Kumar Vijayendra is an author and speaker in small business transformation. He is also the President at Footsteps LLC.
If you own or manage a small business, one of the most strategic decisions you should consider is to realign your business strategy and objectives around sustainability. The reason extends beyond altruism and delves into the long-term survival and success of your business. Embracing sustainability in core business strategy can help bring operational efficiency, contribute to daily cost savings, enhance brand reputation, improve customer loyalty, and increase the valuation of your business.
It’s common for leaders to feel they are too busy to spend time on sustainability, that their finances run too thin, or that they are too small to cause an impact. I want to allay those perceptions by presenting a five-factor analysis of why businesses should make this strategic paradigm shift as soon as possible.
1. Customer Base
A business exists for its customers. Whether you are in a B2C or B2B business, the way your customers relate to your business can be transformed by adopting sustainability as your core strategy.
If you have been in a B2C business for some time, you’ve likely already felt the impact of a change in your customer base. Small businesses now cater to a larger share of young people (Gen Z), whose values and purchasing preferences are very focused on sustainable practices and products. If you are a B2B small business serving major corporations, you may have already witnessed your clients demanding or preferring sustainable practices and operations by building it into their supplier codes. There are also a higher number of businesses that wish to partner with more sustainable organizations.
According to a recent survey conducted by Accenture, over 50% of global consumers are willing to pay a premium for sustainable products. The study reveals that 72% of respondents currently purchase environmentally friendly items—a significant increase compared to five years ago—and 81% anticipate purchasing even more sustainable products in the next five years. This growing demand for sustainability has resulted in heightened expectations from consumers, and companies that do not meet these expectations face the risk of losing customers and market share.
2. Competition
Business owners need to regularly assess the sustainability landscape within their industry and geographical area of operation. Assess whether the competition is adopting sustainability in their operations, which could make them a preferable option to your customers.
Even simple initiatives can start helping your brand stand apart from its competition. For instance, implementing eco-friendly packaging and using recycled materials can appeal to environmentally conscious consumers, giving the business an edge over competitors. Partnering with local suppliers and sourcing products locally reduces transportation emissions and supports the community, creating a unique selling point. Engaging in corporate social responsibility initiatives like donating a portion of profits to environmental causes can also help build a positive brand image.
3. Business Valuation
The 2021 State of Climate Tech Report published by PwC found a 200-fold increase in green investing over the past decade. Adopting sustainability practices in your business can lead to higher employee engagement, customer retention, operational efficiency and profitability in the medium- to long-term. All these result in a higher valuation for your business. It has also been found that businesses that actively integrate environmental, social and governance (ESG) factors into their strategies and operations, such as reducing environmental impact, promoting diversity and inclusion, and ensuring strong governance practices, are more likely to attract investment and achieve higher valuations.
A simple example could be that of adopting a smart routing software to make the customer deliveries for your product or service. The advantages are manifold—it saves on fuel cost, increases your delivery efficiency and gives your employees and customers a better experience. Offering products or services that promote sustainability, such as organic or ethically sourced goods, can attract a niche market of eco-minded customers. It can also add to the long-term economic viability of a business.
4. Collaboration And Partnerships
This factor refers to the ability of your business to form alliances and partnerships in your industry and geography that enhance your power to influence the quality of your business environment, to get favorable terms for your business inputs, and to manage the perception about your business. I believe there is no better rallying point than business owners driven by sustainability and desirous of causing an impact.
Frequently assessing the sustainability practices of potential partners can also be helpful in assessing your relative environmental and social impact and offer opportunities for aligning on shared values and goals. By setting common sustainability objectives and leveraging partnerships to exchange knowledge, resources and best practices, businesses can unlock synergistic benefits and accelerate their progress toward sustainability. Emphasizing transparency and open communication and establishing clear agreements on sustainability expectations are critical in this process.
5. Government Incentives
With a rise in the awareness surrounding sustainability, there has also been a rise in support available from government and non-government organizations. This support comes in the form of government funding and incentives, tax savings, enabling regulatory policies, consulting support, certifications and ESG calculation tools.
Small-business owners in the U.S. can start by researching federal agencies like the Small Business Administration (SBA) and the Department of Energy (DOE), state and local governments, and not-for-profits that may have their own programs and incentives available. It can also be helpful to check with regional economic development agencies, environmental departments and industry associations, engage with local chambers of commerce, and participate in relevant business conferences.
Sustainability in business is changing very rapidly from a “nice-to-have” item on the periphery to a “must-have” core business strategy. Small businesses that do not heed the call in time could miss the bus at their own peril. Let us embrace it and reap the advantages, starting today.
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