Tuesday, 11 February 2014

Sustainability Policy for Small and Medium Businesses – What is it and why do you need it?

Having been part of small/ medium businesses in one form or another for a significant part of my working career, I understand why ‘Sustainability’ might not be the obvious business principle to adopt.  With limited resources at its disposal, just continuing essential operations can often keep one’s hands full.  For those small/ medium-sized organisations that are going through a growth phase, planning for, and adjusting to, scaling up makes all but the most essential operations take a back seat.  In such scenarios, Sustainability concerns can be hard to fit in.

There do exist small/ medium organisations whose products/ services are of an undifferentiated nature (e.g. traders/ vendors of generic machine components like nuts and bolts).  However, a large bulk of small/ medium businesses cater to customers or clients with specific requirements.  The clients/ customers can be individuals and many (e.g. for an independent hotel), or they can be other enterprises and few (e.g. a vendor supplying parts to a larger manufacturing company).  In either case, the relationship with the client/ customer is a valued one, and indeed most small/ medium organisations understand the value of these relationships and consciously nurture them.  Whether the clients/ customers are many distributed individuals or a few large enterprises, they are likely to have already identified their sustainability needs, and likely to be demanding the same of their product/ service providers.  This is apparent from the retail customers who influence the neighbourhood grocery store to discourage use of plastic bags, to the large manufacturer who now has a well-defined sustainability roadmap and is now trying to drive sustainability down the value chain.

As with other business/ management values, the best time to integrate sustainability values in an organisation is when it is small in size.   Small/ medium organisations can save on their bottom line and add to their topline by undertaking well thought-out interventions.  And, lets face it: sooner or later, all organisations, big or small, will have to undertake committed actions towards making their businesses socially, environmentally sustainable, in addition to being economically profitable.  However, even if the top management/ founders in a small/ medium business are personally driven by considerations of sustainability, or by an understanding of its strategic importance in the long-term success of their business, most often initiatives end up being one-off and disconnected.  This is where a Sustainability Policy fits in.
A Policy is a set of basic principles and associated guidelines.  It directs the actions of an organisation towards the achievement of its long terms goals.  It is enforceable and is backed by an organisation structure.  A well-formulated Sustainability Policy integrates the, sometimes contradictory, social, environmental and economic considerations facing an organisation.  It also directs standalone initiatives into a coherent roadmap towards the achievement of a long-term vision.

Considerations for formulating the Sustainability Policy:
Before sitting down to formulate the Sustainability Policy, small/ medium organizations should lay the groundwork:

1.     The ‘Significant Aspects’ facing an organisation – these aspects can be social, economical or environmental and are a function of:
·       The location of a business – its geography, political and legal scenario.  If an environmental legislation is expected to impact how the organization disposes of its waste, it is important to have a recognition and an understanding of it
·       The kind of business that an organisation is engaged in – its customers, competitors and supply chain.  If the large garment retailers have already taken significant steps to make their retail operations more sustainable, it is but obvious that soon the initiative will be driven down the value chain to their suppliers.  If maintaining customer focus is vital for the organisation, a thorough study of the customer’s sustainability focus, strategy and roadmap should be undertaken.  In the case of small/ medium businesses that have a few large customers, this requires some focused research and analysis, but is fairly easy to do through material that is available in the public domain.  Most large companies now have well formulated Sustainability roadmaps, and many of them have defined their approach to integrating their supply chain clearly.  For small/ medium businesses that directly interface with the end user/ retail customers, other mechanisms like informal interviews, or formal survey can be undertaken to understand the customer perception and preferences.
·       Especially for small and medium organisations, it makes sense to first look at low-hanging fruit and the areas that will make the largest impact.  Investment-heavy areas can be looked at next

2.     The internal values of the organisation - An organisation’s values underpin all its actions. E.g. a small/ medium business can be driven by the values of Quality or Continuous Innovation.  If these values have not been clearly defined and understood, it is important to do the exercise before embarking on formulation of a Sustainability Policy.

3.     Evolution of Sustainability within the organisation - Sustainability is an ever-evolving process, not something that is addressed once.  Especially for small and medium businesses that might not initially be able to completely think through their long-term sustainability strategy and roadmap, it is important to make the beginning, engage in periodic reflections and discussions, and take measures to fine-tune/ modify their sustainability strategy, roadmap and policy as required.

4.     Measure, track, analyse – Sustainability aspects, whether social, economical, and environmental, have been broken down into widely accepted frameworks and metrics.  These protocols can be as extensive as the one defined by the Global Reporting Initiative’s Sustainability Reporting Framework, or the World Resources Institute’s GHG Protocol.  At its simplest, it can just be a simple footprintng to resources like energy, water, waste and materials. In order to internally monitor progress, and to externally communicate such progress, it is essential for small and medium businesses to adopt the suitable metric(s) from the earliest stages of a sustainability journey, and to integrate benchmarking, target setting, monitoring, analysis and reporting of sustainability related data into Sustainability Policy.  

Components of Sustainability Policy

11.  The Sustainability Vision - The Sustainability vision, like all vision statements, should be a concise statement that states its ideal outcome or an ideal state.
2.   The Significant/ Material Aspects of Sustainability - the issues in Sustainability that the organisation has identified as being the most important.
3.   Action Plan: While discrete projects are not part of the Sustainability Policy, provisions need to be made in the policy for the following:
a.    Defining the boundaries of influence/ sphere of control of the organisation
b.    Identifying the tools that will be used to tackle the Significant Aspects identified earlier
c.    Committing to an organisational structure - line of control and distribution of responsibility - that will put the Sustainability Action Plan into effect
d.    Periodic review of the Sustainability Policy.
4.  Reporting and Communication – defining the process to communicate the Sustainability Policy to important stakeholders, getting and integrating their feedback.

It helps to engage a sustainability specialist while formulating a sustainability policy – not just for their domain expertise, but also because an informed, neutral, ‘outsider’s perspective adds value to the process and facilitates internal negotiations.  However for a small/ medium business, it is not as important to formulate the ‘perfect policy’, as it is to undertake and showcase a firm commitment to sustainability.

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