According to the WEF, SMEs are key to a more sustainable future. But many don’t have the resources or a CSO to drive ESG strategies. Sorouch Kheradmand, Head of Partner Sustainability at Schneider Electric, talks about how businesses can still achieve environmental goals even with limited resources and without a CSO.
According to a recent World Economic Forum (WEF) report, small- and medium-sized enterprises (SMEs) are the ‘key to a more sustainable and inclusive world’. And rightfully so – they make up 90% of businesses globally and form an indispensable part of the world’s supply chains.
However, many SMEs aren’t yet engaged with environmental, social and governance (ESG) issues, often because they lack the budgets, time or resources to invest in a specialist team or appoint a Chief Sustainability Officer (CSO). However, as new regulations like the EU’s Corporate Sustainability Due Diligence Directive come into force, SMEs need to adapt.
Fortunately, even businesses with limited resources have the power to make a huge environmental impact. If SMEs take the time to plan realistic changes, implement them carefully and then continually iterate on their performance, they can make tangible improvements to their carbon footprints – and even turn sustainability into a competitive business advantage.
Navigating SME sustainability challenges
From grassroots initiatives to technology to employee engagement, there are many alternatives to driving ESG. But the first step on an SME’s environmental journey is to define what ESG is and what it means to their organisation. Research has found that 48% of UK SMEs interested in tackling climate change lack information on how to act. Without first understanding ESG, you won’t know what resources needed or the best course to take.
Meanwhile, a study from Singapore found that one of the top challenges reported by SMEs when implementing sustainability projects is balancing ESG with growth targets. Herein lies the fundamental issue; many businesses currently still see sustainability and performance as two separate agendas. It is in their best interests to instead align the two, as at its core, ESG is about minimising the harmful impact of your business on the environment.
To ensure the needs of key stakeholders align with sustainability, ESG must be framed as a supporting mechanism that can help address problems like cost cutting, resource efficiencies, utility bills and more.
I strongly believe viewing ESG as a key strategic priority for long-term resilience and short-term performance enabler is the key help inspire buy-in, action and change from businesses, regardless of their size.
Now this has been said, how can you go about achieving this?
Four steps to turn sustainability into a competitive advantage
- Create a roadmap
Once you’ve defined your meaning of ESG, your next step is to create a roadmap that defines what success looks like to you. It should encompass a plan that aligns business targets with business performance so that you move from focusing on performance alone to performance with impact.
Science Based Targets (SBT) help organisations to decarbonise based on climate science and data. Incorporating the unique challenges SMEs may face, the SBT initiative sets out a specific route for SMEs to start establishing targets. To align internal cultures and attitudes, it’s essential to engage your employees in every aspect of this journey.
- Embrace digital tools to track and reduce emissions
Tracking emissions is critical to managing and reducing negative environmental impact, but these emissions are often nearly impossible to visualise in analogue. Fortunately, digital tools can help to make the ‘invisible’ visible, linking it to your expenses and carbon footprint. Zeigo Activate is one of our solutions which supports SMEs with decarbonisation by digitising the entire process from planning, acting to taking action and tracking progress. SMEs can gain greater insight into their operational functions, the impact of potential improvements on the environment and their bottom line and the areas of the business they can realistically change to reduce emissions. Tools like this can be especially useful for tackling scope 3 emissions, which are the hardest to track and account for around three-quarters of a company’s average emissions.
- Get the right training
Launching a successful sustainability strategy is risky without the right guidance and a truly data-driven approach. This is the case for two reasons:
• Not having a data-driven approach may cause you to tackle the wrong issues.
• Not linking it to your business might divert resources for minimal outcomes.
This is why it’s important to access training that can turn even the most environmentally inexperienced business leaders into ESG leaders.
Taking action first requires educating yourself on what sustainability means. This is the goal of Schneider Electric’s Sustainability School, a free three-part programme launched this year that teaches businesses worldwide how to accelerate their decarbonisation journeys. In Singapore specifically, Schneider Electric has also set up the SME Kickstarter Decarbonisation Programme, a mentorship scheme in which SMEs can access support to develop their decarbonisation roadmaps and leverage energy-saving digital solutions. Once they enrol in these programmes, SMEs can build the foundational knowledge they need to create tangible, measurable and replicable actions.
- Partner for success
An openness to collaboration with similar businesses and/or ESG experts will help you access the right guidance, support and solutions for your ESG journey and navigate the complexities of corporate sustainability. Plus, they’re likely to open up new revenue streams, too.
For instance, Michael Smith Switchgear – one of Schneider Electric’s 2023 Sustainability Impact Award winners – achieved carbon neutral status in 2021 through digitisation and the adoption of solar, electric vehicles and other energy efficient tools, all the while making it a business relevant action that reduced their cost base.
As a company that manufactures, installs and maintains low-voltage switchgear and control panels, it is helping to create a positive impact on its entire ecosystem of customers, suppliers and vendors. This is an example of how smaller companies can still successfully achieve net zero through partnerships and investments in technology. As Schneider nurtures its partner ecosystem, it has opened registration for next year’s awards to suppliers and customers. After all, the greater the ecosystem, the greater the impact.
Start your sustainability journey today
The role that SMEs play in the economy, society and the environment cannot be understated. They need to feel empowered with the knowledge and tools to fully pursue sustainability.
If every business uses the right strategies and technology to minimise its environmental impact, we can collectively decrease emissions by 30% to 40%, which is all we need to keep up to the required 1.5C net zero trajectory until 2027. By focusing on incremental targets, leveraging existing talent and resources and fostering a culture of sustainability, SMEs can achieve what some of their larger counterparts fail to do. It’s all about doing good through doing business.