Sustainability is a high priority for big business, but what about the smaller companies that account for the majority of employment in the world? We look at the pressures on smaller businesses to prioritise the triple bottom line.
Sustainability management – the prioritisation of environmental and social issues, including protecting and nurturing employees through sound OSH standards – has become a priority for major corporations. Shareholders and the public are subjecting them to closer scrutiny in terms of corporate citizenship and their ability to show ‘purpose’ beyond simply generating financial value, with businesses increasingly trying to balance the ‘triple bottom line’ of social, environmental and economic benefits, rather than solely generating shareholder value.
For small- and medium-sized enterprises (SMEs), defined as those with fewer than 250 employees, short-term financial issues may understandably be distracting, especially in the long tail of the economic disruption caused by the pandemic.
IOSH’s position on sustainability management is that, regardless of their size, ‘well-managed organisations thrive, contributing more to and benefiting more from, healthy and sustainable economies and societies’.
Research suggests that although smaller companies are often aware of the practices that make up a sustainable approach to their business, engage with social and environmental issues, and limit their impacts, some fail to follow through. A recent survey of 229 SMEs in the UK construction sector by the University of Nottingham and the Construction Health and Safety Assessment Scheme found that while 72% of firms had adopted policies against modern slavery, only 39% carried out checks to ensure the policy was upheld in their own businesses and supply chains (University of Nottingham and CHAS, 2021).
Tony Stewart GradIOSH of the consultancy Sustainability in Business has advised small businesses on sustainability management and reporting for 20 years. He says that most SMEs are driven by demand from existing and potential customers, and particularly by requirements to show environmental and social standards in tender documents for the UK NHS, local authorities or when subcontracting for the major construction firms.
If you want to see results in the long run, sustainability isn’t just something you do for a year or two, or even 10
The early work he does with such organisations often requires them to recognise the environmental or human capital value of measures they have already taken for other reasons. ‘It’s about putting a green hat on and thinking about what they are doing,’ Tony says. ‘In construction, they are already segregating materials such as plasterboard, or de-nailing timber, to comply with site rules and for environmental and health and safety reasons. But it’s a matter of stating that as part of their sustainability efforts.’
Another example he offers is of cleaning companies contracting with the NHS: ‘Two years ago they were using paper checklists on clipboards. Now they are using electronic tablets. They made the change purely for reasons of speed and efficiency but you have to remind them about the saving they are making in paper waste.’
The latest tenders ask questions about social value, he says. ‘SMEs say “What is that? How do we answer that?” The answer is what you do locally. Are you buying locally? Do you employ locally? That’s all putting back into the community.’
Looking after employees beyond basic OSH compliance with measures such as wellbeing initiatives is another example of a social benefit, he adds.
Although most SMEs may start their sustainability journey because of customer pressure, Tony notes that they often begin to see the business benefits of a more systematic management approach to environmental and human capital. ‘The next step is an action plan that says what you have got to do to prove you are serious about it,’ he says. In some cases, this can lead to certification in standards such as ISO 45001 for health and safety and ISO 14001 for environment management systems.
Management evolution: Sustainability 3.0
Dyllick and Muff (2016) proposed four categories of sustainability management evolution in companies, starting with ‘business as usual’, in which the organisation takes no interest in sustainable development, seeing it as the responsibility of government. The next category is ‘business sustainability 1.0’, in which the organisation responds to pressure from customers and other stakeholders, bolting on some sustainability measures without disturbing its existing business model.
The next stage, ‘business sustainability 2.0’, considers more deeply the social and environmental elements of the triple bottom line alongside profit. Here the organisation becomes more concerned with the duties it owes to stakeholders other than those who profit financially from its activities, and integrates sustainability into general management.
The final stage is ‘sustainability 3.0’, in which a business has shifted from limiting its negative effects on environment, workers and society and instead seeks to make an active contribution, translating global challenges into business opportunities.
Dr Chris Davis, OSH researcher at IOSH, says that if sustainability 3.0 might seem utopian for companies that have a lot of stakeholders and traditional business models, ‘for smaller businesses that are more agile and slightly more sensitive to pressure from within, it might be more achievable’. Even for those who will never reach that stage, the model is a useful one. ‘It allows businesses to look at exactly where they are and see where the gaps are,’ Chris says. ‘It is also good because the model has OSH right at the heart of it, in the sense of OSH being a driver of positive outcomes.’
That evolution from a client-driven approach to a more self-motivated stage is borne out by a recent study (Tsvetkova et al, 2020). The researchers drew on in-depth interviews with senior managers in nine Swedish businesses, mostly manufacturers.
They found that the most common trajectory among the companies was from a state they describe as ‘situational development’, driven by stakeholder pressure and involving limited sustainability policies and measures, to a more developed stage of ‘incremental development’, where they were implementing more systematic procedures and incorporating the triple bottom line – people, profit and the planet – into daily decision-making. None of the small sample of Swedish companies were placed in the most enlightened category of ‘radical development’ (see Sustainability 3.0, opposite page).
Supplier pressure was definitely the starting point for most businesses in the research, says study author Desislava Tsvetkova: ‘Many of the companies we spoke with were working internationally because the Swedish market is limited and they said that it was a requirement of the companies they were partners with that they have ISO certification, fair wages and a small carbon footprint.’
Desislava makes a distinction between adoption of sustainability practices and maintaining them in practice. ‘We focused on the maintenance, because we found out from previous literature that SMEs can lack the human resources to follow up and develop policies. Adoption is one thing, but if you want to see results in the long run, sustainability isn’t just something you do for a year or two, or even 10. You have to change and adjust.
‘The companies we spoke with said they are building their businesses for generations to come, so they assume that sustainability is here to stay.’
In the paper, Desislava and her co-authors emphasize this long-term commitment to sustainability as one of the keys to making it a successful business strategy, and that business owners should see balancing the three pillars of the triple bottom line as an investment in longevity and future profitability as the demands
of customers change.
Tracking sustainability performance and providing data on initiatives and improvements to stakeholders is also valuable to demonstrate progress and transparency, the paper says, suggesting that the UN Sustainable Development Goals (SDGs) could provide a template to structure reporting.
As the SDGs are designed for governments and global institutions as much as industry, it has been difficult for smaller businesses to map their activities easily on to the target areas. Even the UN Global Compact, the framework that helps organisations adopt and report on sustainable practices contributing to the achievement of the SDGs – to which IOSH recently became a signatory – can be hard to realise in everyday practice for small businesses.
This has been particularly true of OSH measures, where the only conspicuously relevant SDG is Goal 8 – relating to decent work and economic growth – which includes a target to ‘protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment’.
‘That’s where the more established links are,’ says IOSH research adviser Dr Chris Davis about Goal 3 (which relates to good health and wellbeing) and Goal 8. ‘But even in things like education and lifelong learning, OSH can contribute to that through training. We are currently working on a project that looks at the linkages between OSH and the SDG targets.
‘We are just doing some work on the links between OSH and climate change and how, for example, the core OSH principles can contribute in areas such as disaster preparedness or public health planning. There are so many areas where OSH can contribute, as well as the core ones of preventing injury and ill health. OSH is an enabling function that means as soon as you have a safe workplace and healthy workers, the rest can follow. It’s the foundation of sustainability.’
The research on OSH connections to SDGs and how OSH professionals can contribute to various elements of sustainability management will be published in the coming months as part of IOSH’s Catch the Wave campaign.
Desislava says that the businesses in her research implementing sustainability measures tended to focus on the environmental side. ‘The social aspect is something companies need to focus on a bit more. The environmental measures are more obvious – water and electricity use, and so on. But stress and work/life balance are important measures too.’
Chris says that there are more and more OSH professionals who see an opportunity, whatever the size of organisation they work in, to rebalance sustainability management and measurement with those social and human capital indicators and to help manage businesses without undue cost to workers or the wider world. He says there was plenty of evidence of this attitude among the young practitioners at IOSH’s recent Future Leaders community event.
‘There were some very engaged individuals there,’ says Chris, ‘and they see OSH roles going through
a natural evolution that broadens its horizons. In that respect it’s really promising.’
In practice: The new one percenters
Chris Thornhill is co-founder and chief executive of Growth Animals, a UK-based marketing agency that aims to balance financial success with high ethical and environmental standards. He says he and his two co-founders had worked in marketing functions of corporate businesses and could see how social and moral concerns could sometimes be sidelined in the drive for profit.
‘In 20 years’ time, when I’m looking back at the success of Growth Animals, one factor of course is going to be, has it made me financially independent?’ Chris says. ‘But more important is, what’s the legacy that my daughter takes forward? And does she feel proud of the business I have created?’
The company has pledged to give 1% of its time and product to charitable causes. Chris says his 1% translates into time spent as a trustee of Dementia Support, while colleagues donate their time overseeing marketing campaigns for other charities. The agency offsets the carbon it generates from activities such as employee travel by funding a hydropower scheme in Uganda and reforestation in Mozambique. It also tries to reduce impacts by sustainable procurement and being paperless. Complete flexibility in the working day maintains employees’ healthy work/life balances.
Does he believe the company’s ethical commitment helps differentiate it from other agencies and win business? ‘I do. Right now I think it gives us a competitive advantage. But momentum in this area is so strong that before long it will be a hygiene factor. So if you are not acting this way, you’ll likely soon see problems.’
Image credit | iStock | Shutterstock
Dyllick T, Muff K. (2015) Clarifying the meaning of sustainable business: introducing a typology from business-as-usual to true business sustainability. Organization & Environment (accessed 8 September 2021).
University of Nottingham and CHAS. (2021) Developing anti-slavery guidance for SMEs (accessed 23 September 2021).