Sustainability - what's the return on investment and how can SMPs get started?

The key takeaways from this session

23 Feb 16:00 (GMT)

Sustainability - what's the return on investment and how can small and medium-sized practices get started?

For accounting practices to marshal some of their resources behind becoming sustainable, and delivering sustainability-linked services, they need to see that such efforts will have a return on investment. 

ACCA’s Practice Room on 23 February, run by Sarah Whale (UK) and Bright Amisi (South Africa) was about those very questions. 

First, there’s encouraging research from the market showing that there are good reasons to get into sustainability, for example: 

  • 90% of millennials are interested in sustainable investing 
  • 85% of the public is interested in sustainable investing 
  • 49% of Gen Z consider boycotting businesses that don’t align with their values and 40% of Gin Z has already done so
  • 65% of people want to work for a business with a powerful social conscience
  • 36% of HR professionals are building talent strategies around social and environmental conscience 
  • 22% of investors are motivated to explore ethical investing as a direct reaction to COVID 19
  • Environmental Social and Governance funds account for 10% of worldwide assets. 

So there’s a serious market for those who are sustainable, and those who help clients with sustainability services. In fact, according to the recent research by Profit Impact the average return on investment from going sustainable is about 18%.

But what’s enough of a return on your investment to make you want to consider ESG? Well, that depends.

Different businesses have different reasons for getting into sustainability. Here are some of the key factors that practices say pushed them to make the leap:

  • Some practice leaders think it is the right thing to do 
  • Some believe it will help recruit more clients 
  • Some think it will open up more revenue streams (e.g., carbon accounting) 
  • Some think it will attract scarce talent, especially those with tech skills
  • Some believe it will help them retain staff - especially younger team members (see this ACCA paper for more information, page 27 onwards)

You can find out more about sustainability business case for small businesses in ACCA’s recently released SME sustainability Playbook ( p.15-17).

But having a reason to start is not the same as having a reason to continue. So what can small and medium sized practices do to persuade themselves that the effort is worth it? We suggest:

  • Speaking to your clients - see if they have valued you being a sustainable business, and ask questions about their satisfaction with the sustainability services you provide. See if you could even do more!
  • Work out your key reason for being more ESG-focused. If you have a key reason, it will help provide momentum and also delineate parameters for measurement 
  • Work out how you want to measure success? What are you looking for exactly? Is it an improvement in the average length of retention of staff? Is it cost-cutting in certain areas like travel? Or is it client satisfaction. Measurement is management, so understanding what success looks like is key. 
  • Discuss what costs are included in becoming more sustainable. If you have an advance view of costs, you’re more likely to stick with your decision and make plans to meet them. 
  • Make sure you’ve done the work to become a sustainable practice before you roll out sustainability services, or you might find that there’s some conflict with clients.
  • Be aware of your local context. Some practices will have very different reasons for doing it than others, so there is no single blueprint. For example, a practice in Belize may focus on their ESG because they need to protect the environment, a key source of tourism revenue for the country. But in Europe, some may be more focused on helping their clients with ESG as a route to more pots of funding for their businesses. 
  • And at the moment particularly, it is important to be aware of where in the pandemic recovery phase you and your clients sit. For some people, ‘bread and butter’ will come first because they have struggled. Others have done well and can move toward sustainability faster. 

In our experience, the biggest benefits of becoming a sustainable practice are:

  • Minimising risk
  • Innovation and growth 
  • Staff retention
  • Customer acquisition 

But every sustainability journey is different. The main thing for smaller practices is not to over-complicate it. There are concrete and simple steps you can take to get started. 

Download our ACCA and CA ANZ jointly developed SME sustainability playbook, that we put together ed to support you to find out more about:

  • Sustainability terminology explained
  • The business case of sustainability in SME
  • How accountants can support SMEs in their sustainable transformation
  • Stories of SME/Ps already active in sustainability field, also providing it as a service to their clients
  • Broad range of checklists, practical tools, links and resources in open access to support you in sustainability journey.

For further practical material, visit the Growing Sustainably Section of our Practice Connect hub.