Sustainability Support for SMEs

"We are the first generation to feel the impact of climate change and the last generation that can do something about it"

2015, Barack Obama, Conference of Parties (COP) 21

And yet as recently as 2023's COP 28 a Sage global study involving over 16,000 SMEs (Small and Medium Enterprises) found that only 8% had formal sustainability reporting programs. The primary barriers cited were lack of time, expertise, and budget, making it difficult for SMEs to measure and track their sustainability performance effectively. The report called Path for Growth: Bridging the SME Sustainability Reporting Gap found that requests to SMEs for sustainability-related data are rising in frequency and complexity. However, the lack of time, expertise and budget means that many SMEs are not able to measure and track their sustainability performance appropriately. Only 7.7% currently run formal reporting programs – and just 0.7% report on their social and governance impacts.

The problem

With 90% of global business being SME’s, employing 50% of the global workforce and yet when we look at emerging markets the International Finance Corporation (IFC) estimates that 65 million firms, or 40% of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion every year, which is equivalent to 1.4 times the current level of the global MSME lending.

Alongside this much of the sustainability reporting, and frameworks currently in the market are developed to assess and create strategy for large organisations where they have the capital and resources to make them effective. Sustainability reporting and legislation can be complex, it requires a lot of training and even then, it can be hard to keep progressing or even maintain passed a certain point. With this Large companies often use legislative models or industry frameworks they must respond to and expect compliance with suppliers, and the burden of admin can prove too much as the suppliers do not have the same access to capital or resources as we have identified. This means it is often rushed or completed without full understanding or compliance, or it is incomplete with errors, or not done at all of done badly or not at all. As many suppliers will have numerous clients and all clients their suppliers to follow their program, framework or training suppliers can find themselves overwhelmed and sometimes confused trying to follow so many different standards and processes. With over 600 frameworks and standards in the world currently suppliers can find themselves overwhelmed by the sheer number of requests, alongside meeting GDPR requirements, Health & Safety, legal and accounting data the cost of doing business is now exponentially more than it has ever been.

We need a new approach

To round this all off, sustainability is a topic mired in contradictions and complexity. Often when you solve one issue 3 more pop up. This is why we must have a holistic approach to sustainability that is simple and replicable for SMEs. Enabling collaborative work throughout value chains supported by industry peers to deliver a positive impact on multiple fronts, including social, environmental, and economic spheres. This approach involves businesses working together with suppliers, customers, and other stakeholders to address shared challenges and opportunities, leading to more sustainable and resilient supply chains.

Dandelion imagery and the concept of fractals can inspire sustainable practices in small businesses by promoting interconnectedness, resilience, and adaptability