How can SMEs contribute to a just and sustainable world?

Smaller businesses in the EU make up 99% of all businesses and provide around three-quarters of all jobs. A lively small and medium-sized enterprise (SME) sector including the newly founded startups is crucial for a healthy market economy and a functioning society. With their flexible and agile structures compared to larger corporations, they are more open to change. However, due to their limited resources, whether financial maturity or the lack of human resources, social start-ups, and SMEs are slower to adapt to new regulations and structural changes in the global markets.

Nevertheless, the European Union will start requiring SMEs to implement measures to address Environmental, Social and Governance concerns. The new changes involve innovative regulations such as the Carbon Border Adjustment Mechanism (a carbon tariff on carbon-intensive products imported by the EU) and the Corporate Sustainability Reporting Directive in Europe, which will extend the scope of the European Union taxonomy and mandate disclosure against ESG indicators starting in 2024. That is, even small businesses will increasingly be impacted by climate change mitigation measures; mostly due to their role in the supply chains for larger corporations. 

Often, transitioning and understanding ESG scores come with hefty costs. This challenge impedes the economy’s transition to a green and just one for all. As Green at Heart, we believe that every actor’s impact, regardless of its size, is significant. That is why we are working on new innovative tools and other support mechanisms to help start-ups and SMEs understand their impact and create options to be better for the planet and the society in which they operate. Green at Heart project, aims to respond to the challenge of complexity and transition by providing access to an automated and digitized consulting service through tools and help companies to understand where they stand at their ESG and circularity strategies; because they matter.

According to the OECD, SMEs in OECD countries account for approximately 99% of all firms, 60% of jobs, and over 50% of value added on average. However, they also account for at least 50% of greenhouse gas (GHG) emissions in the business sector. Yet, only 10% of SMEs measure their emissions. This lack of understanding can slow down the progress into a net-zero society.

[Juciety | Photographer: Vere Maagdenberg]

Apart from emissions themselves, resource usage is another part of the discussion. This is where circular practices come into play. There are also potential economic benefits to the circular economy. For example, a shift to a circular economy can create new jobs in industries such as recycling and remanufacturing. It can also reduce costs for businesses by decreasing the need for new raw materials and waste disposal costs.

With increasing social problems a green and just transition can help address issues related to poverty by creating new job opportunities and providing affordable goods and services. Furthermore, good governance and ESG practices can contribute to social inclusion by providing opportunities for people from diverse backgrounds to participate in the economy.

How can SMEs become more sustainable?

As ESG practices are beyond regenerative business practices, transitioning to a sustainable economy requires stakeholder activation and inclusion. The so-called ESG imperative can help social startups and SMEs improve employee retention and productivity by creating a positive work culture that values diversity, inclusion, and well-being. By aligning strategic decisions with ESG principles, SMEs can also strengthen their relationships with key stakeholders, such as suppliers, customers, regulators, and communities.

If you are a social startup or SME registered in the Netherlands, Austria, and/or Spain, have fewer than 250 team members, and are interested in sustainability practices, sign up for our innovative and easy-to-use tool to bring green initiatives to the heart of your business.

Green at Heart is Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or European Innovation Council and SMEs Executive Agency (EISMEA). Neither the European Union nor EISMEA can be held responsible for them.