As the industrial sector faces increasing pressure to combat climate change, businesses across the globe are stepping up their sustainability efforts. By 2050, or sooner, the goal is to achieve net zero emissions, and while large corporations often lead the charge, small and mid-sized enterprises (SMEs) are equally crucial in this transformation. Despite contributing significantly to industrial emissions, many SMEs still lack the resources to fully commit to environmental sustainability. However, by adopting a business mindset focused on sustainability for SMEs, they can gain significant benefits—ranging from profitability to talent attraction.
The Growing Importance of Sustainability in Industry
The industrial sector accounts for approximately 30% of global greenhouse gas emissions, making it a key player in addressing climate change. According to the Climate Action 100+ 2023 report, 77% of surveyed companies are committed to achieving net zero emissions, particularly focusing on Scope 1 and 2 emissions, which encompass direct and indirect emissions from energy consumption. Interestingly, a study by McKinsey has shown that companies excelling in environmental, social, and governance (ESG) areas tend to outperform their peers in both profitability and revenue growth. These “triple outperformers” are twice as likely to grow revenues by over 10%.
Despite the growing momentum, many SMEs are still not fully engaged in the sustainability journey. While they may lack the resources of larger corporations, their role is critical, as SMEs contribute up to 60-70% of global industrial emissions. For SMEs, embracing sustainability can lead to significant advantages that extend beyond environmental impact.
Three Key Benefits of Sustainability for SMEs
- Improved Profitability and Operational Efficiency
Sustainability efforts do not always require expensive, long-term investments. Instead, SMEs can start with affordable, quick-win projects that reduce emissions and cut costs. For instance, technologies like Variable Speed Drives (VSDs) can help motor systems, such as those used in pumps or fans, operate more efficiently. By adjusting motor speed based on demand, VSDs can reduce energy consumption by up to 50%, extend motor lifespan, and lower operational costs.
An example of this is Benders, a UK-based paper cup manufacturer. Benders piloted VSD technology to improve the efficiency of their wastepaper extraction fans. The result? They significantly cut energy usage, extended the life of their motors, and saw a return on investment in under six months—on a project costing less than $10,000.
- Attracting and Retaining Top Talent
The competition for skilled talent is fierce, and companies that prioritize sustainability are more attractive to potential employees. According to an IBM study, 69% of global consumers prefer to work for companies committed to environmental sustainability. Additionally, businesses that embed sustainability into their culture experience lower workforce turnover compared to industry averages.
For SMEs, incorporating sustainability into recruitment efforts can be a game changer, helping them stand out to environmentally conscious job seekers and retain valuable employees.
- New Business Models and Innovation
Sustainability can also drive innovation, opening the door to new business models. By rethinking processes and exploring partnerships, SMEs can turn waste into resources and differentiate themselves in the marketplace. For instance, the agtech company InnovaFeed produces animal feed from Black Soldier Fly larvae by leveraging agricultural by-products. This approach significantly reduces feedstock costs and highlights how sustainability can transform a company’s operations.
Another example is Schneider Electric’s Angouleme plant, which manufactures push buttons. Initially, the plant considered scrap metal filaments from the production process as waste. However, by compacting the filaments into blocks, the plant was able to sell them for recycling, turning waste into revenue and lowering material costs.
The Role of Sustainability in Future Business Success
The connection between sustainability and business performance is undeniable. For SMEs, adopting environmentally sustainable practices can reduce operational costs, improve talent acquisition, and foster innovation. These benefits not only contribute to a cleaner planet but also position businesses for long-term success in a competitive market.
Tools and Resources for SMEs on the Sustainability Path
To support SMEs in their sustainability journey, organizations like the World Economic Forum are stepping in. Through initiatives such as the SME Sustainability Accelerator, the Forum, in collaboration with partners like Schneider Electric, is offering tailored insights and guidance to help SMEs overcome sustainability challenges. SMEs are encouraged to participate in surveys and provide input on the obstacles they face, shaping solutions that meet their unique needs.
By starting small, leveraging affordable technologies, and prioritizing sustainability, SMEs can achieve both environmental and business growth. The path to sustainability is a path to long-term profitability and resilience, ensuring that businesses thrive in a world that increasingly demands environmental responsibility.
How You Can Get Involved
The journey toward net zero is one that SMEs cannot afford to ignore. As the World Economic Forum continues its Sustainable Development Impact Meetings from September 23-27, 2024, SMEs have the chance to contribute their insights through the Sustainability Accelerator Survey. By doing so, they can help shape a future where sustainability is not just a responsibility but a key to thriving in the modern business landscape.
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