top of page

Unlocking Organisations’ Potential: The Importance, Challenges, and Benefits of Sustainability for SMEs

Updated: Jun 14


Introduction


In today's ever-evolving business landscape, sustainability has emerged as a pivotal force driving change, innovation, and competitiveness. While large corporations have often taken the lead in adopting sustainability strategies, the spotlight is increasingly turning toward a powerful and dynamic segment of the business world – Small and Medium-sized Enterprises (SMEs). 


In this article, we embark on a journey to explore the challenges and benefits of sustainability strategies in SMEs. We will delve into the intricacies of why sustainability matters to these enterprises, how they navigate the unique hurdles they face and the remarkable advantages they stand to gain. 


 

Sustainability Importance to the Long-Term Success of SMEs


The concept of sustainability emerged in the 1970s, when society began to become more aware (Dresner, 2012). The concept of sustainable development was introduced by the United Nations and defined by WCED (1987) as “development that meets the needs of the present, without compromising the ability of future generations to meet their own needs”. Since then, the terms sustainable development and sustainability have proliferated and are currently considered fundamental for good business management practices. 


Sustainability is, according to Milanese et al. (2022), a top priority for most business leaders and organisations are struggling to incorporate sustainability into their operations. Becoming truly sustainable is a major transformation process that encompasses culture, planning, metrics, governance, reporting and mindset.

Sustainability is constantly and strongly promoted by the largest product and service companies in the world (Paysse, M., 2022). However, sustainability strategies are becoming increasingly important for companies of all sizes, but for SMEs, the challenge of developing and implementing one can often seem overwhelming (Firth, A., 2023).


Despite the challenges, there is enormous pressure for SMEs to act in favour of sustainability. Collectively, SMEs represent more than 90% of businesses worldwide. It is therefore critical that SMEs consider sustainability as early as possible (Firth, A., 2023). As the main form of business and employment, SMEs are crucial actors in building more sustainable growth (Martins et al., 2022).

SMEs normally do not see sustainability as something that is part of their business, they think that it is only an issue for large companies that have the money, people, and means. However, SMEs are essential for national economies and global supply chains, therefore it is essential that they participate in the transition to sustainability (Gonçalves, 2020).


Many Small and Medium-sized Companies are beginning to be concerned about these issues, but according to Martins et al. (2022), sustainability practices are informal in most SMEs and are not integrated into their business strategies.

Failure to embed sustainability at the heart of the organisation not only causes potential environmental and social harm, it also harms business performance. Many companies are still unable to link sustainability performance to financial or innovation metrics (Milanese et al., 2022).


In order to better adapt to sustainability, SMEs must, according to Gonçalves (2020), reflect on the context that surrounds them and their impact on the world, particularly at an economic, environmental and social level. They should also think about how they can contribute to a more positive future and what will be the most relevant issues to be addressed.

 


Challenges that SMEs commonly face when implementing sustainability strategies


It is probably easier and faster to incorporate sustainability in a small or medium-sized company, as SMEs have simpler business structures (Gonçalves, 2020).

SMEs have a more limited number of resources (from human to financial). Developing a sustainability strategy can seem like a huge challenge for SMEs, as they are expensive and complex for the scale of small and medium-sized companies.


The transition to sustainability is not easy and according to Milanese et al. (2022), successfully implementing sustainability programs requires overcoming six main challenges:


1. Sustainability strategy not understood

There is a gap in understanding what sustainability means for business. Companies need to know how to simplify reporting to reduce redundancy, resolve inconsistencies, and make a positive impact (NBS, 2016) by optimizing their work processes and developing their people’s required sustainability-building skills.


2. Failure to change business models

Companies need to better understand how to measure, classify, and market sustainable products and services in a way that avoids greenwashing and positively influences consumer behaviour (NBS, 2016).


3. Lack of clear balance between short-term and long-term plans

According to NBS (2016), companies need a way to reconcile short- and long-term perspectives.


4. Lack of seeking new sustainability partners in broader ecosystems

NBS (2016) argues that most sustainability issues require systemic change, and systemic change requires collaboration between stakeholders.


5. Wide range of governance control

According to Wunderlich (2023), the challenges come from legislation, governance, companies, technologies, and personal behaviours and mentalities.


6. Inability to track performance with the right tools.

New and improved technologies are fundamental to successful sustainability initiatives (Milanese et al., 2022).


Furthermore, sustainable strategies can often, intentionally, or not, result in greenwashing. The strategy may be communicated in such a way that the company appears to be highly invested in the issue, while in practice it may just be a bureaucratic attempt at short-sighted economic gains or a result of miscommunication and a lack of holistic awareness of the impacts of the operations (Palm & Sieczko, 2021).

 


Benefits and rewards of sustainability strategies for SMEs


However, SMEs that adopt sustainability strategies, according to Gonçalves (2020), can have multiple benefits, from reduced risks to opportunities for innovation and greater operational efficiency. According to Firth, A. (2023), implementing sustainability strategies not only benefits the environment but also leads to a wide range of additional benefits. 


Despite the initial costs of sustainability integration and communication, the benefits can be offset by cost savings. The reduction of business risks, the ability to meet the expectations of consumers, employees, and suppliers regarding responsible products and services, and, therefore, a positive brand association, will probably make the initial costs only a safe investment (Gonçalves, 2020).

The appropriate adoption of sustainability within an organisation can provide benefits (Milanese et al., 2022). According to Paysse, M. (2022), there are five reasons why sustainability is good for SMEs:


1. Attract and retain talent

Involving employees in sustainability can also increase motivation and productivity (Firth, A., 2023).


2. Create value, reduce costs, and innovate

One of the most significant benefits is long-term cost savings. It can attract customers and investors, leading to long-term growth and profitability (Firth, A., 2023).


3. Improve brand reputation and consumer demand

Furthermore, it can improve your brand's image and reputation, as customers are increasingly aware of the impact of their purchasing decisions and there is evidence that many are favoring brands with a commitment to sustainability (Firth, A ., 2023).


4. New opportunities and emerging markets

Companies that have sustainability strategies increase their chances of winning new or repeat business, as they demonstrate a commitment to reducing their environmental impact and improving their social practices (Firth, A., 2023).


5. Competitive advantage

Adopting sustainable practices also ensures that companies follow regulations and comply with relevant legislation. It can also help improve business resilience and product/service availability (Firth, A., 2023).


6. Government Incentives 

In some regions, such as EU countries, governments offer incentives, tax breaks, or grants to SMEs that adopt sustainability practices.


7. Access to Capital

Investors and financial institutions increasingly favour sustainable businesses, making it easier for SMEs to secure funding and loans.

Image


These benefits not only contribute to the SME's bottom line but also play a vital role in addressing pressing global challenges such as climate change, resource depletion, and social inequality. By integrating sustainability into their core strategies, SMEs can secure a brighter and more sustainable future for themselves and the planet.

 


SMEs Across Different Regions that Have Successfully Implemented Sustainability Strategies


Some real-world examples of SMEs across different regions that have successfully implemented sustainability strategies and reaped the benefits:


1. The Happy Pear: (https://thehappypear.ie/) - Ireland

  • Sustainability Strategy: This Irish SME, a vegetarian food company, is committed to a sustainability strategy that includes sourcing local, organic produce and reducing food waste.

  • Positive Outcomes: Reduced carbon footprint, and increased customer loyalty due to their eco-friendly practices.


2. Cork Supply (https://corksupply.com/pt)  - Portugal 

  • Sustainability Strategy: Cork Supply, a Portuguese SME, specializes in cork products and has a strong sustainability commitment, focusing on sustainable cork harvesting.

  • Positive Outcomes: Enhanced brand reputation, attracting environmentally conscious customers, and supporting local communities.


3. Biovega - (https://biovegagrupa.hr/) - Croatia 

  • Sustainability Strategy: Croatian SME Biovega produces organic food and promotes sustainable agriculture practices.

  • Positive Outcomes: Support for local farmers, healthier food options, and contributing to Croatia's sustainable agriculture.


4. Allbirds - (https://www.allbirds.eu/) -  USA 

  • Sustainability Strategy: Allbirds, a U.S.-based footwear company, focuses on using sustainable materials like wool and eucalyptus for its products.

  • Positive Outcomes: Enhanced brand loyalty, appeal to eco-conscious consumers, and innovation in sustainable fashion.


5. Bee'ah - (https://www.beeahgroup.com/)  UAE  

  • Sustainability Strategy: UAE-based Bee'ah is involved in waste management and environmental services. They emphasize recycling, renewable energy, and sustainable practices.

  • Positive Outcomes: Improved waste diversion rates, reduced landfill usage, and a cleaner environment.

 

 

6. Greenway Grameen Infra - India

  • Sustainability Strategy: Greenway Grameen Infra in India provides clean cooking solutions in rural areas. Their strategy includes promoting clean energy and reducing indoor air pollution.

  • Positive Outcomes: Improved health of rural communities, reduced reliance on non-renewable fuels, and positive social impact.


7. UBQ Materials (https://www.ubqmaterials.com/) - Israel 

  • Sustainability Strategy: UBQ Materials in Israel transforms unsorted household waste into a sustainable thermoplastic material.

  • Positive Outcomes: Diverted waste from landfills, reduced greenhouse gas emissions, and created a circular economy model.

 


Actionable tips for SMEs looking to embark on their sustainability journey


Embarking on a sustainability journey can challenging for SMEs, but it requires a strategic approach. Here are practical tips and actionable steps to get started:


1.Create a Sustainability Team:

Appoint a dedicated sustainability team or designate individuals responsible for sustainability-related tasks. Ensure they have the necessary training and resources.


2. Engage Stakeholders:

Involve employees, customers, suppliers, and local communities in your sustainability efforts. Gather their insights and support to build a robust sustainability strategy.


3. Conduct a Sustainability Assessment:

Assess your current environmental and social impact. This baseline data will help you measure progress and set realistic targets.


4. Define Your Company’s Sustainability Vision and Goals:

Start by identifying what sustainability means for your SME. Is it reducing carbon emissions, minimising waste, or promoting ethical sourcing? Define clear and specific sustainability goals.


5. Set Measurable Targets:

Establish key performance indicators (KPIs) and set quantifiable targets for reducing waste, energy consumption, or other sustainability metrics.


6. Stakeholders Training and Engagement:

Educate your stakeholders (mostly internally) about sustainability and involve them in the decision-making process.


7. Implement Strategic Sustainability Measures:

 

8. Continuous Improvement:

Sustainability is an ongoing journey. Regularly review and revise your sustainability goals and strategies to adapt to changing circumstances.


9. Measure and Communicate Impact:

Communicate your sustainability progress transparently through reports, websites, and marketing materials. Use recognised frameworks like ESRS, GRI, or SASB for reporting.


10. Seek Sustainability Certifications:

Consider obtaining certifications such as B Corp, ISO 14001 (Environmental Management), and Fair-Trade certification… depending on your industry.


Sustainability is a holistic concept that goes beyond environmental concerns. It encompasses social, economic, and environmental aspects. By taking these practical steps and committing to a sustainability mindset, SMEs can contribute to a more sustainable future while also reaping the many benefits of responsible business practices.


 

Sustainability and SMEs: A One Way to Go!


Sustainability as a fundamental and critical business practice, is here to stay, and the best companies are adopting it as a lever for new growth (Paysse, M., 2022).

Therefore, now is the time to act and operationalise sustainability. Not only will this bring benefits in combating climate change and improving the world around us, but it also simply makes business sense. Overcoming the challenges to incorporate sustainability is, therefore, a business imperative for everyone (Milanese et al., 2022).


The next step for SMEs, according to Palm & Sieczko (2021), is to develop a clear purpose, aligned with sustainability principles, that can guide the organisation in its daily operations and facilitate a collaborative market environment, rather than an exploitative and competitive market.


The positive news is that change is happening. Technological advances are enabling sustainability, new tools and frameworks are being field-proven, consumer demand is growing, and best practices are emerging and being shared across ecosystems. At the same time, institutional and government actors are offering greater volumes of green financing (Milanese et al., 2022).


According to Milanese et al. (2022), organisations should seek to combine sustainability and innovation in four main ways:


  • Leverage innovation to increase sustainability

  • Search for the right technologies in the respective ecosystem

  • Encourage the adoption of sustainable technologies

  • Leverage a portfolio sustainability analysis approach

 


SMEs being a driver of positive change


Does your SME establish sustainability strategies? Does your SME invest in tools and metrics to measure your sustainability impact? Do you encourage your employee's active involvement in strategy?


 

References and Further Reading


Dresner, S. (2012). The principles of sustainability. London: Earthscan.


Firth, A. (2023). Sustainability strategies for SMEs: the benefits you can’t ignore! WRM Make it possible. Available in: https://wrm-ltd.co.uk/sustainability-strategies-for-smes-the-benefits-you-cant-ignore/


Gonçalves, A. (2020). Should SMBs have a CSR or sustainability strategy? How can they create it? Youmatter. Available in: https://youmatter.world/en/small-medium-business-sustainability-strategy/


Martins, A., Branco, M. C., Melo, P. N. & Machado, C. (2022). Sustainability in small medium-sized enterprises: a systematic literature review and future research agenda. MDPI.


Milanese, S., Eikelenboom, M., Stella, C. & Decadri, S. (2022). Overcoming the challenges to sustainability: exploring the state of sustainability & the challenges to adoption. ArthurDLittle. Available in: https://www.adlittle.com/en/insights/report/overcoming-challenges-sustainability


Palm, R. & Sieczko, M. (2021). Transitioning towards the regenerative business phase: an exploratory study of SMEs from the perspective of sustainability consultants. Jonkoping University – International Business School.


Paysse, M. (2022). 5 reasons sustainability is beneficial for business – not just the environment. Forbes. Available in: https://www.forbes.com/sites/forbesbusinessdevelopmentcouncil/2022/09/01/5-reasons-sustainability-is-beneficial-for-business-not-just-the-environment/?sh=3f99be72439c


WCED, U. (1987). Our Common Future—The Brundtland Report. Report of the World Commission on Environment and Development (WCED).


Wunderlich, P. (2023). Sustainability challenges. European Environment Agency. Available in: https://www.eea.europa.eu/en/topics/in-depth/sustainability-challenges

NBS (2016). Top 7 business sustainability challenges. Network for Business Sustainability. Available in: https://nbs.net/top-7-business-sustainability-challenges-in-2016/

 


Comentarios


bottom of page