Managing Director, Canada at Sage [https://www.sage.com/en-ca/medium/] – Empowering Canadian businesses by simplifying workflows to break down barriers and achieve growth.
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ESG and sustainability strategies are no longer nice to have—they are becoming central to successful business strategies as external stakeholders put increased pressure on organizations to demonstrate how they are making a positive impact in the communities they serve. These strategies are quickly becoming key differentiators for leaders around the world.
Research from Bain & Company and EcoVadis found [https://www.bain.com/insights/do-esg-efforts-create-value/] “connections between business results and four different aspects of sustainability,” which include DEI, employee satisfaction, renewable energy and sustainable supply chain. Additionally, my company’s recent “Path for Growth” survey [https://www.sage.com/en-ca/news/press-releases/2023/11/canadian-smbs-most-likely-to-struggle-with-understanding-esg-reporting-standards/] found that Canadian small and mid-size businesses (SMBs) are acutely interested in enhancing their sustainable business practices.
As a result, many businesses are recognizing the positive impact sustainability strategies can have from a performance standpoint. Turns out that what’s good for the planet is also good for an organization’s bottom line.
ESG REPORTING REGULATIONS ARE GAINING MOMENTUM
We now find ourselves at a crossroads as ESG reporting regulations are gaining momentum in Canada and around the world.
For example, a new bill [https://www.parl.ca/legisinfo/en/bill/44-1/s-211] passed by Canada’s Parliament took effect on January 1, 2024, enacted the Fighting Against Forced Labour and Child Labour in Supply Chains Acts and amended the Customs Tariff (Bill S-211). The bill focuses on forced labor, child labor and human rights in supply chains, requiring companies explain how they’re preventing and reducing the risk of forced and child labor in their own supply chains.
Likewise, “the U.S. Securities and Exchange Commission (SEC) unveiled plans [https://www.sec.gov/news/press-release/2022-46] to enhance and standardize climate-related disclosures for investors, as part of a growing awareness of the importance of environmental, social & governance (ESG) issues among public companies,” according to reporting [https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/sec-climate-disclosures-esg-strategy/] from Reuters.
While we typically read about large organizations laying out their goals and strategies, SMBs are equally focused on delivering a positive impact. However, many SMBs often struggle with getting started on their sustainability journey. Many of the guidelines and regulations are targeted at large, publicly traded organizations, and SMBs have to deal with a unique set of challenges.
NAVIGATING THE SUSTAINABILITY JOURNEY
Our study investigated SMBs’ motivations for and challenges to becoming greener. SMBs recognize the positive impact successful sustainability programs can have from improving community engagement, building brand awareness as well as increasing operational efficiencies. We found more than two-thirds of Canadian SMBs (67%) see sustainability as important to their business but struggle with the complexities of the process.
Our research also found the lack of knowledge or understanding about sustainable practices presented the main barrier that prevented 44% of respondents from taking more concrete action to measure their environmental impact. Our report also found that, “If reporting standards were simpler and more closely tailored to their businesses, 59% strongly believe that they would be more inclined to engage in climate reporting.”
There are some immediate best practices organizations can follow to set them on the right path for their sustainability journey. It’s important to remember that Rome wasn’t built in a day, so organizations can begin with small steps, which can lead to a bigger impact down the road.
UNDERSTAND YOUR ORGANIZATION’S CURRENT PRACTICES
Begin by conducting an internal audit of current practices to understand what practices already have a positive environmental impact; what practices can be changed; and which practices can be stopped altogether. Having a clearer picture of current practices is critical to knowing where organizations need to prioritize their efforts to drive both immediate and longer-term impact.
For example, adopting a paperless approach is a simple, but effective way to reduce waste. Moving to digital-first—particularly with finance and payroll—decreases the company’s carbon footprint but also has the added benefit of improving information management, driving efficiency as well as increasing information security and compliance.
SET MEASURABLE AND ACHIEVABLE GOALS
Conducting an audit will give you insights into where strategies can have the most impact, but businesses also need to ensure their sustainability strategies are achievable. While it’s good to have aspirational goals, it’s equally important that those goals are achievable and align with your organization’s values.
SMBs can start by integrating metric-based success benchmarks to gain tangible feedback and insights into what is and isn’t working. This can give organizations the ability to better understand their progress and adjust as needed.
For example, businesses that are focused on reducing their local carbon footprints can begin by setting achievable milestones for reducing waste and energy usage by 10%. For SMBs prioritizing diversity, equity and inclusion efforts, consider setting hiring or promotion benchmarks for members of under-represented communities. The key is regularly monitoring progress and scaling as needed.
ACCEPT THAT IT TAKES A COMMUNITY
Addressing climate change isn’t a race but a team sport as it impacts everyone. Collaboration across governments and industry leaders, as well as having the right partner ecosystem, will be vital to success.
Choosing to work with suppliers and partners that prioritize sustainability can help SMBs reduce their carbon footprint. Businesses can outline guardrails during the selection process that give preference to partners with similar sustainability strategies that aim to lower their own carbon footprints or operate an ethical and transparent supply chain.
Many SMBs often lack sustainability specialists and resources within their organizations to prioritize and accelerate ESG strategies. Support from regulators, industry leaders and partners will likely be critical to simplifying reporting standards. Making tools and data more accessible will be critical to democratizing sustainability for all businesses. At the end of the day, what’s good for the planet is good for business.
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