The business case

Taking the theme of ‘SMEs and sustainability: the path towards sustainable transformation’, the webinar put forward the business case for sustainability. There are compelling reasons why this is the right time for SMEs to take steps towards sustainable transformation:

• Wider supply chain transformation. Larger organisations are coming under pressure to make their supply chains more sustainable. It makes sense for SMEs to move simultaneously with them, as they form a significant part of the supply chain of larger businesses.
• Cost management. Sustainability is an opportunity, not a cost. Water and energy efficiency initiatives, recycling and waste reduction all offer opportunities to improve resource allocation, streamline operations and improve profitability.
• Creating value. In an increasingly environmentally conscious world, sustainable business practices can enhance brand value and ensure that organisations are more resilient to shock.
• Attracting talent. Younger workers in particular are attracted to organisations with values that reflect their own, and which take a strong stand on social and environmental issues. A purpose-driven business can make SMEs more attractive to talent.
• Securing investment. Lenders and investors are looking for and expecting commitment to sustainable business practices.

AFA and ACCA believe that sustainability is a significant area of untapped potential for professional accountants. Accountants work at the heart of organisations and are ideally positioned to help drive an organisation towards sustainable business practices. And as trusted advisers, they are particularly well placed to support SMEs on sustainability and able to play a critical role at every stage by, for example:

• explaining the business case for sustainability
• identifying and evaluating risks
• advising SMEs on reporting frameworks, waste reduction schemes and other emerging initiatives
• facilitating networking and information sharing on sustainability
• providing the data and analysis to help SMEs chart their progress and set and meet targets
• helping SMEs communicate transparently with stakeholders – SMEs are not yet required to report in detail on sustainability, but it is likely that reporting requirements will increase in the future
• helping SMEs to access government incentives and grants.

Transformation stories

Sustainability is a huge topic and can be intimidating for SMEs, but the journey towards sustainability need not be complex. A panel discussion during the webinar included businesses in the region recounting their own experiences of transformation or how they helped clients in their sustainability transformation. The speakers made it clear that transformation and sustainability action takes time and begins with knowledge and awareness. Even small, simple steps can have a large impact over time.

In terms of a starting point for sustainability action, the United Nations’ 17 Sustainable Development Goals are an excellent guide, but the individual context of each business is equally important. In other words, an SME should focus on those sustainability topics that align with its own purpose and strategy and which are relevant and important to the business. This might mean, for example, waste reduction, diversity and human rights. The next step is to identify sustainable business actions within these themes, such as recycling in the office or screening of suppliers.

New mindset

Another key point highlighted at the event is that sustainability is not just about reporting, disclosures or compliance – it is a way of doing business. Sustainability is a mindset that should be embedded from the very top of the organisation; it should be part of the business’s culture and drive key decisions such as policy-making, investment and procurement.

The webinar speakers stressed that for sustainability to be credible it must be based on action rather than words, and that means monitoring and measuring it. Asking suppliers to self-declare their social or environmental credentials, for example, may be an important first step but it should also be supported by verifiable evidence – for example, in the contracting process.

The business world is undergoing a profound transformation as it continues to embrace sustainable business practices, and accountants should be leading the way. Professional accountants’ collective technical and business knowledge, analytical skills, understanding of risk and, above all, ability to explain sustainability in the language of business will be invaluable to businesses large and small. Together, we can make a real difference.