Sustainability Reporting: SME’s Find Benefits From Transparency

elaine cohenSustainability Reporting is often regarded as the proprietary privilege of large global multinationals whose powerful and often dominating impacts on our lives and our planet cannot be overlooked.

Employing hundreds of thousands of people, generating billions in revenues, emitting millions of tons of carbon, while enjoying the fruits of an imperfect capitalist system, large companies, wherever they are, are expected to disclose the details of the way they do business and the responsibility they take for the way they change our lives. The benefits of Sustainability Reporting for large companies has been widely researched and in general, it seems to be an axiom that reporting delivers value, both in terms of long-term stock prices and also reputation building.

But what about small and medium-sized enterprises (SMEs)?

Sustainability Reporting: Only for Large Companies?

Impacts are local, limited, uncomplicated and carry low risk for the sustainability of the planet and the quality of life in general. SME organizations are small, often led by a visionary entrepreneur who sees business as part of a life mission, rooted in a strong sense of values.

SMEs are personal, integrated in the local community, and flexible and agile. Cost-consciousness often Sustainability Reporting for SMEsdrives efficiencies in small businesses and budgets are tightly controlled by default if not by choice.  All of this sounds as though SMEs have a built-in advantage when it comes to sustainability, environmental efficiency, stakeholder engagement, responsible workplace and community involvement.

Why should SMEs invest in being transparent? What’s the added value of all that added effort?

The sheer difference in scale surely means that what’s right for large (especially publicly traded) companies in terms of transparency may not be right for SMEs. Indeed, I have spoken to several SME owners who clearly think that Sustainability Reporting is not for them.

Transparency: Nothing To Do With Size

Despite what they say, this approach is flawed. SMEs have a responsibility to be transparent in the same way and for the same reasons that large companies should be transparent, and, no less importantly, they can gain serious competitive advantage through developing the transparency habit.

First: Responsibility

SMEs have impacts. Every small business has impacts. The late Stephen Covey said “How you treat the one reveals how you regard the many, because everyone is ultimately a one”. Even in a small business, there are ones. Whether you employ 10, 20 or 300 people, and not thousands, you are still playing a significant role in shaping the quality of life for each of the ones you employ, and their families and their communities. Small businesses consume energy, generate waste and use water resources. Don’t SMEs also have a responsibility to do this in an environmentally friendly way?

Of course they do.

Customers and consumers of companies and their brands have a preference to engage with responsible companies, irrespective of their size.

But here’s the thing:

There are tens of millions of SMEs around the world, generally forming more than 80 percent of all companies in different countries. They might be micro (up to 10 employees), small (up to around 50 employees) or medium-sized (up to 500 employees), but collectively, they employ more than 60 percent of our global workforce and contribute a substantial proportion of national GDP in most countries.

Collectively, SMEs are a force to be reckoned with.

And individually, every SME is a part of a larger company supply chain, upstream or downstream. small business Every SME has customers and suppliers, whose businesses are affected by the way SMEs do business. In fact, the sustainability of large companies is largely dependent on the sustainability of small companies. SME’s have a responsibility to recognize this role that they play in advancing and enabling sustainable business.

And transparency is a necessary part of the interaction within complex supply chains, enabling the most informed choices to be made and the most sustainable decisions to be taken.

Second: Opportunity

SMEs gain from transparency. Often, SMEs are restricted by access to capital and cost of capital but sustainability reporting can be a powerful tool in helping providers of capital make favorable decisions about financing SME business expansion. William Hughes, Managing Director of Impahla Clothing, a South Africa-based SME, confirmed that his company obtained funding for a factory upgrade at preferential interest rates, a direct result of consistent annual Sustainability Reporting.

Deb Leary, founder and CEO of Forensic Pathways Ltd, a U.K.-based SME, confirmed that transparency helps build a higher quality client base. A range of interesting case studies of SMEs pursuing sustainability programs shows the benefits of sustainability practices for SMEs. The added element of transparency ensures these benefits are understood by SME stakeholders which creates opportunities to attract support and do better business.

Finally, SME Reporting need not be the costly, burdensome headache that it is reputed to be. SMEs can report in a focused way, keeping costs to a minimum and resources at a manageable and affordable level.

SME reporting is on the business agenda. It’s now time for SMEs to stop asking why and start asking how, as they learn to develop the transparency habit.

This article was originally published on CSRwire
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Elaine Cohen is the author of the new DōShort Sustainability Reporting for SMEs: Competitive Advantage through Transparency.  Elaine’s ebook is part of Dō Sustainability’s new DōShort series of concise, sustainable business ebooks for professionals. These practical ebooks support professionals in the vanguard of sustainable business — who are often forging new paths in their organizations — by giving them the confidence, information and tactics they need at every stage of their career.  To find out more please visit  www.dosustainability.com.

  • Great article. Thank you for writing about this, I definitely agree that SMEs need to take greater responsibility, and I believe its our role to present the moral (along with the business case) for why they should start reporting.