In the face of increasing climate shocks — and recent dire warnings from the Intergovernmental Panel on Climate Change (IPCC) — companies face mounting pressure to step up their climate commitments. But in thinking about private sector sustainability, our minds jump to the Googles and Netflixes of the world, not the coffee shop down the road. What role should small businesses play in the transition?
Small and medium enterprises (SMEs) are trending behind large companies when it comes to sustainability disclosure and action, but represent a massive opportunity for mitigating the climate crisis. For example, while over 70 percent of S&P 500 companies disclose their greenhouse gas (GHG) emissions, this number drops to just 28 percent among the S&P MidCap 400, according to data from The Conference Board.
What’s going on here, and how can we truly push for sustainable change among SMEs?
The case for SME sustainability
Promoting sustainable business practices among SMEs presents a major (and largely untapped) opportunity in the fight against climate change. Globally, SMEs make up 90 percent of businesses and employ 50 percent of the world’s workforce; in the U.S., over 32 million SMEs employ almost half of all workers. Taken together, they contribute an astonishing number of GHG emissions each year. In Canada, SMEs emit over 200 million tons of carbon annually — emissions equivalent to that of the country’s entire transportation sector.
But with public, investor and regulatory pressures focused on large corporations, SMEs are often overlooked. Although this removes pressure from small companies and enables them to be more flexible with climate goals, it also leaves them largely without the tools, guidance, peer benchmarks and buying power big companies have when it comes to taking climate action.
Bringing SMEs into the fold
It’s unfair to say that SMEs are completely left out of the sustainability conversation.
For starters, countless online blogs and articles provide recommendations and tips to SMEs — from cutting down on energy use and waste to driving electric vehicles and educating employees. Other efforts focus on ESG reporting, with large companies such as Intuit looking to help their smaller suppliers report on ESG impacts — mostly to help capture data on their own Scope 3 emissions.
When SMEs don’t act on climate, it’s not necessarily because they don’t know climate change is a problem, it’s often because they’re not sure where to start.
Initiatives such as the SME Climate Hub, Climate Smart in Canada, Small 99 in the U.K. and the UN Global Compact SME Library are working to make sustainability more accessible by sharing information, guidance and best practices on standards and topics such as sustainable leadership, net zero and supply chain management. Major reporting organizations such as the CDP and Science Based Targets initiative have also launched SME-friendly reporting programs that are better-suited to the tighter timelines — and even tighter resources — of small businesses.
Although noble efforts, such solutions focus on reporting and don’t account for the unique contexts and motivations of SMEs, which often come less from top-down instruction and more from peer experience and example.
Moving beyond reporting and advice: Sharing SME stories to inspire change
When SMEs don’t act on climate, it’s not necessarily because they don’t know climate change is a problem, it’s often because they’re not sure where to start. For many, reporting is the last thing on their mind.
Small business owners and entrepreneurs, research shows, are less concerned with investor pressures or public regulation, but more with internal values and: “What is the other local coffee shop down the road doing to cut down on electricity bills?”
In this context, it’s a simple story shared by a local entrepreneur facing the same challenge — not structured standards for setting and reporting on commitments — that can actually make a difference in the life of an SME seeking to mitigate its climate impact.
Enter Pivot, an action research project started in 2018 by academics from McGill University and the National Film Board of Canada. The platform is driving change among SMEs through a “narrative-based, motivationally-centered, peer-to-peer approach” to addressing climate change.
Pivot’s principle is simple: If “how-to” guides and advice aren’t enough to motivate SMEs or explain their business actions, maybe bringing them together for inspiration will be.
The website started out by sharing stories of entrepreneurs across Canada making sustainable change. Now, Pivot 2.0 has evolved into an interactive platform where SME peers can ask questions, ideate and inspire one another for change.
“The idea is to raise awareness, engagement and motivation — not by wielding the carrots and sticks of government policy, but rather by creating a social community, a place where [SMEs] interact with each other, ask each other questions, motivate each other, discover stories and inspire each other,” said Dror Etzion, a management professor at McGill and one of the project’s co-founders.
The approach is based on two key insights: that storytelling, not just access to information, is a critical catalyst for change in the business world; and that climate action among SMEs and their leaders cuts across ideological, geographical and industry differences.
“We showcase entrepreneurs from coast to coast in different industries, different sectors,” Etzion said in a recent podcast. “We find inspiration through SMEs that are actually walking the talk — even if they might be small, isolated.”
Paul Rak, president of VeriForm, a metal fabrication business in Ontario and one such entrepreneur, shared this belief in the power of storytelling for sustainability among SMEs.
“My experience is that in any interaction, whether in a presentation or a sit down with a friend, we don’t really remember more than two or three things,” Rak said. “People remember the stories far more than charts [or] bullet points. Pivot doing these stories is like story time, but it’s factual reporting — that’s what lasts.”
His story, in particular, has inspired other SMEs to take action.
“I’ve had people call me and say, ‘Oh, I heard your story, and it’s really made an impact.’ That to me is worth it — it’s the ultimate moment in our efforts here.”
At Rak’s company, sustainability initiatives such as installing automatic sensors on garage doors to keep them open for shorter periods while trucks are unloaded have not only lowered demands for heating during cold winter months but also have raised profits 15 to 30 percent higher than others in the industry, he shared. Rak believes that more companies will follow suit if they’re able to hear about such success from their peers; likewise, he believes they will start with small projects where results are evident.
Eddy Dureuil, co-founder and vice president of Ecotime, a Quebec-based startup creating sustainable building water management systems, is another early adopter of Pivot voicing support for the platform’s grassroots approach and online community.
“It takes a team… It takes other media to create the feeling that we can’t continue building the way we’ve been building,” he said. “We’re expecting Pivot to talk about this, create discussions with their network. It has to exist, has to be done.”
If engaging SMEs proves successful, the insights generated will have both real-world impact and academic value — informing and supporting media organizations, policymakers, advocacy groups and journalists in how to target the motivations, decisions and activities of SMEs to mobilize around climate action.
For Etzion, it’s not one single action or platform that gives him hope. Instead, it’s about shifting the narrative around climate change and how small businesses can play their part.
“It’s a lot of emissions. If we overlook a sector that’s meaningful, we’re just missing an opportunity,” he said.
April 20, 2022 at 02:15PM