What is sustainability and what does it mean for smaller businesses?

Sustainability and climate change are hot topics, especially for small and medium-sized businesses. A key objective at the global climate change conference, COP26, is to limit global warming to 1.5 degrees. Coupled with the UK’s pledge to be a carbon-neutral nation by 2050, this means businesses of all sizes have a role to play in tackling climate change.

With smaller businesses estimated to account for 50 % of all UK business-driven emissions, encouraging them to become sustainable makes sound environmental sense. From reducing greenhouse gas (GHG) emissions to lowering demand for plastics and toxic materials, smaller businesses can play a pivotal part in delivering a positive environmental outcome.

But what is sustainability, why is it important for smaller businesses and what are the benefits and myths around sustainability?

What is sustainability?

Sustainability is used to define how we avoid the depletion of natural resources through everyday activities. In a business context, sustainability generally refers to business activities that don’t negatively impact the environment, society or communities.

Business sustainability applies to key activities such as operations, logistics, waste and environmental management along with a wide range of assets, including natural resources, social and economic assets.

Business sustainability includes:

• Sustainability and the environment – Ensuring business operations don’t deplete natural resources or negatively impact the environment through poorly managed waste disposal, GHG emissions or activities that impact natural habitats.
• Sustainability and society – Ensuring businesses avoid a negative impact on communities, poor or toxic working conditions or creating social injustice through business activities.

Carefully considering your business’s impact on the environment and on society can help elevate its sustainability credentials. Simple, everyday changes such as improved recycling and responsible waste disposal can greatly impact the environment when adopted by thousands of smaller businesses.

By implementing environmental management systems, businesses are able to apply for certification in independently recognised global standards such as ISO 14001 to better understand and reduce their impact on the environment. Acquiring this ISO standard can also benefit smaller business by enhancing their reputation and providing access to competitive tenders that require suppliers to have ISO 14001 certification.

Why is sustainability important for your business?

Business owners may believe their company is too small to contribute towards making a difference that will help the environment.

According to research by Virgin Money, 85% of small business owners surveyed believe that sustainability in their business is important – but only 43% currently have targets. The study also found that only 14% of senior decision-makers identified embedding sustainability as a priority over the coming 12 months.

Smaller businesses are also in the early stages of transitioning to net-zero, with 76% yet to implement a decarbonisation strategy.

Sustainability can have a positive impact on a business’s bottom line, as well as the environment. According to the International Organization for Standardization (ISO), taking steps to improve environmental performance can provide businesses with a competitive and financial advantage through improved efficiencies and reduced costs.

What are the regulations about sustainability?

While a few broad regulations about the need to operate a business sustainably exist, small businesses should expect an increase in targeted legislation to support the UK’s aim to become carbon-neutral and meet international commitments in the fight against climate change.

It’s worth checking any regulations that apply to your business sector to ensure that you don’t run foul of the law regarding issues such as landfill use, single-use plastics and carbon emissions. Some examples include:

Landfill tax

Landfill tax increased in April 2021 to £96.70 per tonne for ‘standard rated waste’ to help reduce the amount of waste disposed of in landfills. Since the introduction of the tax in 1996, the amount of waste in the UK significantly dropped – around 5 million tonnes between 2012 and 2014.

Ultra-low emission zone

Clean air zones in cities such as London's Ultra-low Emission Zone (ULEZ) – which operates 24/7, every day of the year, except Christmas day – are set to roll out in cities across the UK. Vehicles entering these zones must meet the emission standards of the ULEZ or are charged daily to drive through. If your business uses couriers and suppliers that enter this zone frequently, it’s worth noting if their vehicles meet the ULEZ criteria.

Single-use plastics

The UK government is consulting on the use of single-use plastics such as plastic plates, cutlery and polystyrene cups. Some single-use plastics last for hundreds of years in landfills, in seas and on land, disrupting natural habitats and making their way into the food chain. The UK government has already banned the use of plastic microbeads in rinse-off personal care products and has banned the supply of single-use plastic straws, stirrers and cotton buds.

The barriers to business sustainability

Many barriers and myths surrounding sustainability can prevent smaller businesses from embracing sustainable working practices and commercial operations. Some examples include:

1. Lack of knowledge and guidance

A deterrent to operating sustainably is a perceived lack of guidance and knowledge around the subject, according to a recent study. For smaller businesses, identifying the sustainability issues they face and how they can tackle both sustainability and net zero may be a challenge. A recent study. The same study found that 12% of smaller businesses cited a lack of information as a barrier to taking actions to achieve net zero.

Many local councils and business organisations such as the Federation of Small Businesses can provide mentoring, advice and guidance on the steps to being more sustainable.

2. There’s no return on investment

Some business owners may fail to see the connection between sustainability and profit, believing that actions such as reducing waste or better insulating an office won’t benefit their business’s bottom line. However, becoming more sustainable can help save money in the long term, even after investing in specific solutions. If a business invests in solar panels or wind turbines, for example, not only can it reduce energy bills, but excess electricity can be sold back to energy companies via the Smart Export Guarantee (SEG).

Small steps to sustainability don’t have to be expensive. Turning the office heating down by as little as 1°C can reduce the heating bill by up to 8% annually.

3. Upfront costs are too expensive

Business owners may feel that upfront costs are too expensive when investing in green technology or new sustainable processes, and some owners may be deterred by the capital costs involved. According to research by the British Business Bank, 35% of smaller businesses cited costs as a barrier for reducing carbon emissions including upfront costs.

But it can be worthwhile reaching out to finance providers to explore finance options that can help alleviate upfront costs. In fact, 11% of smaller businesses (more than 600,000) have already accessed external finance to support their move to net zero.

4. Customers aren’t interested

With businesses trying to build back better and recover from the impact of Covid-19, small businesses may feel that customers are not focused on sustainability issues.

However, there is strong customer demand for a greener recovery since Covid-19 restrictions have eased, with between 30% and 50% of customers intending to buy sustainable products. According to a report commissioned by the Carbon Trust, smaller business owners claimed they are more likely to be asked by customers to reduce their environmental impact compared to three years ago.