Digital Innovation & Entrepreneurship
5 Incompatible goals Many SME leaders have bought into the importance of sustainability. They are deeply committed to the net zero agenda. However, they are also committed to sustaining and growing their businesses. Some initiatives can cut costs as well as helping the environment, such as reducing waste and energy consumption. But, in other instances, leaders often feel compelled to prioritise the commercial needs of the business over their sustainability goals. This can leave them frustrated and trapped in a cycle of inaction, or minimal action, on net zero. There is not always an easy solution to these tensions. However, ERC research shows that technological initiatives are more likely to improve the environmental performance of SMEs – and this often correlates with stronger business performance. More broadly, leaders need to accept that both business objectives and green goals are important and continually strive towards both. They may need help and support to embrace that ambiguity. They may also have to make some difficult decisions along the way. But small business leaders should recognise that moving to a green business model does not necessarily come at the expense of performance. In a world where environmentally aware consumers increasingly demand low-carbon products and services, it can be a win-win scenario for profitability and the planet.
This poses a particular problem given that an ERC study of more than 1,000 SMEs found that improved reputation was an important motive for many firms to adopt net zero practices. SME leaders need clear advice about what constitutes a truly sustainable practice so they can distinguish the initiatives they should embrace from those that are greenwashing. This can help them to be more confident about the environmental measures they are taking on the journey to net zero. 4 Reliable information Interestingly, some business leaders we spoke to said it was not a lack of information that was the biggest problem. On the contrary, it was the enormous quantity of information that exists. The key was identifying reliable sources, condensing that information, understanding it, and adapting it for their business. However, our research found only 63 per cent of SMEs in the UK actually knew where to find reliable information on net zero. This rose to 76 per cent of firms with between 50 and 100 employees. Firms that knew where to find reliable information took nearly twice as many active steps to reduce their environmental impact as those who were unsure how to source it. Most SMEs rely heavily on government support schemes and websites for this information. This was especially true of small and micro-businesses, while medium- sized firms were slightly more likely to seek advice from specialist consultants. Policymakers and business support agencies need to make sure that actionable information that can be applied to specific situations is easy to find.
T he UK Government’s net zero strategy outlined a bold vision to create jobs and prosperity by leading the world towards a future in which humans no longer contribute to climate change. At its heart was a pledge that the UK would achieve ‘net zero’ – producing no more greenhouse gas emissions than it removes from the atmosphere – by 2050. That commitment will affect all businesses, not just energy suppliers and large multinational companies. It will also have an impact on 5.9 million small and medium-sized enterprises (SMEs). The British Business Bank estimates that these smaller firms are jointly responsible for half of the greenhouse gas emissions created by UK companies. As such, SMEs have the potential to make a significant contribution to the UK’s net zero target. But are they adopting the right practices to
do so? Research conducted by the Enterprise Research Centre (ERC), based at WBS, suggests not. While many small business leaders are willing to take action, they often struggle to overcome the obstacles that block their way. Understanding these barriers is vital to ensure we can enable SMEs to become more sustainable. So, what can small business leaders do, and what support do they need? 1 Investment can be expensive Many SME leaders believe the investment required by net zero initiatives – in terms of both time and money – is another unfair burden for small businesses. And, even if they reduce their own carbon footprint, it can feel like a drop in the ocean compared to large emitters and the total emissions produced by businesses nationally. As a result, they may be wary of investing heavily in measures that appear to deliver little impact. It is important that small business
opportunity arises. Our research shows innovation- oriented firms are more likely to adopt net zero initiatives. This may be because they are more adept at identifying and adopting practices that have worked elsewhere. Perhaps unsurprisingly, firms are also more likely to adopt sustainable practices if they believe in their own ability to succeed and embed net zero when they begin planning any new process. This self-efficacy may stem from previous experience, a growth mindset, and access to the right support. 3 Accusations of greenwashing SME leaders are often deterred from embracing net zero because they are unclear on what counts, and what does not count, as genuinely sustainable activity. Consequently, they are afraid of misrepresenting their environmental initiatives and facing a damaging backlash from clients and commentators.
leaders can see the bigger picture. Robust data on the contribution that small steps make towards broader net zero goals can give business leaders renewed impetus. And SMEs that do invest in sustainability – such as training on environmental matters – can reap the benefits as their small size means they can pivot to new practices more quickly than larger firms can. 2 Lack of control SMEs may have limited control over key elements of their carbon footprint. If they are tenants, they may have little say on the heating, lighting, and other energy use in the buildings they occupy. And, if they have to rely on subcontractors, their small size may compromise their ability to demand sustainable practices from their suppliers. However, there are steps SME leaders can take to help their organisation explore these challenges and take positive steps wherever the
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Sustainable Development Goals
Warwick Business School | wbs.ac.uk
wbs.ac.uk | Warwick Business School
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