Benefits of ESG for small businesses

Sustainability is an increasingly pressing topic for small businesses in the UK.

Consumer trends reveal that consumers are increasingly assessing a company's environmental credentials, while business supply chains are under scrutiny to minimise environmental, ethical, and social impacts.

There are also lots of incentives for environmentally switched-on businesses and climate change awareness is also likely to see legislation designed to support environmental pledges and limit global warming to 1.5 degrees.

Even small changes can help move UK businesses towards a greener future.

With a renewed focus on climate change and the environment, sustainability should be increasingly at the heart of business operations.

Benefits of ESG for SMEs

Adopting a sustainability action strategy and putting sustainable practices and policies at the heart of your business can result in significant business benefits including cost savings and an enhanced reputation meaning businesses are increasingly waking up to the advantages of more sustainable operations.

1. Attract more eco-aware customers

Consumers are increasingly eco-conscious, meaning that adopting a sustainable strategy can boost your reputation and give you a competitive edge against other businesses.

2. Supply chain requirements

Companies supplying government, large organisations, and other businesses may need to strengthen the environmental, social, and ethical robustness of their business.

Organisations are placing supply chains under renewed scrutiny as environmental management gains traction in a bid to tackle climate change and sustainability issues.

SMEs that don't hold environmental standards, such as ISO 14001, may find themselves unable to demonstrate that they meet regulatory or contractual requirements.

3. Employee engagement

Green-spirited companies could benefit from attracting and retaining staff with 28% of employees check a company's sustainability practices before applying for a job, rising to 39% for millennials according to research by TotalJobs.

If your business has Green credentials, you'll attract like-minded employees who will help the company embed its green practices.

Research by Lloyds Bank found that environmental values positively boost employee spirit, leading to staff retention.

4. Reduced waste and lower operating costs

Reducing waste, being more energy efficient, or complying with local environmental regulations may help save you money in the long term.

Around 40% of SMEs cited commercial rationale as a reason for green actions, such as upgrading vehicles to meet air pollution rules so that they can continue to operate in Clean Air Zones without paying toll fees.

Less waste may often be the result of more efficient manufacturing processes, improving efficiency, and lowering the cost of storing and processing excess waste.

5. Comply with regulations

Regulations are put in place to encourage sustainable practices and future legislation is likely to help Government meet any climate change pledges.

Existing measures include:

These measures attempt to reduce waste and carbon emissions; non-compliance can lead to fines and harm a business’ reputation.

6. Investment attractiveness

As a company with green credentials, your business may be increasingly attractive to investors.

Even if you haven't yet made the step to be greener, creating a plan to do so in the future may draw investors in to help you make improvements.

Businesses that are less reliant on fossil fuels may be seen as more resilient against fluctuations in energy prices, for example.

7. Drives innovative ways of working

Change, new legislation and shifting customer demand can be a driver for innovation within a business.

The need to be more sustainable can spark new ways of operating, new processes and new products – all with the potential to drive efficiencies, open alternate markets and attract new customers.

Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

Green Decoder

Featuring a glossary of sustainable terms curated in partnership with the Nottingham Business School, Nottingham Trent University, our green decoder is helping smaller businesses decipher the terminology surrounding decarbonisation.

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