Sustainability initiatives often seem overwhelming for small businesses, with concerns about the perceived costs and time commitments.
However, it’s crucial to consider the potential cost benefits. Despite initial resource investments, establishing sustainability initiatives can directly impact revenue in three significant ways.
1. Talent Attraction and Retention
Small business employees typically exhibit a higher level of commitment to their organization. Research from Adobe reveals that small business employees feel personally responsible for their productivity and the success of their organization more than their counterparts in larger corporations.
Moreover, more than half (56%) of these employees expect their employer to foster a purpose-driven culture, where the company stands for something larger than its products and services.
Sustainability plays a vital role in this culture. Employees are increasingly concerned about their organization’s environmental impact and seek opportunities to make sustainable choices in their work. For example, according to the SAP Concur Global Business Travel Survey, 89% of small business travelers plan to take steps to reduce the environmental impact of their business trips in the coming year.
More than one out of five business travelers view environmentally unsustainable travel options as the most significant threats to business travel. Businesses can enhance employee experiences by prioritizing sustainability in their travel programs, offering tools to display carbon emissions information for flights, and suggesting carbon offset purchases. Employers can also explore options like carpooling, greener rideshares, or rail travel to limit carbon emissions.
The agriculture sector, including deforestation, represents 10% of greenhouse gas emissions in the U.S., according to the United States Environmental Protection Agency (EPA). Reducing paper-based processes, such as expense reports, meeting agendas, and customer invoices, can contribute significantly to sustainability efforts and employee satisfaction.
These measures help attract and retain talent, ultimately saving on the high costs associated with recruiting and hiring new employees, estimated by the Society for Human Resource Management (SHRM) at nearly $4,700 per hire.
Investors play a crucial role in small business growth, and a substantial majority (89%) consider environmental, social, and corporate governance (ESG) factors in their investment decisions, according to a Capital Group study.
While environmental impact is just one aspect, it can significantly enhance the prospects of securing additional funding.
Small businesses should integrate sustainability into their business strategy by creating a narrative aligned with their mission, values, products, services, and organizational goals. Demonstrating commitment to environmental practices, such as reducing carbon emissions, optimizing energy and resource efficiency, utilizing renewable energy sources, and adopting circular economy principles, can strengthen investor confidence.
Reporting is essential for sustainability initiatives, and small businesses should establish a reporting framework aligned with recognized standards like the Global Reporting Initiative (GRI) or Sustainability Accounting Standards Board (SASB). Proper data systems are critical for effective expense and invoice reporting.
Regularly reporting on sustainability performance, targets, and achievements can provide consistent, strong results to investors.
3. Corporate Customers
Small businesses can become part of the sustainable supply chain for larger companies, as sustainability is increasingly crucial for attracting customers and complying with regulations. A study by SAP found that nearly half of supply chain executives emphasize the importance of sustainably sourced, ethically designed products to their customers. Moreover, many large organizations focus on improving environmental impact reporting, with 28% of supply chain executives including sustainability metrics among their top three strategic goals.
Small businesses can position themselves within this sustainable supply chain by marketing their services and products to larger organizations. They can leverage sustainability certifications and metrics, such as carbon reduction, energy consumption, water usage, and waste reduction goals, as key selling points.
As revenue increasingly depends on environmental impact reports, small businesses can foster growth by prioritizing sustainable products and services, as well as addressing backend processes through corporate travel programs and automated spend management to eliminate paper usage.
The result will not only be increased profits but also satisfied employees.
Kacey Flygare is the General Manager and Global Business Head of SMB at SAP Concur.