What is a Sustainable Business Strategy?
Sustainability is one of the most wide-spread topics of discussion in the world today. Everyone wants to be a part of the movement that leads us to a better and brighter future. You’ve heard the slogans about reducing your plastic waste and taking public transport to work. Of course, these are necessary to protect the environment. But sustainability isn’t only about saving the turtles. Think of society as the wheel on a bicycle – different spokes have different functions; one can be economic growth, the other could be the health of a population, while another could be societal relations. Now, if one of these spokes break down, the wheel would stop moving. The goal of sustainability is to make sure that all spokes keep working naturally, and that the wheel keeps turning through time. Unfortunately, that is too much for one person to do alone, which is where business sustainability comes in.
As a team effort, small and medium-sized enterprises (SMEs) can practice several different ways to reach their sustainability goals. These practices are known as sustainable business strategies and can include environmental, human, and economic sustainability. These strategies benefit SMEs through combining the ethical use of natural and human resources to ensure that aspects such as business activity, employee behavior, and production remain beneficial.
Why are business strategies essential in Singapore?
SMEs are responsible for nearly half of Singapore’s GDP and provide ⅔ of all employment in the country, which makes them invaluable to its economy. Enterprises in Singapore are known for their innovative ideas. They are quick to adapt to the accelerating speed of changes in the domestic market, which makes them perfect candidates to develop and test sustainable practices. More importantly, sustainability can improve the economic standing of SMEs; the awareness of environmental, social, and governance (ESG) principles can help them evaluate the impact on customers, investors, and employees.
The main criticism with trying to incorporate sustainability with SMEs is that it is a “luxury” with large corporations with established practices. However, that’s not true; sustainability is less a matter of implementation, and more a problem of poor awareness and lack of incentive. SMEs in Singapore are easily capable of practicing sustainability through small-scale changes in their business strategies if provided with good incentives. Read on below to find out 5 easy ways to make your SME more sustainable!
1. In The Workplace
The easiest way for any company to get started on their sustainability journey would be to bring about changes from within. Waste management and plastic recycling continues to be a topic that Singaporeans do not have much knowledge. By starting from the workplace, SMEs can raise awareness about the same while also directly decreasing their operating costs as office material costs in energy, water, plastic, etc. are significantly reduced.
In ten years, Singapore has increased its waste production by 25%. Recycling methods are at an all-time low, and most of it is due to lack of awareness – four in ten Singaporeans consider recycling to be inconvenient, while 20% of them do not even know where recycling bins get placed. SMEs can reduce waste production by setting up internal recycling systems in their offices; emphasizing on the importance of recycling will make employees mindful of the importance of reducing waste to society and the environment. On that note, training sessions can help to educate employees about the problem. It will improve employee participation and help bring about a positive change.
A slightly more advanced approach is to install technology to cut down on carbon emissions and reduce the production of waste. Although a costly initial expense, environmentally friendly technology is ultimately the key to long-term sustainability, which will lead to reduced consumption costs.
On a larger scale, Citi Singapore has reported massive cost savings across their green initiatives, including a reduction of about 720,000 kwh of energy use in 2017 when compared to their 2016 figures, translating into an S$150,000 saving. Initiatives include the reduction of energy use. Employees to turn off non-critical lighting after office hours, making use of more energy-efficient products in the workplace and switching both office lighting & signage to LED – which is much more energy-efficient!
So, not only is reducing in-office waste good for the environment, but it also provides SMEs with economic benefits. Recycling practices can increase community participation and a positive atmosphere, which are sure to pose long term benefits.
2. Supply Chain Management
Supply chain management (SCM) is becoming increasingly important to sustainable business strategies. SCMs are responsible for many sustainability-related issues – high carbon dioxide emissions due to transportation and shipping, labor exploitation, and unethical sourcing. Improving SCM is necessary to increasing the economic performance of the SME and achieving environmental sustainability. A survey in 2012 found that nearly half of the participants noticed that better SCM resulted in better crisis management and problem-solving. More relevantly, managing supply chains provides a competitive edge to SMEs compared to those that are lacking in sustainable practices. ‘Green’ supply chains, therefore, probably have the most significant potential for sustainability efforts. Thankfully, the Singapore government provides more than a few initiatives to allow businesses to manage their resources more efficiently; schemes include the Water Efficiency Fund as well as the Energy Efficiency Improvement Assistance Scheme, which allows for improvements at the manufacturing level.
The Ford Motor Company is an ideal example of a company that is adopting green practices. They have a small group of immediate suppliers known as the Tier 1 suppliers. The company has negotiated with them to become more energy-efficient and reduce emissions. This approach expected to yield incredible results – Ford’s suppliers to reduce 500,000 metric tonnes of carbon and save 550 million gallons of water by 2022.
SMEs can improve their supply chains in two ways; first, partner with companies that are already sustainable! Establishing supply codes of conduct and working with like-minded green corporations leads to a bond formed in trust, where both parties have the same expectations from their endeavors. Sourcing sustainably is a crucial part of an SME today, as environmental laws in place prevent companies from producing merchandise unless they have proof of ethical sourcing. Customers also prefer companies that are greener in their practices, which provides sustainable SMEs with better opportunities.
Another way to reduce the impact of current supply chains is to move everything online; incorporating technology into SCM can improve competitiveness as well as sustainability. Cloud-based supply chains are becoming increasingly popular tools for supply management. Logistics, for example, is a nightmare to manage on the best of days. Still, people have found that using online resources is often more sustainable and more natural to use – there has been a 20% growth in using the cloud for logistics, while only 5% for methods that require on-site performance. Cloud-based supply chains are becoming increasingly popular tools for supply management because they are convenient, easily accessible, and quicker at solving inventory-related problems. The best part about them is that you can use one from anywhere in the world!
SAP and Oracle currently dominate the cloud market. Still, Singapore is making progress as well – Infineon Technologies, a German brand, recently launched a Smart Enterprise Program (SEP) in the country, which gets aimed at better cloud-based manufacturing, including cloud robotics and automatic vehicles.
3. Human resources
With a competitive job market in Singapore, introducing the concept of sustainability can provide both job-hunters & job providers a new edge. Unlike its previous generations, Millennials get attracted to jobs for reasons beyond compensation; they value CSR and sustainable practices within the workplace – this will be discussed further in strategy 5!
As human capital is a crucial stakeholder in an SME, involving employees can drive the company’s goal of sustainability. It is essential to ensure diversity, representation, and an equal sex-ratio – in addition to the standard employee safety and benefits to implement sustainability within HR.
A diverse and equal opportunity workplace becomes a differentiating factor as it brings a creative and innovative outlook towards tasks. By fostering cultural development, it provides individuals with a platform to work towards a more significant social issue, allowing SMEs to achieve higher growth levels. According to the Society of Human Resource Management, 61% of the younger workforce stays at the firm for sustainability mission. Additionally, the cost of turn-over reduces as employees feel a strong sense of loyalty towards their brand. Similar strategies are already in motion in Singapore as the Singapore Business Federation approached larger firms during the Sustainable Employment Conference in 2019. It can act as a stepping stone for SMEs to learn from key players to work towards purposeful success together.
Let’s not forget that hiring the right talent is only the first step, but discovering and developing on each person’s unique strengths closes the gap. The idea is to move from ‘good to great’ where the individual shows promise for optimal returns on investment.
4. Community engagement
It is essential to engage with your local community, to realize the real impact of your company on society. External facing strategies allow for a better connection between the business and its surroundings. The most common and straightforward way is through an act of philanthropy, which can get done in two ways – financial or voluntary.
In this day and age, consumers are highly critical of a business and its actions, hence the method of financial philanthropy has become quite outdated as it is perceived to be shallow. However, having managers and employees volunteer their time to serve the community by working with relevant organizations, allows the company to bring their positive internal initiatives to a broader audience and enable change more largely.
The National Volunteer and Philanthropy Centre (NVPC) of Singapore is an excellent place for employees to embark on their journey to contribute towards building a ‘City of Good.’ They support over 500 charities that target 14 core causes across the island city-state with tasks including teaching, cleaning, crafting, and fundraisers to help the lesser privileged. Through these activities, you can engage your employees and society with the company and with each other. As an added benefit, it acts as an indirect promotion by attaching a positive image to the company.
Traditionally, companies had a way of working only to show their final products to customers. However, this practice falls directly against the concept of sustainability, since it is essential to see what part of company funding goes in making the company more sustainable.
Transparency is a tool that allows customers to engage indirectly in company decision making and guide them towards making greener and more environmentally friendly decisions. It also allows more platforms to collaborate with SMEs to initiate more sustainable projects.
But of course, merely carrying out initiatives related to sustainability are not sufficient. Communicating with customers and investors is also a vital social responsibility practice. Under sustainability, the concept of transparency is starting to become highly relevant. Younger generations, both millennials and generation zs have shown preferences in not just choosing, but also patronizing and investing in sustainable brands over their regular counterparts. For instance, American clothing brand Patagonia started a brand new up-cycled line that goes by the name ReCrafted supported by the fact that almost half of all youngsters now prefer up-cycled products. It can inspire SMEs to follow in their footsteps to create up-cycled products as an innovative sustainable practice.
Let’s not forget the urgent need for transparency in the food & beverage industry. As a consumer, product labeling, and adequate information sources have grown in importance with the increased concerns regarding healthcare, animal welfare, and obtaining high-quality ingredients. Consumers have turned towards making purchasing decisions based on data that is being presented by small and larger companies alike.
A holistic approach to success
Sustainable efforts in SMEs are of growing value to everyone – the company, the employees, the stakeholders, and the customers. The five sustainable business strategies described above are just starting points to build on and act as a key for SMEs to open up new avenues. Managing sustainable practices in the office and human resources is critical to make employees engaged in sustainability, which will automatically improve productivity. Logistical elements like SCM and transparency benefit the company and community – the public can now trust the SMEs practices, which would no doubt make it a better choice for future decisions.
Sustainability is a holistic approach to success – whether in the office or for the community, bringing about long-term positive change is needed. Singapore is one of the cash-rich countries in the world, with the third-highest GDP. Its unique position as a prosperous economy, combined with a diverse population, makes it one of the best candidates to begin sustainable efforts in corporate environments.