Why is ESG an SME advantage?

The UK shocked the world in April with the announcement that we’ll deliver cut our carbon emissions 78% vs. 1990 levels. Stemming from the 2008 Climate Change Act (2008), the implications for every business will be huge.

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ESG and Dead and Dying Businesses

Environment, Social, and Governance, ESG, is a complex field which has been ignored by most UK SMEs whose leaders perceive it to be pertinent only to FTSE-listed corporations. This is an error, and in due course we’ll see the commercial landscape littered the dead and dying businesses which failed to take a proactive and comprehensive approach to ESG transformation.

Even more so than regulatory requirements, it has been larger corporations who have forced awareness and compliance with cybersecurity and data protection upon their supply chain. Now, amid the pandemic, we must add ESG compliance as a key concern for the SME wishing to win government grants, or to succeed when bidding to be a supplier to a larger, more regulated, entity.

ESG Will Become Key to SME Cashflow

According to Lloyds Bank, 91% of the UK’s SMEs see sustainability as an important consideration and yet only 5% of tour largest SMEs have any plan in place to capitalise on the challenges and demands of Net Zero. The reality is that ‘demand from government, customers, and suppliers to be ethical, and sustainable will only increase and eventually become expected rather than a unique selling point’[1].

ESG is key to cash flow, the life blood of every business. It facilitates top-line growth, reduces costs, minimises regulatory and legal interventions, increases employee productivity, and optimises investment and capital expenditures. With these factors as motivation, how then to prepare for the ESG journey ahead?

Core Values of your Customers

Everyone is fighting for revenue recovery, but has seeking to achieve growth and preserving margins made you blind to the costs of continuing as before? Are your business practises outdated, inefficient, and entirely unappealing to the core values of your customer base?

The Millennial generation are the largest in history and they’re in their prime spending years. Their beliefs are reshaping the economy and they’ll already changing the ways we buy and sell, forcing companies to do business on their terms. When they choose an employer, a solicitor, a car, or when they shop for day-to-day goods and services, they’re far more inclined to consider the vendor’s overall ESG message. Ignore them at your peril!

The Millennial Coin

SMEs are under pressure. Firstly, there are the ESG demands from larger corporations and government bodies when bidding for work, and it’s the Millennial cohort who are reviewing the responses. This is the C21st consumer, and they give preference to those firms which demonstrate environmental awareness.

Quantifying the issue, we can refer to the survey[2] by RetailMeNot: 74% of millennial internet users (aged 22 to 37) said more brands should take public stands on important social issues, and a Deloitte report found that 42% of millennials said they have begun or deepened a relationship with a company due to a positive impact on society or the environment, while 37% said they have ended a relationship because of a company’s negative impact.

So how can businesses win the Millennial coin when budgets are tight? Only by demonstrating to the organisation’s Executive that ‘green’ initiatives can both save money and win new clients, will the typical SME be likely to invest and, even then, there needs to be an overwhelmingly strong financial case. How strong? Enough to prove the changes will be cost-neutral or better.

Millennials are disgusted by waste, and upon learning that the average UK secondary school produces 2.2 million A4 sheets of paper per year[3], they’re calling for change. Similarly, research has revealed that the average law firm spends up to 3 percent of its annual revenues on printing and the modern consumer is appalled by the inefficiency and awkwardness of receiving printed communications.

Waste begins at the office printer

For every 150,000 pages not printed – that’s approximately one tonne of paper – you save a staggering 7,000 gallons of water, 17 trees, 380 gallons of oil, three cubic yards of landfill space, and 4,000 kilowatts of energy[4]!

By adopting print management software, your print usage will fall by 30%, and it’s easy to enrol with Print Releaf™ to achieve SGS certified reforestation. This impresses clients!

From switching to electric cars to more efficient ways to heat and cool the office, there are almost unlimited approaches to reduce energy costs and emissions. Look at your dated printers and replace them with ENERGY STAR certified devices. Their advanced power management reduces electricity consumption by 14%, and that’s important, given that the electricity required to print 8,000 pages a month is equivalent to 158 kWh or 6,100 hours of laptop usage.

Your choice of suppliers brings opportunity to reduce your carbon emissions even further. Advanced UK, for example, complete 62% of their field service calls remotely. Our records suggest we’re saving 18 tonnes of CO2 annually, on top of our fuel savings. This is a marketing opportunity created through ESG, and just one example of how the opportunity to ‘go green’ does not have to have a negative impact on the balance sheet.

Social and Governance?

The Social and Governance component of your ESG strategy will come under increasing scrutiny, and as more regulations and ever higher taxes come to bear, the smart SME of every size will gain from making a head start.

We will all be rated on our diversity and inclusion, and what we put back into our communities too. Make no mistake, a solid ESG rating adds value to a business seeking both clients and investors.

In conclusion, by incorporating your organisation’s ESG goals into your marketing communications, you are more likely to find progress easier since you may be held to account by your staff and clients alike. We can guide you through the process.

author avatar
Humperdinck Jackman
Leads the daily operations at ESG PRO, he specialises in matters of corporate governance. Humperdinck hails from Bermuda, has twice sailed the Atlantic solo, and recently devoted a few years to fighting poachers in Kenya. Writing about business matters, he’s a published author, and his articles have been published in The Times, The Telegraph and various business journals.


Matt Whiteman

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