Does Small Business Have a Role in Environmental Sustainability?

Having recently finished Andrew Winston’s book entitled The Big Pivot, Radically Practical Strategies for a Hotter, Scarcer and More Open World (2014), I was struck by the author’s explanation on the last page of why his strategies on adapting to a world with a hotter climate, more scarce natural resources, and increasingly transparent operations are focused on large companies.

“… primarily I focus on big companies because humanity has big, global-level problems to solve. We need scale to move the needle in a real way. The reality is that no matter how many people the small businesses of the world employ, the economic, environmental and social impacts lie squarely with the giants. Just the largest 200 companies have revenues of over $20 trillion – that’s about 29 percent of global GDP. As the famous line goes, you rob banks because that’s where the money is.”

While true, we are still left with the question: what about the other 71%? If we’re looking for economic, environmental and social impacts, surely we need to consider more than a third of the global economy.
In 2010, a global organization, the Association of Chartered Certified Accountants, offered an answer to the question of where is the other 71%. They estimated the contribution of small and medium-sized enterprises (SMEs) to the global economy – no mean feat given variations in definitions and challenges in finding data. The ACCA concluded that if their members’ top 20 markets and “all other countries for which reasonably good data are available” are considered, “SMEs can be shown to account for 52% of private sector value added and 67% of employment, which provides a reasonable approximation for the sector’s global footprint.” Surely policy-makers and supply chain managers (if not corporate executive in large firms) should be looking at the SME community’s potential contribution to addressing those “big, global-level problems”.

To be fair, Winston does suggest that many of his strategies, especially the value-creation tactics he describes, are applicable to small and medium-sized businesses. Agreed. And he says “innovative strategies that save money, reduce risk, drive new products, or create brand value are not the sole domain of big companies.” Agreed. However, he is also clear that he expects changes in business strategies to be driven by a) the pressure that large companies put on their supply chains, and b) the unique “influence” that large companies wield over government policy”. For an SME, both of these drivers are unsettling even though the evidence of their effectiveness is well-known. But both are typically undertaken with little regard for how the decisions emerging from these types of “pressure” will actually be implemented at street level, far below the CEO’s boardroom or the floors of legislatures.

Witness the recently released Climate Change Discussion Paper from the Province of Ontario: it makes a strong case at the document’s front end for being able to have economic growth while addressing the need for adaptation to a changing climate (and by the way, there would be many here who would say that shifting climates might be a better description of what is happening in this province as we contend with polar air masses moving south… and staying.) And while the Province says that “all individuals, economic sectors and regions will have a role”, there are precious few references to SMEs in the Paper. One place is the Caring for Climate (C4C) group of 390 “large, small and medium business located worldwide” (Take a look at the list of signatories at http://caringforclimate.org/about/list-of-signatories/ and see how many small businesses you find. Hint: you will likely be able to tally them up using just your fingers.) And of the five Ontario Sustainability leaders in the Global 100 Ranking listed in Discussion Paper, four of the five are in the financial sector, not the sectors that will be most expected to respond as the Province puts a price on carbon utilization. Fortunately the Province has appointed a Special Advisor and Climate Action Group (http://news.ontario.ca/ene/en/2015/03/special-advisor-and-climate-action-group.html) with representation that can provide some insight from the automotive sector, the residential home construction sector, the agricultural sector, the cement industry, and the building trades. Hopefully they can bring the perspectives of business of ALL sizes to the table — not just the behemoths.

There’s a reason that consultants and governments prefer to spend their time with large businesses: there’s fewer of them and they are easier to find. It’s convenient. As the ACCA put it:
“Entire industries exist solely to produce, disseminate and interpret information about these sectors (financial, corporate and public), and their needs are considered by policy-makers from the local to the global level. Information on small, private enterprises, however, is much harder to come by, more localized, and nowhere near as reliable or actionable.”

Actionable is an important word here: if we are to implement strategies that embody both economic growth and adaptation to climate change, the participation and support of SMEs will be essential. Why? Because they make decisions every day about production (inputs, processes, technologies), about facilities, transportation, shipping & logistics, about chemicals and other materials, about use of fuels and other forms of energy. These decisions drive our economy and affect our environment. SME decision-makers are integral parts of the communities from which they operate. The ACCA describes it this way:
“It has become commonplace, in the aftermath of the global downturn of 2008-2009, to refer to SMEs as the backbone of the global economy. To do the sector justice, commentators would have to resort to further anatomical analogies; the sinews and heart, for instance, would be highly appropriate, as the contribution of SMEs is significant not only in static but also in dynamic and possibly moral terms”.

If we are to maintain and grow our economies, decoupled from negative environmental impacts, wouldn’t it make sense to engage the millions of SMEs across whose desks the real implementation decisions will ultimately flow? At the end of the day, environmental sustainability will be achieved (or not) based on those decisions.