Adopting sustainable practices is increasingly critical to small to medium enterprise (SME) businesses' long-term survival, and key to empowering future growth. If SMEs can't demonstrate sustainability practices they risk losing contracts and customers as many bigger businesses' supply chain models mandate environmentally positive sustainable partners.

Businesses are proactively and reactively taking a sustainability-based approach to their operations to meet mandatory carbon emissions reduction goals and avoid 'greenwashing' regulatory actions, — as investors and other stakeholders, business partners, employees and consumers, are showing preference and demand for brands presenting strong sustainability practices.

A large number of Australia's 2.5 million SMEs are leveraging their ability to readily adapt their businesses to incorporate greener values — some 80 per cent of SMEs already have implemented green ambitions into their strategies locally1.

The positive green practices in play by SMEs include asking their suppliers about what they are doing to reduce their environmental impact, where their products originate, what raw materials are used in their manufacture, how they are made and if labour conditions meet international standards.

What's involved in adopting sustainable practices?

The three ESG pillars provide a guide as to the foundational areas of focus businesses can take to be consciously sustainable. Here are some key areas for each of the ESG pillars that are useful to businesses seeking sustainability improvements:

  1. Environmental sustainability is concerned with your business's carbon footprint and applies to actions to reduce carbon emissions. Improving waste management practices and reducing wastage and overuse of energy, materials and water also involves seeking more energy efficient solutions to business functions and packaging, for example, and considering biodiversity and ecosystem impacts. Businesses are also encouraged to take the approach of responsible sourcing and supply chain management by forming supply chain partnerships with other organisations with the same standards and values supporting sustainability improvement.
  2. Social sustainability centres on the human factors in your business and those that you partner with, including human rights and labour standards around modern slavery and human trafficking. In addition to providing safe workplaces that protect your employees' emotional and physical wellbeing, it also encompasses equal opportunity employment and career advancement practices. These need to demonstrate diversity and the absence of discrimination on the basis of ethnic background, religious beliefs, age, gender or sexual preferences. Supporting social causes is another area where businesses can demonstrate and activate improved social sustainability.
  3. For SME businesses the governance pillar of sustainability means having accountability via governance structures in place to promote and engage in sustainability. This could comprise overseeing and prioritising many positive sustainability practices such as promoting and conducting ethical business practices, maintaining support for ESG through local community activity, employment, and charitable activities such as sponsorship and volunteering.

Benefits for SMEs adopting sustainability values

Adapting sustainable practices across areas such as essential services, employment policies, partnerships and community engagement can also provide opportunities for SMEs to achieve cost savings and build stronger relationships with the communities where they operate.

On an operational level potential areas to address sustainability benefits in may include:

  • alternative low carbon energy sources
  • water use
  • lighting
  • plastics-free/biodegradable packaging
  • upcycling waste (from food production, eg)
  • electric vehicles running costs (some banks may offer finance for investing in green vehicles and equipment)
  • measuring and identifying opportunities for reducing or offsetting carbon emissions within the supply chain.

The Environmental Protection Agency (EPA) has information on every material or product that businesses can recycle in Australia2. Joining forces with environmental organisations such as the EPA can help keep you on track with tangible carbon reduction goals.

These actions can also help build your brand and your customer base among those who share the same principles and want to contribute via their purchasing decisions. Ideally commitment to sustainable values should be embedded in your business's mission statement.

Being able to tell a compelling sustainability story about your business can help attract quality talent as company values that people are proud to align with are becoming an important differentiator in employer preferences.

Sustainability support resources that Australian businesses can tap

There is considerable support and resource materials and guidance via government and sustainability organisations that businesses can leverage. These include:

How Gallagher can help

The Gallagher Climate and Sustainability practice is dedicated to guiding businesses through the complexities of sustainability risk, climate change and transitioning to low-carbon emission practices.

Our aim is not only to support businesses in achieving their sustainability goals but also to help insure effective understanding in managing any potential risks that may emerge from sustainability initiatives and actions.

Sustainable insurance practices involve a responsible and forward-looking approach to identifying, assessing, managing, and monitoring risks and opportunities associated with environmental, social, and governance issues.

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1How SMEs are leading the way to Australia's net zero ambitions, Inside Small Business, Oct 23

2What materials can my business recycle?, Environmental Protection Agency, 26 Sept 2022


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