What drives small and mid-sized companies (SMEs) to incorporate sustainable practices into their business? Knowing the answers to this question will aid trade associations and other trusted advisors in developing their outreach and support programs aimed at the SME market. Sustainability4SMEs identified in a previous post that trade associations and a variety of other advisory organizations (e.g. chambers of commerce, economic development agencies) are the primary go-to sources of sustainable business information.
In the largest U.S.-based study to date on sustainability adoption and hurdles to implementation for SMEs, Sustainability4SMEs asked survey respondents to identify the drivers to implementing sustainability. Recognizing that there are myriad reasons influencing company decisions, the participants were allowed to check multiple responses.
The results of the question, shown in the figure below, were startling; inverse to what was expected.
Regulatory Compliance was the least often cited as a sustainability driving factor in spite of ever increasing regulations at all levels of government. This shows that government can impose as many onerous requirements on SMEs as it desires, but it remains unimportant in encouraging them to build sustainable practices into their ongoing operations.
From a carrot-stick perspective, adding more and more regulations for businesses only contributes to a business faltering or worse, failing. Regulatory compliance is an overhead cost adding to business’ balance sheets, certainly not a motivator for the income statement.
Upstream Supply Chain Imperatives and Financial Incentives also reside in the category of least frequently cited driving factors.
Upstream Supply Chain Imperatives include the ability to obtain a steady source of raw materials for a company’s outputs. This data is consistent with an earlier question in the survey identifying the type of business responding to the study. Respondents weigh heavily in the professional services sector (e.g. accounting, legal) which are knowledge-based industries. Raw materials are not a concern to this demographic.
Financial Incentives should have been a strong driver for implementing sustainability initiatives in small and mid-sized firms. A common market perception is that going green is expensive so one might think that the availability of a wide variety of incentives (block grants, utility rebates, federal, state and local rebates, etc.) would be a major consideration. However, based on this body of research, money is almost the least of a business’s concerns when it comes to sustainability. This may be due to a lack of knowledge of available funding sources to pursue. Here is another opportunity for trade associations, chambers of commerce and other trusted advisors to add value to their constituents.
The bulk of the remaining response options all fall within 15 percent of each other. Clearly there are numerous factors driving SMEs to implement sustainability initiatives, with Customer Demand being at the higher end of the scale.
Our study bifurcates between those implementing sustainability initiatives and those who are not pursuing a green strategy. This particular question was answered only by those who are pursuing sustainability. Our last post addressed the hurdles and barriers for those not implementing sustainability.
No matter which side of the fence your company is on regarding sustainability, we’d like your input into this body of work. Click here to complete the 28-question survey. Thanks for reading, participating and engaging with great comments. We look forward to sharing additional data from this research project.
Sustainability4SMEs: Graham Russell & Martha Young
Graham Russell brings 25 years of CEO experience in the environmental services industry to his current role as a sustainability professional. He currently teaches sustainable business in the University of Colorado, Denver MBA program and chair’s the School’s Managing for Sustainability Advisory Council. He provides sustainability and cleantech consulting services to SMEs through TrupointAdvisors and is on the board of the International Society of Sustainability Professionals.
Martha Young has been an industry analyst and writer for 20 years. Her expertise is in small and mid-sized businesses, information technology and energy. Young co-authored four books on virtual business processes (cloud computing), and project management for IT. She is on the board of two small Texas-based businesses, and acts in a technical advisory and business strategy capacity for an east coast venture capitalist.