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SMEs: can environmental improvements save money?
| by Richard Willsher 03 Sep 2004 Topic: Environmental accounting, SME |
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Richard Willsher looks at how SMEs can benefit their bottom lines by adopting sound environmental business practices The environment is no longer just a big business concern. It is a global issue that affects everyone, but convincing small and medium sized enterprises that it can matter to them means demonstrating business benefits. Environmental reporting is well and truly lodged onto the listed company agenda. According to the Global Reporting Initiative, the Amsterdam-based institution that in conjunction with a variety of other organisations and institutions plays a leading role in setting reporting standards, 484 organisations across 45 countries are currently using their Sustainability Reporting Guidelines. It is increasingly rare that a major FTSE100 or Fortune 500 company omits a corporate social responsibility section from its annual report, but then they have increasingly vociferous and environmentally conscious shareholders to please. Not so SMEs. Small, perhaps family run businesses often pride themselves on their independence, battling their way ahead despite government red tape and taxation to run their businesses and make a healthy living. For many SMEs, looking after the environment may be a long way from the top of their 'to do' lists. Rachel Jackson, ACCA's head of social and environmental issues, says that it is important to make a business case otherwise SMEs won't listen. 'Making environmental improvements makes business sense. It makes sense to save money on resources, save on bills and save the environment. At the same time,' she continues, 'there is increasing pressure from the supply chain. Larger companies are looking at their sphere of influence, including customers downstream and suppliers upstream, and asking about their socially responsible credentials. More and more SMEs will be asked questions by their customers because larger companies do not want to taint their own reputations for being environmentally concerned.' At the same time the accountancy profession has an important role to play in bringing these key messages to SMEs as Martin Bennett of the University of Gloucester speaking at an ACCA/ Environment Agency Seminar noted (1). He pointed out that accountants are key influencers of SMEs; trusted advisers with a greater knowledge of social and environmental reporting issues than individuals running small businesses. They can, importantly, suggest to SMEs how they can measure their environmental impacts and show them how to save money. Managing what you can measure A key point of reference for larger companies is the Global Reporting Initiative's 2002 Sustainability Reporting Guidelines. These include economic, social and environmental indicators. The last of these encompass '...an organisation's impacts on living and non-living natural systems, including eco-systems, land, air and water. Included within environmental indicators are the environmental impacts of products and services; energy, material and water use; greenhouse gas and other emissions; effluents and waste generation; impacts on biodiversity; use of hazardous materials; recycling, pollution, waste reduction and other environmental programmes; environmental expenditures; and fines and penalties for non-compliance...' (2) The GRI is due to publish its Reporting Handbook for SMEs in November this year. Getting down to the practicalities of how to measure environmental impacts is important. One company that has achieved this so successfully that it received a Queen's Award for its 'tree of sustainability' model is east London printing company Bovince. According to its quality and environmental manager, Derek Hall, it subjects its business to a number of measures or branches of its model, some of which are environmental ones:
'At the end of the day,' says Hall, 'it is about waste within the business, which is about money. As a small business, we have to be practical and relate our effect on the environment back to real time figures. At the same time, we are passionate about the environment in which we work and we want to do our bit for the planet.' Bovince, although employing only 49 people, was quick to gain ISO 14001 accreditation; the environmental management standard. By gaining ISO 14001 a business is able to demonstrate to its stakeholders, such as its suppliers and customers, that it is serious about its concern for the environment. www.iso14000-iso14001-environmental-management.com/iso14001.htm is a useful reference for this standard. Companies like Bovince are also proving that being environmentally concerned saves money. The more small businesses make this discovery the quicker they will be to grab the opportunity to make themselves more efficient, and this will be to the greater good of the world in which they do business.
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