Discussion around business sustainability has largely centred around big corporates. For most of these companies, becoming sustainable involves building long-term value for shareholders.
The big corporates, in essence, make efforts to include sustainability metrics in their capital budgeting, develop solid valuation processes that take external factors into account, and set clear targets for sustainability objectives while establishing targeted programmes linking the objectives to business results and value to shareholders.
All these are done within a framework of organised structure.
However, it seems small and medium-sized enterprises (SMEs) -- a significant sector-- have been relegated regarding the subject of sustainability.
The SME sector makes a significant contribution toward delivering a substantial increase in global wealth and improved standards of living through innovation, job creation, income generation, poverty alleviation, and climate change mitigation and adaptation.
Whereas their actual contribution to sustainable economic development may not be accurately measured due to their diverse nature, SMEs have been recognised for their role in facilitating economic development because they are found in rural and urban centres and require relatively low investment to establish and operate.
In Kenya, SMEs are considered to be the backbone of socio-economic development. The sector is a key driver of employment growth and considerably contributes to the country’s gross domestic product (GDP) by manufacturing a wide range of goods and services.
A recent National Economic Survey report indicates that SMEs constitute 98 percent of all businesses in Kenya, create 30 percent of the jobs annually as well as contribute three percent to the GDP.
Despite the huge role SMEs play, minimal effort is being put to enhance or encourage business sustainability in this sector.
Many small businesses form a huge informal economy, which offers relief for short-term challenges around sustainable livelihoods but in the long run, if sustainability is not addressed, this will minimise their growth, access to wider resources and markets and limit their socio-economic impact.
Businesses are facing a challenging operating environment and have to deal with aspects such as climate change, dwindling natural resources, increasing energy demands, and food supply disrupting business operations and supply chains in unexpected ways.
It is becoming more important than ever for businesses to fundamentally rethink the way they function. Transforming into a successful sustainable business requires new ways of thinking supported by responsible practices that preserve the environment.
It is, therefore, paramount for SMEs to contribute both socially and environmentally and maintain financial profitability as this has slowly turned into a key factor for many businesses.
Sustainability takes into account not only profits and returns on investment but also how operations affect the environment, natural resources, and future generations. These activities should increasingly be part of a deeper strategic perspective for small businesses.
Small enterprises that responsibly integrate sustainable practices into their operations are reaping benefits. Some of the benefits are enormous.
For example, being known as a sustainable business improves your brand awareness and helps you attract consumers that are favourably predisposed to companies well known for sustainable practices, and, in equal measure, attracting sustainable conscious investors.
Secondly, governments, being part of the international community, will continue to expand regulations and corporate sustainable development goals (SDGs). By implementing sustainable solutions early, the small business will stay ahead of the curve.
Thirdly, implementing sustainable practices such as reducing resource consumption and optimising operational efficiencies, improves your bottom line.
SMEs play a role in achieving the desired industrial and economic development objectives of an economy just like their larger counterparts can contribute towards increased inequality and environmental degradation if sustainability is not embraced.
It isimportant that sustainable SMEs maximise their net economic, social, and environmental contribution by embracing the opportunities and managing risks that result from an organisation’s economic, environmental, and social impacts, and play a key role in supporting sustainable development.
Ernest Chitechi, Manager Corporate Services,
Kenya Climate Innovation Center
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