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Smaller firms can think bigger on sustainability

They can go further in areas such as good labour relations, ethical practices, and positive community impact.

THE year 2016 was one of the hottest years on record. Across the globe, temperatures soared as climate change continued to wreak havoc.

For companies, especially, the uptick in heat is a stark reminder of the urgent need to push ahead with business strategies that incorporate sustainability efforts.

That said, companies and regulators have made considerable progress in adopting sustainable growth models. For instance, the Singapore Exchange has incorporated sustainability reporting into its governance regime on a "comply or explain" basis.

Meanwhile, large corporations are increasingly cognisant of the need to adopt more environmentally and socially sustainable means of growth. Some Singapore firms such as SingTel and City Developments are even leading the agenda: they rank among the top 100 Most Sustainable Companies, according to the Toronto-based magazine and research firm, Corporate Knights.

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But the push for sustainable growth cannot be left solely in the hands of a few large and enlightened firms. Smaller firms must step up and play their part.

Focusing efforts on small firms

It's practically axiomatic that SMEs are crucial to the functioning of any economy. After all, they employ the largest number of workers, they contribute the bulk of growth, and they are the main driving force behind the growth of most countries.

In 2010, the OECD stressed that "the prospects and strategies for a green growth economy cannot be entirely understood without taking fully into account the production, technology and management practices of (SMEs)".

In Singapore, SMEs make up 99 per cent of the country's enterprises. They employ 70 per cent of the workforce and contribute nearly half the GDP. Imagine the exponential effect if each of these firms were to take an aggressive, proactive approach to sustainable growth.

To be certain, SMEs face several practical challenges in this area.

The first is really understanding what corporate sustainability actually involves. Many continue to equate sustainability solely with environmental or green growth factors, when the ambit is much wider.

For instance, a construction firm's main sustainable issues will include not just the environment, but also feature the physical safety of its workers.

Part of the solution here is to continue working to raise the awareness and educate the business community, but more needs to be done.

A more fundamental problem is this: for many SMEs, sustainable growth remains an aspiration, rather than a necessity. With the survival of the company at stake, how can SMEs be reasonably expected to divert their attention from growth to sustainable growth?

Embedded in this question is the issue of costs: Does sustainable growth mean having to spend more money to achieve the same growth?

Corporate strategy the starting point

The answers are found by re-examining the company's starting point, or its corporate strategy.

The company's directors who formulate corporate strategy owe a duty of care to the company. Here, care does not simply mean ensuring that shareholder profits are maximised. It means care for the entire company - from where it procures materials, providing fair benefits to its staff to taking care of the physical environment in which it operates.

The point is that when small but growing firms adopt good sustainable practices early, there is a good chance that as they grow, they will continue to have the same outlook.

What's more, sustainable practices make for good business. Shares of the hundred most sustainable companies in the world, according to a list put together by consultancy Corporate Knights, have done exceedingly well. Every $100 invested in this Global 100 back in 2005 would have multiplied to $232 by 2016.

What is encouraging is just how many small Singapore clean energy and logistics firms run socially and environmentally responsible businesses. They show that sustainable growth is possible, even for SMEs.

A good example is Greenpac, a home-grown green packaging company. From a one-woman firm that started in 2002, founder Susan Chong has created a multi-million dollar business that employs over 30 staff, and provides eco-friendly packaging to Fortune 500 companies.

Many small business owners already take the opportunity to give back to society, whether through corporate philanthropy or volunteerism. The next stage is to embrace sustainability in ever more ways: good labour relations, ethical practices, and positive environmental and community impact.

The challenge now is to institutionalise this mentality as part of a company's overall strategy, and to spread the word in the firm and the community.

And if it is not already clear: there is no longer any debate that when companies, large or small, do good, they also do well.

  • The writer is a member of the Governing Council of the Singapore Institute of Directors.
  • For more articles, go to btd.sg/BMatters

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