Are Small Businesses More Sustainable? How to Showcase Sustainability

Small businesses are everywhere. Whether it’s the local plumbing company, a neighborhood restaurant, or the nearby salon, small businesses meet more daily needs and cultivate much closer ties to their communities than big businesses. Because of this, small businesses have a significant and largely untapped potential to make tremendous impacts on their communities, especially when it comes to sustainability.

Adopting more efficient practices and showcasing sustainability efforts can help small businesses reduce environmental impact and strengthen relationships with customers and employees while positively impacting the bottom line.

Sustainability and small business

Small businesses can have an enormous effect on not only their local communities but also on the larger economy. According to research from the SBA's Office of Advocacy, small businesses created 62% of new jobs since 1995, comprised 99.7% of firms with paid employees, and generated approximately 43.5% of U.S. GDP between 1998 and 2014. On the local scale, small businesses wield even more power. The American Independent Business Alliance reports that 48% of the revenue generated at a local independent business recirculates within the community, compared to only 13.6% of chain retailer revenue.

Meanwhile, sustainability practices are gaining economic influence. A Simon-Kucher & Partners’ report found that 34% of consumers are willing to pay a premium for sustainable products, with millennials and Gen Z leading the way at 42 and 39% respectively. Although these generations are the youngest consumers, they are also the largest generations, have significant purchasing power, and the importance of their opinions and preferences is only likely to grow.

In 1987, the United Nations Brundtland Commission defined sustainable development as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” For businesses, sustainability is related to operational efficiency; that is, using fewer resources and less time to do the same amount of work.

Barriers to sustainability

For small businesses, financial survival is a consistent concern. In survival mode, it is difficult to imagine a way to achieve sustainability goals, especially with the perception that these initiatives will negatively impact profits. However, approaching sustainability as an effort to improve efficiency enables small businesses to increase this initiative without cutting into profits.

Another barrier to small businesses adopting sustainability practices is a lack of accountability, compared to larger companies. Big businesses have boards, investors, and competition to answer to and to drive both innovation and sustainability goals, but small businesses are often owner or family-managed and lack the same accountability structure. At best, some local incentives and community preference may drive sustainability efforts, but for small businesses, it largely falls within the purview of the owners.

The triple bottom line

The triple bottom line is a sustainability framework that calls for companies to focus on whether their business practices are aligned with the three Ps: people, planet, and profit. As an example, imagine a delivery company that utilizes route mapping software to optimize its delivery route. Examining this decision through the lens of the three Ps can highlight how the framework can be put into practice to benefit a business.

1. Good for the planet

This aspect of the three Ps focuses on improving efficiency and reducing emissions and waste. As an example, for a delivery company, an optimized route reduces the time vehicles are on the road, decreasing overall emissions and improving the fleet’s efficiency.

2. Good for people

It is important for businesses to ensure they are engaging both their employees and customers with a well-structured process and a strong organizational mission that will help attract and retain quality workers. When the community being served knows an organization operates with strong values and cares for the community, residents are more likely to become loyal customers.

Using the three Ps framework again, the new delivery route means drivers spend less time on the road, reducing fatigue, and increasing employee happiness. Additionally, customers appreciate the increased delivery speed and sustainability provided by the new routes.

3. Good for profit

To improve profitability, businesses need to seek to reduce expenses, whenever possible, even when increasing sustainability efforts. The delivery company’s optimized delivery route allows it to reduce several expenses, including those related to gas costs, driver time, and vehicle wear.

How to build sustainable small businesses

Because of the diversity of small businesses, the specifics of what a focus on sustainability looks like will vary. There is no single way to have a positive impact; instead, companies can use principles, like the triple bottom line, as a framework to increase profit, sustainability, and their connection to both employees and customers.

The first step is to improve efficiency by lowering business costs and reducing the resources used to conduct business. Sometimes, shifting toward greater efficiency may require an upfront cost, but understanding downstream benefits and future cost savings will help small businesses determine the long-term value of these investments.

Second, small businesses can increase their impact by improving customer and employee experiences. Because small businesses are more intimately tied to their local communities, the relationships they develop with their customers, employees, and the broader community will have a larger impact on the business. A reputation as a good employer with values that align with business practices and a focus on sustainability is a huge boon to any business.

The three Ps can be used as a guiding star by small businesses to evaluate the company’s practices to ensure they are good for people, good for the planet, and good for profit. By regularly monitoring employee happiness, customer satisfaction, profit, and even their environmental impact, small businesses can gain additional insight into the effects of their decisions.

Sustainable practices can make a big difference

Although governments, big businesses, and international agencies garner the most focus and research when it comes to sustainability, there is an enormous opportunity for small businesses to make a significant impact in their local communities.

Public opinion is clear, and companies should consider adopting more environmentally sustainable practices as an opportunity to capitalize on this growing support for sustainable products and businesses.

FAQs on small businesses and sustainability

About the Author

Kumar Vijayendra

Kumar Vijayendra is a thought leader in sustainable operations management and has 17 years’ experience in transforming the operations of small businesses around the world. He is a frequent peer judge for industry organizations dedicated to management and business innovation. Kumar holds an MBA from the University of Pittsburgh with a concentration in sustainability and operations. He is a certified Six Sigma green belt, a certified scrum master, and a professional executive coach.

Company: Voto Consulting, LLC
Website: www.votoconsulting.com