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Banks, Lenders & Investors Business Development & Marketing Finance General

Business opportunities for SMEs in the growing demand for sustainability and cutting waste

cutting waste is essential to preserve a beautiful environmentThe neoliberal economic model based on perpetual growth has come under increasing attack from environmental campaigners particularly since the week-long Extinction Rebellion activity in April this year.
With almost-daily horror stories about climate change, global warming and the amount of plastic waste littering the planet, not to mention a significant decrease in biodiversity, it is clear that action needs to happen a lot more urgently than has previously been admitted.
Changing the developed world’s economic model from perpetual to sustainable growth is no doubt going to be a major challenge, particularly in the face of a rise in populist political parties putting national self-interest first and also of some leaders, such as US President Donald Trump who despite the evidence still questions the truth of climate change.
Nobel prize-winning economist Joseph Stiglitz makes a distinction between good capitalism, which he calls “wealth creation”, and bad capitalism, which he called “wealth grabbing” (extracting rent).
Some of this thinking may be behind the recent announcement by the UK’s largest money manager, Legal & General Investment Management that warned about “climate catastrophe” and has promised to get tougher on boards where it identifies a high level of executive pay, lack of diversity in senior corporate roles, as well as “insufficient stewardship” of the way the business is acting.
The company voted against the re-election of nearly 4,000 directors in 2018 – an increase of 37%. – and it has published a blacklist of eight companies whose shares they decided to dump.
In October last year, ten companies announced that they were cutting waste by ditching plastic. They included McDonalds, Starbucks, Aldi, Lidl, Pizza Express and Costa. Supermarkets have also been at the forefront of a drive to eliminating throwaway plastic shopping bags, with Morrisons offering both re-usable and paper alternatives and encouraging shoppers to bring their own containers when buying vegetables.
There is already some evidence that becoming a “greener and leaner” company can actually benefit a business’ bottom line.
SMEs have been encouraged to cut their CO2 emissions and offered financial incentives for changing to more environmentally-friendly processes, such as better building insulation and reducing paper use and have seen their overheads reduce as a result. Use of automation and AI has also benefited some.

Are there positive business opportunities for SMEs as a result of cutting waste?

There has been an increase in the number of small businesses, mostly located in High Street shops, specialising in the repair of household products that would once have been discarded and in teaching people how to do the repairs themselves.
Other small businesses have developed classes teaching people how to make or re-purpose their own clothes and are reportedly thriving.
Here are examples of two other SMEs that have developed, and are thriving based on their social, sustainable and environmental awareness.
In Ipswich, a clothes company originally set up in partnership with Indian producers out of a concern for Fair Trade, has recently formed another partnership with African producers to source sustainably-grown cotton which local garment workers then use to make attractive clothes that are imported to UK to be sold online. One of the selling points of the garments produced is that each item comes with a verifiable history of its production.
Another business operating nationwide and based in Essex has created a service for building contractors with contracts to re-purpose or refit existing buildings. It offers site preparation that includes initial site layout, demolition, removal of internal and external fixtures and fittings, and the removal of all waste sorted into recyclable materials that are verified by an independent adjudicator and certified so that both this company and the contractor have evidence of their efforts to be as sustainable and environmentally friendly as possible. It also clears sites at the end of the contract.
With some innovative thinking, there are huge opportunities for SMEs to create completely new, social, sustainable and environmentally friendly products and services.
If you have any examples do please let us know in the comments.

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Business Development & Marketing Finance General

Climate change is an opportunity for SMEs

climate change effectsIn December 2018 the world’s leading scientists warned that there were only 12 years to get climate change under control with warming kept to a maximum of 1.5C or there would be significantly greater risks of drought, floods, extreme heat and poverty for hundreds of millions of people.
Such warnings often seem to fall on deaf ears, when it comes to economists and businesses, and even some politicians, notably US President Donald Trump, who has denied that climate change is a serious issue.
However, at December’s UN Climate Change summit in Katowice, Poland, the message seems to have struck home with some of the world’s largest investors, including pension funds, insurers and asset managers, who issued a Global Investment Statement warning that without urgent action there could be a financial crisis several times worse than the one in 2008. They demanded urgent cuts in carbon emissions and the phasing out of all coal burning.
All this may seem a long way from the day to day concerns of SMEs and larger businesses, especially amid the current worries of Brexit, the latest ONS (Office for National Statistics) figures for UK economic growth was near-stagnant in the last six months of the year and amid warnings from the World Bank that the Global Economy, too, was facing significant problems in 2019.
This theme was picked up in an article by the economist Ken Rogoff in the Guardian where he outlined the main risks which included a significant slowdown in China, “a rise in global long-term real interest rates and a crescendo of populist economic policies that undermine the credibility of central bank independence, resulting in higher interest rates on “safe” advanced-country government bonds.
The elephant in the room in both World Bank warnings and in Rogoff’s analysis is the assumption that there can be perpetual growth and that it is essential to both global and national economic health.
This ignores the fact that the earth has finite resources and that sooner or later they will run out.

Small is beautiful, sustainable growth and the benefits for SMEs

Clearly, there needs to be a change in thinking on many levels and we may be seeing the first signs, for example in consumer behaviour, which resulted in significantly lower spending in the run-up to Christmas.
This has been variously attributed in the UK to worries over jobs and Brexit, and to rising costs of such basics as energy supplies and local taxes.
A related influence on spending, however, has been the growing awareness among consumers of the environmental impact of goods they buy. Customers increasingly demand that goods be made from recycled, sustainable or natural materials and that their repackaging and transport-related impacts are minimal.
This underlying change is perhaps also exemplified by the woes of the motor manufacturing industry where sales of new cars and in particular diesel engines have been plummeting for more than a year.
While this tends to be attributed to uncertainty about the future of diesel-powered vehicles or rising raw materials costs given the low value of £Sterling, is it also possible that people are beginning to think harder about their need for and use of cars in the context of climate change? Equally, are people beginning to question the wisdom of constantly updating their wardrobes and their pursuit of the latest new “thing”?
In recent weeks there have been several interesting and thought-provoking articles in Wired, an online publication focusing on all things technological. They include one in November on Carbon Capture technology, which was greeted enthusiastically ten years ago, but whose development has struggled for funding since because although feasible, developing the technology for it to be useful at scale is difficult and it is hard for governments to justify the upfront costs.
In another article in January, there was a discussion of the potential for using AI (Artificial Intelligence) to help in the more efficient use of energy by predicting the demand peaks and troughs and adjusting supply accordingly in order to meet sustainable development goals.
Perhaps the most interesting article of all was by Bernice Lee on the theme of “small is beautiful”, an idea first proposed in 1973, by EF Schumacher. It was largely ignored by big businesses wedded to economies of scale as defined by Adam Smith, in a model that argued that scale and the division of labour lowers costs and increases efficiency.
However, Lee argues that the downsides of Smith’s model are more obvious today in that many traditional business giants have kept real wages low despite soaring profits and have benefited from offshoring, opaque supply chains and the short-termism of investors.
Big businesses also suffer from an inability to change their business models quickly or to be agile in meeting changing circumstances, not least those relating to climate change.
She argues that SMEs, on the other hand, have the advantage of agility, especially given the growth of such things as AI, cloud computing, of outsourcing back-office functions.
As a result, SMEs can be more creative, more innovative and are increasingly attracting the notice of larger businesses.  Therefore, there is more potential for SMEs to grow but also to lead the way to a more sustainable form of economic growth that does less damage to planet Earth.