Research by HSBC Commercial Banking suggests smaller firms around the world are increasingly harnessing sustainable thinking to grow revenues
Ambitious climate action is still often seen as the preserve of multinational corporates. Programmes such as RE100 and the Science-Based Targets initiative are touted by household names endowed with balance sheets strong enough to invest huge sums in environmentally friendly measures, and to reap the financial rewards.
Yet the potential of 'clean growth' is being noticed throughout the wider economy, with evidence building that a growing proportion of smaller companies are also turning to sustainability to increase their profitability.
Research published today by HSBC Commercial Banking suggests almost a third of 'smaller companies' - those with between 200 and 2,000 employees - consider having a sustainable impact on the community and environment as one of their top three long-term objectives.
The findings come from an HSBC poll of more than 1,400 decision makers at medium-sized businesses across 14 countries, which found more than half recognise their customers are demanding products that consider green and social impacts. Clearly, these respondents recognise the competitive advantage in offering such products, with 59 per cent of firms - almost two thirds - believing that sustainable business practices will improve their growth and profitability.
Interestingly, while companies in the manufacturing sector (72 per cent) were most likely to recognise the commercial benefit of greener practices, so were companies in countries such as India (68 per cent), Saudi Arabia (66 per cent) and Canada (66 per cent).
Meanwhile, almost a third (30 per cent) of respondents globally also believe that becoming a more sustainable business will contribute to improving their financial performance over the next three years, the survey found.
The good news, too, is that the poll results appear to show a growing focus beyond short term profitability, with firms from Indonesia (43 per cent), USA/Saudi Arabia (36 per cent) and Australia (34 per cent) most likely to focus their long-term strategies on sustainability objectives. Moreover, in terms of sectors, survey results suggested mining (36 per cent), professional services (34 per cent) and utilities (33 per cent) have the greatest commitment to becoming more sustainable in terms of investment.
While on average only 18 per cent of medium-sized firms rated sustainable actions as important to their business today, nearly half (46 per cent) said such actions were important to them in the next three years, according to the findings. Specifically, the action with most importance for these companies looking to the future is to set up a dedicated team responsible for corporate social responsibility (CSR) initiatives, while 47 per cent also see a need to find operational efficiencies in their supply chains.
Bryan Pascoe, global head of client coverage at HSBC Commercial Banking, said building sustainable practices into both immediate and long-term strategies has now become a "no brainer" for business leaders.
"That's what customers are demanding, and that's how businesses will find growth to compete in today's economy," said Pascoe. "It is positive to see smaller firms are not only aware of sustainability as a potential game-changer, but many are already capitalising on trends and taking action."
But in order to drill sustainability further into the heart of their business, he explained, small and medium sized companies should consider a number of steps that can also increase revenues. These include building more cost-effective and efficient supply chains that see raw materials travel shorter distances; selling more sustainably sourced products to boost sales; investing in renewable energy; and more transparent reporting on environmental and social governance (ESG) issues.
And if the cost benefits aren't enough to encourage action, the risks of not aligning business models with a 'well below' 2C world are far becoming far too difficult to ignore, as ExxonMobil's decision this week to finally produce a climate risk assessment report in the future shows.
"What we, at HSBC, are doing is helping these firms take this further," said Pascoe. "That means working with them to look at their entire ecosystem to identify efficiencies in their supply chains, adapt their product offering, and meet the sustainability standards expected by their buyers."
Businesses of all size are by their nature ambitious, ever eager to grow and reach the next level. And as the rewards of more ambitious climate action and green practices become ever more apparent for leading multinational companies, so smaller and medium businesses may be increasingly encouraged to follow suit.
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