· 5 min read
In today’s business landscape, sustainability has become more than just a buzzword – it is a necessity. Although the concept is often associated with large corporations with global operations, small businesses, and entrepreneurs stand to gain significantly by integrating sustainability practices into their business operations. One key approach is sustainability due diligence, a process that describes the actions taken by a company to identify and act on actual and potential risks to people and to the environment. In this article, I explored how small businesses can leverage sustainability due diligence to enhance their reputation, mitigate risks, and unlock growth opportunities.
Why SMEs must care about sustainability
Sustainability is not a moral obligation or a choice, - it is a critical business strategy in the 21st century. Customers, investors, and even employees increasingly value companies that prioritize sustainability. According to IBM’s “Sustainability at a Turning Point” Research Brief, about 70% of employees (or potential employees) report that sustainability programs make employers more appealing, whether in accepting an offer or remaining at a company. For small businesses, this shift represents an opportunity to stand out in competitive markets.
Moreover, regulatory frameworks around environmental, social, and governance (ESG) factors are tightening worldwide. By adopting sustainability due diligence, small businesses can stay ahead of compliance requirements while fostering trust with stakeholders.
Understanding sustainability due diligence
Sustainability due diligence involves understanding how business operations impact people and the planet. Beyond the traditional “value chain” approach which focuses on supply chains, due diligence is not only connected to business risk management, it starts with understanding what the risks to people and the environment could be. Hence, conducting the assessment of the business operations is something small businesses can easily start with.
Practical Due Diligence Steps for SMEs
1. Understanding operations impacts
Entrepreneurs must begin by assessing the environmental and social impacts of their business. For example, does the business produce significant waste that increases emissions? Are materials ethically sourced? Do the products and services being offered contribute to sustainability? As important as these questions are, they are not an exhaustive process of understanding the impacts of business operations. Additionally, SMEs can use simple tools like carbon footprint calculators or conduct informal reviews of their supply chain practices.
2. Engage value chain
Most company's emissions come from their value chain scope 3 sources, which include both upstream emissions from the supply chain including downstream emissions from product use and disposal. Similarly for SMEs, as operations grow, so would their value chain. It is important to know that suppliers account for a large share of value chain emissions. SMEs can deal with this by engaging suppliers to reduce emissions; doing this will have a positive impact on their carbon footprint.
3. Document process improvements
Transparency is a good business strategy. SME owners must maintain a record of the process improvements they have made and are taking to reduce environmental harm. For instance, this could include energy-efficient upgrades across locations where they have businesses; or switching to recyclable packaging, as being considered by the European Union (EU) government directive in the EU. Additionally, SMEs can set measurable goals like reducing water usage by 10% within a year. These efforts can later be shared in a sustainability report or a dedicated section on the business website.
4. Set achievable goals
Another strategy for SMEs is to set small achievable goals and communicate them to customers. For instance, a coffee shop could commit to sourcing 50% of its beans from certified fair-trade farms within the next year. Being able to achieve this and building on this level of success helps to gain the customer’s trust and loyalty.
5. Stay updated with regulatory changes
Regulations and industry standards are continually evolving in the EU and the U.S. on sustainability due diligence. SMEs must stay informed about changes in regulations that may impact their suppliers and business operations. To do this, SMES should subscribe to industry newsletters, attend relevant webinars, and proactively participate in industry associations to keep up-to-date with regulatory developments on industry regulations, environmental law and labor practices. Additionally, SMEs should hire sustainability experts to help interpret several regulatory policies as they change; and conduct compliance training for internal teams to understand current and emerging regulations. This helps ensure compliance due diligence.
SMEs can learn from big corporations
Big corporations often spend millions on elaborate sustainability strategies, but small businesses can adapt these lessons on a smaller scale. For instance, instead of prioritizing complex supply chain assessments, prioritize changes you can control directly, such as reducing energy use or supporting your local community. Focus on what’s achievable and meaningful for your business size.
Advice for aspiring entrepreneurs
For aspiring entrepreneurs, sustainability offers a golden opportunity to carve out a niche. Whether you’re starting a business or seeking a career in sustainability consulting, here’s how you can get started:
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Identify a problem: Look for areas where existing businesses are falling short—such as waste management, energy efficiency, or ethical sourcing—and create a solution
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Build a sustainable business from the ground up: Entrepreneurs who embed sustainability into their business models from day one often have an edge in attracting socially conscious customers and investors
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Upskill in ESG practices: Consider taking courses or certifications in sustainability and ESG to gain the expertise needed to help others navigate this evolving field
Conclusion
Sustainability due diligence is no longer reserved for large corporations—it’s a tool that small businesses can use to grow responsibly and profitably. By understanding your impacts, engaging your partners, and being transparent about your efforts, you can build a business that not only thrives but also makes a positive difference.
As an entrepreneur or small business owner, integrating sustainability into your strategy today will help future-proof your business and set you apart in an increasingly conscious market.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
