Implementing sustainable business practices improves performance. Sustainable companies grow more, their costs are reduced, their attractiveness increases, they can avoid certain risks and fines, they are more flexible in changing markets, and so on. Besides the fact that a company can give something back to the world, there are many other reasons why sustainable business is advisable.
What is sustainable business?
Before we look further into why entrepreneurs engage in sustainability, we should perhaps clarify what sustainable business means. A good summary might be: “In all their business decisions, entrepreneurs and directors who practice sustainable business not only strive for higher business profitability, but also make the most of opportunities to improve the environment and increase wellbeing for their employees and society.”
We recognise 3 key issues here: environmental impact, social impact and good corporate management, or ESG (Environmental, Social, Governance). These 3 issues must always be well balanced to achieve sustainability.
Are Flemish SMEs engaged in sustainable business?
A HOGENT research team recently published a report on sustainable business among Flemish SMEs. More specifically, they investigated how Flemish companies communicate about their sustainability, based on a data-driven survey. The data for this research was collected by examining websites using a so-called web scraper, software written to read the website and collect the required data in a database. The results from annual reports and sustainability reports were also browsed. Then, based on a scoring model, researchers looked at what companies currently communicate about sustainability.
The conclusions of the study are, to say the least, remarkable. It turns out, for example, that a large number of the more than 12000 SMEs surveyed already communicate about their sustainability to the outside world. Topics such as dealing sustainably with personnel, customers and suppliers are common, but issues such as the environment, diversity and transparency came up frequently too.
Perhaps more remarkably, the research also showed up some clear differences. The sectors that communicate most often about sustainability are transport and trade, while hospitality, administrative and support services figure least in the study. Furthermore, we see that some companies already communicate in a very structured way, but that many still communicate ad hoc and randomly.
What opportunities does sustainable business offer?
Reduced costs
Reducing costs is an integral part of sustainable business. This obviously has a direct impact on the company’s financial results, freeing up still more resources that can be used for implementing sustainable business practices. Examples include investing in renewable energy instead of fossil fuels. But things like investing in employees to increase their wellbeing also ensure that they remain healthier, are happier and will stay with a company longer, which makes it possible to reduce recruitment costs. A lot of research shows that there is a direct correlation between sustainable business and improved financial results.
Reduced risks
The reduction in risks is another advantage of sustainable business for SMEs. You can help limit environmental change, for example, avoid taxes on polluting emissions, reduce the chance that larger companies cease to want to work with your company, or that new generations cease to want to work for you, and be better prepared for future legislation etc. Indeed, you could make a long list of reasons why companies can reduce their risks by operating more sustainably.
The development of new ideas
Thinking about sustainable business need not only concern the internal workings of the company. As a business you can also think, for example, about how a greener product could be good for your customers. That way you can turn a company that regularly takes from the world into even more of a company that gives back to the world, as well. In addition, studies also show that customers are often willing to pay considerably more for a sustainable product, which frequently makes it a good financial decision too.
Improves your brand and reputation
It goes without saying that investing in the environment, improving people’s welfare and managing a company well are things you want to make known to the world. Employees, customers and suppliers are increasingly looking for companies that operate sustainably. What is important here is that a company communicates this well. For instance, there are more and more companies that publish sustainability reports on their entire value chain. We notice that these are increasingly seen as an important factor when it comes to evaluating a company properly.
Sustainable entrepreneurs are more resilient and flexible
Europe is going all out for sustainable business with its ESG legislation because it believes that it will be a competitive advantage in the future. EU legislators want Europe to be a pioneer in sustainable business. This will be important, first and foremost, to large and listed companies and their value chain, but SMEs will also be encouraged to report on their sustainability in the future. More specifically, the fact is that the world will change and companies that prepare themselves well will obviously be more resilient. They will be able to change direction faster and adapt better to the challenges that arise.
So, as an entrepreneur, how can you best take this further?
As the HOGENT study shows, a lot of companies are already working on many sustainability issues. Often, assessing what can still be done and communicating where you already stand as a company today is the next step to take. Given the opportunities we discussed above, it is often worth investing in it. It is best, of course, to let an expert assist you in this, to give you direction and to learn for yourself. Usually, some kind of scan or audit is done first to assess the current situation. Then a clear report can be made and the necessary steps for improvements for the following year can be determined.
Our BOFIDI experts will be pleased to help you
Would you like more information about sustainable business practices or do you need help implementing them? Then you can always contact cristof.vanlaer@pkfbofidi.com.