How small businesses benefit from a robust sustainability strategy

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How small businesses benefit from a robust sustainability strategy

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Tips for market resilience, customer trust and revenue growth

As market and stakeholder expectations shift, the resilience and competitiveness of companies of all sizes hinge on their ability to address sustainability. Despite the skeptics, evidence shows companies that integrate sustainability into their growth strategy outperform their peers, particularly when combined with high levels of innovation. Clearly, forward-thinking businesses know that embracing sustainability isn’t just about doing what’s right; it’s about becoming a better, stronger business.

For many of the 6 million small businesses that make up the backbone of the U.S. economy, the path to sustainability can be intimidating. Whether challenged by competing priorities, limited resources, inconsistent guidance, or the need for greater internal buy-in, getting started can seem daunting, distracting or unnecessary. But small and midsize enterprises (SMEs) are pivotal in advancing a net zero transition and can have a transformative, global impact. 

Major corporations are forging ahead, offering insights and incentives to their smaller counterparts. A recent Deloitte survey found 97% of top executives anticipate climate change will impact strategy and operations, ranking it among the top concerns for the upcoming year. McKinsey found that 92% “say they’ll build new businesses at least in part to meet demand for sustainable products and services.” We’re seeing growing consensus around what sustainability pioneer Hunter Lovins called “the sustainability imperative.” 

Just look at industry leaders like Mars, which recently committed $1 billion to cutting emissions in half by 2030, enhancing supply-chain traceability, expanding financial incentives for the farmers it works with to adopt regenerative farming, and optimizing logistics — all to create a business that can thrive in a clean economy.

As stakeholder expectations evolve, businesses — regardless of their size — must adapt and respond to remain competitive and maintain consumer, employee, and community trust.

As stakeholder expectations evolve, businesses — regardless of their size — must adapt and respond to remain competitive and maintain consumer, employee, and community trust. Embracing sustainability can help improve a company’s brand reputation, attract investment, foster employee engagement, and bolster stakeholder trust – particularly among Gen Z and Millennial consumers and employees

Businesses that don’t adopt sustainable practices are exposing themselves to reputational damage and loss of market share, particularly those that partner with or supply to larger corporations pursuing increasingly robust sustainability goals.

Corporate customers up the supply chain are responding to increasing pressures from changing market and regulatory dynamics. Recent policy shifts, such as the new SEC climate-disclosure rule and the more stringent disclosure laws in California, Europe and Asia are designed to provide greater transparency and accountability regarding climate risks in companies, the financial system and economy. While the new SEC rule does not mandate that larger companies disclose Scope 3 emissions “both upstream and downstream of the organization’s activities” — not getting a handle on this data puts smaller companies at risk of lagging in a competitive market. 

Global corporations are increasingly focusing on reducing planet-warming pollution throughout their supply chain — with nearly one-third of public U.S. corporations voluntarily disclosing Scope 3 data so that they can build customer trust, grow new revenue lines, and do business in California and abroad. Many are now incentivizing suppliers to support their goals. 

For instance, Unilever is implementing its Supplier Climate Programme to reach 300 suppliers — responsible for nearly half of its Scope 3 emissions — by the end of this year. Apple’s Supplier Clean Energy Program is another strategy for reaching its goal of 100% clean energy throughout all its production by 2030.

Investors have increasingly embraced emissions disclosures so that they can better manage climate risks. A Ceres analysis of institutional investor comments to the SEC on disclosure proposals found that 97% supported requiring disclosures in 10-K filings, and 100% supported aligning mandates with the Task Force on Climate-related Financial Disclosures which require Scope 3 reporting. And a record number of climate-related resolutions were filed at companies this proxy season.

While developing a sustainability strategy might seem complicated, small businesses can take proactive steps to thrive in this changing economy.  

Small businesses are not immune to the impact of these shifts. While developing a sustainability strategy might seem complicated, small businesses can take proactive steps to thrive in this changing economy.  

Future-proofing small business: Five key actions for a sustainability strategy

For businesses beginning their sustainability journey, user-friendly guidance tailored to their foundational needs is essential for navigating complex topics. Developed by Ceres in-house experts, the Ceres Roadmap 360 is a sustainability assessment tool that equips businesses with self-guided learning modules covering a range of topics and customized reports featuring a scorecard and best practice recommendations. In addition to learning from the Ceres Roadmap 360º resource, consider these five steps to get started with your company’s sustainability strategy.

  1. Conduct a materiality assessment: Start by digging into your day-to-day operations. Figure out what’s working, what’s not, and what really matters to your business to help you build your business case for sustainability, which will improve and strengthen your company’s competitive advantage in ways unique to how you do business. To build that case, consider sustainability issues through a diversity of lenses, including managing risk, cutting costs, making your business more resilient, improving growth and customer loyalty, and attracting and retaining employees. For instance, you might discover that reducing energy usage not only cuts costs but also aligns with your customers’ values, increasing the appeal of your brand. 
  2. Set clear goals and targets: Define measurable sustainability objectives that are in line with your business values, industry standards, and the expectations of your partners, employees, or investors and that help you manage your risks and ensure that your company is more resilient over the long term. For example, you could aim to source a certain percentage of your materials from sustainable suppliers by a certain date. By setting concrete targets and regularly reporting progress, companies can demonstrate a genuine commitment to sustainability while building trust with stakeholders. 
  3. Define KPIs and measure and disclose performance: Once you’ve established your goals and targets for managing your risks and taking advantage of sustainable business opportunities, set up some yardsticks to track your progress. Maybe it’s reducing waste or ensuring equitable wages for employees. Whatever it is, keeping an eye on these metrics against KPIs helps you make smart, informed decisions and helps ensure long-term accountability. And don’t forget to keep everyone in the loop about your progress—transparency is key to showing you’re serious about sustainability and not just paying lip service.
  4. Build partnerships: Involve employees, customers, suppliers, and local communities as you develop your sustainability strategy. Foster open communication, solicit feedback, and collaborate with stakeholders to address their concerns. Explore partnerships with sustainability-focused organizations, industry associations, and government agencies to access resources, expertise, and funding opportunities. You might collaborate with local community organizations to ensure that a new building development aligns with community needs and values, or partner with suppliers who share your commitment to fair labor practices. Collaborative planning can help you see blind spots and increase stakeholder buy-in. 
  5. Implement plan, monitor, and adjust: Develop and implement policies and action plans based on your sustainability goals and targets. Regularly monitor progress, evaluate the effectiveness of your initiatives, and adjust as needed to stay on track toward your sustainability objectives. For instance, if you find that a particular initiative aimed at reducing waste isn’t yielding the expected results, you might pivot to explore alternative solutions or invest in new technologies to improve efficiency. Flexibility and adaptability are key to ensuring that your sustainability efforts remain effective and aligned with your business goals. 

Featured photo: Innovative practices at Rothy’s, a sustainable shoe brand that uses renewable and bio-based materials in their production.

Written by

Dan Saccardi and Leonardo (LJ) DeLuca

As Program Director in Ceres' Company Network, Dan Saccardi leads efforts to advance sustainable business leadership with influential companies across economic sectors. He has co-authored pioneering reports on the economic transition and physical climate risk in the banking sector. He also chairs the Civil Society Advisory Body of the UNEP-FI Principles for Responsible Banking. // As senior manager in the Ceres Company Network, Leonardo (LJ) DeLuca engages with companies on sustainable business strategies, making the business case for integrating environmental, social, and governance factors into decision-making, operations, and supply chains. He drives advancement of Ceres Roadmap 2030, a 10-year action framework for sustainable corporate leadership, and Ceres Roadmap 360º, a sustainability assessment tool for smaller companies.