Tuesday, 10 November 2020
How sustainability in business can bring a boost to your bottom line
The Chamber’s Sustainable East Midlands campaign was developed following research conducted alongside the University of Derby, which highlights a growing engagement in the low-carbon agenda but a gap in knowledge about accessing support. Dan Robinson explores these trends and finds out how some firms are already turning sustainability into a business opportunity.
Dr Fred Paterson is a man who sits in many seats within the region’s sustainable business community, but it’s as leader of the Low Carbon Business Network where he has witnessed the subtle real-world changes that suggest we may be edging in the right direction.
The group brings together SMEs across Derbyshire and Nottinghamshire so they can collaborate on meeting the sustainability demands of larger organisations.
He reels off examples of businesses that are beginning to sell what he terms low-carbon and pro-environmental goods and services as part of their wider offer.
There is a car leasing firm that now has more electric and hybrid vehicles in its fleet; a business recycling computer batteries to make car batteries; and an electrical sales company that’s added LED bulbs to its stock alongside its bread-and-butter of washing machines and the like.
“Another company supplies data cabling but it can work out which rooms in buildings are occupied, so it’s turned into a building management efficiency outfit,” he explains.
“So we can see there are more and more businesses doing something in sustainability without having to change their entire model.”
In his day job as an associate professor at the University of Derby, Dr Paterson is responsible for research at Derby Business School that focuses on the skills and qualities required for businesses to lead the transition to a sustainable future.
The UK’s six million businesses are responsible for about 18% of the country’s carbon emissions. Given that 99% of these are SMEs, employing fewer than 50 people, he’s clear on where the priorities lie.
He adds: “In the effort to shift our economy, we know we need to engage smaller businesses in the whole sustainability agenda.
“We also know that corporates in the past two decades have been further ahead in that agenda due to the increasing awareness of corporate social responsibility, governance and legislation.
“Small businesses in general have lagged behind – partly because they don’t have the time or knowledge and partly because they don’t have the capacity to keep their eye on the latest developments in the circular economy, for example, because they’re busy keeping the business afloat.”
Research underpinning Sustainable East Midlands campaign
Dr Paterson is aware it all begins at the bottom line for small businesses. While joining the sustainability agenda has many environmental, reputational and idealistic benefits, it must first present financial and business opportunities.
Identifying this, he has also been the project lead for the DE-Carbonise business project, a European Regional Development Fund-backed scheme that is working with two cohorts of SMEs to decarbonise their operations and develop sustainable supply chains via small grants for R&D and business development.
“Knowing that small businesses are looking at the bottom line first – whether it’s energy efficiency improvements or reducing costs – is the obvious starting point,” says Dr Paterson.
“However, as this agenda speeds up – and it is speeding up – more businesses need to create products and services that address sustainability issues, whether they are kinder to the environment, use fewer resources or proactively do positive things for their community.
“All this is ramping up and, therefore, it’s important to support these businesses.”
This is the context behind why the University of Derby has partnered with the Chamber to gather intelligence about the level of engagement in the sustainability agenda among East Midlands businesses via the Quarterly Economic Survey over the past five years.
In February, the university added questions to the Q1 survey – which explores a range of business interests to gauge the state of the East Midlands economy – related to awareness and engagement with clean growth.
Some 250 companies answered these extra questions out of 406 total respondents so it was presumed, for the purposes of the results, that the 38% who didn’t take part were not engaged.
One of the headline findings was that the proportion of businesses deriving turnover from low-carbon and pro-environmental goods and services has grown from 16% in 2015 to 31% in 2020.
These included anything from environmental consultancy and waste recovery services to specialists in renewable electricity generation, energy efficiency and low-emission transport.
About six in 10 of the firms within this 31% (of the 406 respondents) bracket said up to a fifth of their turnover was from sustainable products and services, meaning it’s still not a major part of most business models.
But Dr Paterson is still encouraged by the findings, saying: “These companies aren’t just being energy-efficient within the business but are actually selling environmental goods and services.
“The message to SMEs is that any small business can do something in terms of their goods and services, as there is a market out there that’s only going to grow – whether it’s for tissue paper made from properly-managed forests, insulation for the outside of a house or plant-based food products.”
Only 4% of all respondents said they derived at least four-fifths of their turnover from sustainable products and services, but there seems to be a clear pathway for specialists – with 13% of micro businesses, which have up to nine employees, in this bracket.
Dr Paterson adds: “There’s important niches where you can start or grow your business around green goods and services.
“Both individual consumers and, increasingly, corporates in the upstream demand side – such as councils and hospitals or companies like Boots and Rolls-Royce – want to demonstrate they’re doing their bit for the environment, so this market is only going to grow.”
More awareness needed among businesses with sustainability agenda
Financial support for clean growth projects is available from Government, councils, local enterprise partnerships and numerous other organisations, but not everyone appears to know this.
Four in 10 businesses surveyed by the Chamber and University of Derby said they did not feel well informed about the support available, with only 23% feeling well-informed. The impact of this is that 26% admitted they aren’t engaging in the sustainability agenda.
Helen Taylor, founder and managing director of Nottingham-based sustainable business consultancy Hosta Consulting, has helped to educate individuals in small businesses about carbon literacy in a sustainability and inclusive leadership course at Nottingham Trent University.
She believes the most important consideration for companies is to embed sustainability into a wider strategy, and using it as a means to unpick the business and save money or disrupt a market.
“You need to think about your carbon cost in an authentic way rather than sticking a badge on it,” she says.
“What does your own supply chain look like? What do you know about the materials you buy? Is there anything you can do to improve the efficiency of your office space or transport fleet?
“Whatever you think you can do, it’s about having a short, medium and long-term strategy for sustainability that fits into your overall strategy.
“Then you can tell your customers what you’re doing and create a narrative around it.”
'Build Back Greener' vision reflects macro trends towards sustainability
While the University of Derby and Chamber research was conducted just before the global outbreak of Covid-19 and its resulting lockdowns that have bulldozed our economies, the future appears no less green.
An avalanche of regulations are on the horizon – particularly in energy-intensive industries such as transport, construction and manufacturing, which will impact how businesses operate, while the ability to win contracts for major infrastructure projects such as HS2 will depend on whether firms can demonstrate their green credentials.
The International Monetary Fund (IMF) has predicted a 5% contraction in global GDP in 2020 but a similar bounceback of 5.4% in 2021, spearheaded by pro-environmental strategies like the UK’s own “Build Back Greener” plan that seeks to make the nation a world leader in wind energy and support 60,000 jobs.
It reflects how, regardless of polarising political views, the macro trends are moving away from fossil fuels and towards renewables.
“We need to be pivoting towards growth markets, and pro-environmental and sustainability is a growth market,” adds Dr Paterson.
“There’s massive opportunities to step into those markets and supply chains to sell sustainable goods and services.
“They can actually build reputations and their own market share at the leading edge of the new economic world, whatever that turns out to be.
“It’s more exciting to be part of the future than part of the past.”
Pro-environmental business and clean growth trends for the East Midlands
- 31% of businesses in the East Midlands are deriving turnover from low-carbon and pro-environmental goods and services (up from 16% in 2015)
- 19% derived 1-19% of their turnover from sustainable products and services (4% derive 20-49%; 3% derive 50-79%; and 4% derive 80-100%)
- 59% of businesses that responded said their environmental strategy is strongly linked with their business strategy
- 35% are integrating clean growth into their business plan (19% proactively capitalising on opportunities and 16% in the process of developing plans)
- 14% had not considered clean growth opportunities at all (down from 36% in 2018) and 12% had explored these but did not consider them worth pursuing
- 40% do not feel well-informed about support for clean growth
(Based on 406 responses to the East Midlands Chamber Quarterly Economic Survey in February 2020)
To find out more about the Sustainable East Midlands campaign, visit emc-dnl.co.uk/sustainability.
This article featured in the November issue of Business Network magazine, which is a special sustainability edition. To read an online version of the magazine, click here.Back