When considering the corporate world’s role in climate change, we naturally focus on the big names. It’s understandable - your local greengrocer isn’t rupturing pipelines, and your accountant isn’t running a carbon offsets pyramid scheme (we hope). Yet with that thinking, it’s easy for small to medium enterprises (SMEs) to understate their role in a sustainable future.
There are three points to consider when deciding how seriously to take climate change as a leader in an SME. We’ll explore them in more detail below, but let’s sum them up here:
Across ASEAN for example, they account for 41% of GDP and almost 60% of employment according to the Asian Development Bank.
2. SMEs are a material contributor to global carbon emissions
SMEs Scope 1 (direct operations) are often a multinational’s Scope 3 (supply chain).
3. SMEs have lagged in transformative policies
There’s now a major opportunity for innovation and leadership to mitigate emissions and increase resilience.
Climate change represents a risk to cash flow and economic growth. SMEs face increasing operating costs, variable resource availability, and shifts in demand. This can disrupt and bring new challenges to fragile and vulnerable supply chains.
As global corporations set sustainability targets, like Apple’s carbon neutral supply chain by 2030, procurement processes will increasingly include sustainability criteria and audits.
Primary, secondary and tertiary-tier suppliers will need to share data along the extended supply chain to measure and manage emissions. Only by cooperating with SMEs, can global corporations achieve targets. We’re in this together.
SMEs make up a major part of global workforce and economic output. They also make up a large percentage of greenhouse gas emissions. For example, they’re estimated to produce up to two-thirds of all corporate emissions in the EU.
They might be small fish, but those small fish take up a lot of the pond.
Yet there’s a distinct paradox with SMEs. While they’re innovators when it comes to technology and business structures, they often lag behind large corporations when it comes to transformative climate action. The barriers are the same as they often are for individuals - confidence, lack of knowledge, and access to resources.
If you’re a leader in an SME, invest in climate-related innovation within your business. A recent study from the Salford Business School shows unsurprisingly that a business with high growth and greater earnings has greater investment in climate innovation. And there’s a payoff: ‘green’ internal and customer integration impact improves SMEs economic performance. The flipside is that the most vulnerable firms tend to invest less.
Investing in innovation, whether in your technology, people, or business model, boosts your ability to respond to the financial and physical risks posed by climate change.
Five ways to start:
As an SME, you may not have the resources of larger corporations, but you have flexibility and speed of implementation on your side. Innovation helps you reduce costs, lift efficiency, adapt, and increase climate change resilience. It gets you ahead of the learning curve, and as a leader in an SME you’re ideally placed to do so.
“SMEs possess characteristics which enable them to proactively create new products and processes (and hence competitive advantage) at a faster rate than larger companies.” Alam et. al, 2023
There is, of course, the rub. “investing in innovation” can apply across the entire business, but knowing where the biggest reductions are in terms of emissions requires knowing exactly where your emissions are highest. Do you focus on enabling home-office on a regular basis, electrifying your fleet, or revamping your manufacturing line?
You’ve got the will to act, and lead. But knowledge barriers in evaluating trade-offs and ROI must be overcome, and you may not have that experience in your team - yet.
If you want to learn more on where to start, book a planning session with Getting to Zero now and start planning your part in a sustainable future.
