Are You Ever Too Small To Make A Difference

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The Sustainable Business Podcast. I'm Will Richardson. I'm the founder and CEO of the Green Element Group, incorporating Green Element, Compare Your Footprint, and of course Sustainability Solved. We've been helping businesses become more sustainable since 2004. Small and medium-sized enterprises, otherwise known as SMEs, make up about 90% of businesses globally and are responsible for creating the majority of jobs. Yet many business owners who make up this big chunk of industry think they are too small on their own to make a contribution to sustainability. Today we ask, are you ever too small to matter? And I'm joined by two people who help SMEs become more sustainable. Sarah Whale is the managing director of Profit Impact, and Andy Hawkins is the self-styled C3PO, that's Chief People, Planet, and Purpose Officer at Business On Purpose. Welcome to both of you.

Thank you, Will. Lovely to be here.

Thank you so much, Will. It's great to be here.

So first of all, do you think a business can ever be too small to make a difference?

So I definitely do not think any business is too small to make a difference. So This weekend I did some youth work and one of the games that we played was to play football without a goalkeeper, and as a result lots more goals were scored than when we have got a goalkeeper. And in that same way, even though someone might just be one part of a bigger machine or a bigger part of the economy, they can for sure make a big difference. And we looked with that youth team at people in history who have made a big difference, be it Nelson Mandela or Florence Nightingale, all these different things. So in the context of a business, collectively lots of us can make much more difference than one single business in isolation. So I'm a huge fan of small businesses collectively making a big difference.

Brilliant. And Sarah, what are your thoughts?

No, I agree with Andy, but I would even take it back to individuals. You know, it starts with people, doesn't it? So you can be, you could be a massive corporate, you could be an individual person. It's all about the outcomes and what you achieve. You know, you can have one person doing a brilliant thing or a big company doing nothing, and you want, just want that one person doing that brilliant thing. So I actually think it's irrelevant what size business you are, it's what are you actually doing.

Yeah, we'll be going on to this later on, but what resonates to me with both of you is you've both got to quite different business models, but very, very SME-focused, and they're brilliant, brilliant business models that really help SMEs as well. And so it's kind of— it's— oh, I can't wait to draw this out and talk about SMEs. So what reasoning do you hear from small business owners about why they don't want or need to think about sustainability?

So I don't think it's that they won't spend the money. I don't, that's generally, I don't get that impression. It's about giving up their time. That's the big one that I see that, you know, we never quite get to the top of the priority list. But also there's something a bit broader that most businesses on average last 8.5 years. So we're asking people to do things today for the long benefit over the long term. Whereas not many, not many businesses are going to last for the long term, is the reality actually. So yeah, that's broadly what I think. It's not enough of a priority.

And Andy? I think, you know, most things do come back to priorities, and therefore they see, especially in the early days of getting businesses up and running, they've got so many different plates to spin. They just don't see the sustainability and the social impact piece as sufficient enough of a priority. And, you know, we get that. All 3 of us have started businesses and we know that exact same thing. But what's been interesting is taking clients on that, you know, B Corp journey or their sustainability journey is they actually recognize they can achieve quite a lot Initially, with a little bit of education and some effort, I think, you know, their mindset is it's this huge thing that is going to completely derail their business. But the reality is, by making some small changes and adjustments and doing some measurement, they can actually get insights that help them make those changes in a way that doesn't need to significantly detract from their business. So it's almost that education piece of educating them. It's not that bad, is it?

No, it's interesting, Sarah, you say you don't think it's financial. Financial. Whereas I would actually not— it's not disagree, I agree with what you actually said, but also say that some businesses would say it's financial and they can't do it because— and maybe it is that prioritization. And rather than pay for, I don't know, schmoozing that client, they could pay for one of your services, you know, because it is Because it can come to that. And so therefore we'd be remiss to push that aside because I think that doing what you guys do actually almost makes the business stronger and more financial.

Yeah, completely. I mean, I've been saying this for a long time. I use the phrase utterly compelling. Now, I am an accountant. Don't hold that against me. And mathematically, this is just utterly compelling. Okay, because if you don't do this, you are building quite a lot of risk into your business. If you do do it, you're building competitive advantage. So in my mind, and I have one thing I've learned is I need to push this out more, is that the ROI on this is just, it's off the scale. It really is. It's just so compelling to do. That's what I honestly believe and on the numbers I've seen.

Well, just on that as well, I'm doing some research with a couple of master's students at Bristol University this summer. One of them is doing a, you're a B Corp now, did you derive the benefits that you thought you would get? So that's one of the bits she's doing. And then the other master's student is doing a piece of research on what are the barriers that stop you measuring your social and environmental impact and improving it. So, um, yeah, it will be an interesting piece of research. I'll happily share that with you at the tail end of the summer. But we see that there are gaps in both of those aspects of knowledge, and I'm interested to see what those researchers come up with.

Yeah, so am I.

I was just gonna say, that does sound fascinating, because one of the challenges that we face, which might tie a little bit into what you're saying, Will, is that there are people that like to see evidence. before they commit to something. So on my first month of launch, someone said, come back to me when you've got 5 user cases. I'm like, right, it might be a while because we're building long-term benefit. And so that information, Andy, would be hugely beneficial. I'm doing with Minou Schillings, who's a regenerative expert, what we want to do is to fast forward the financial impact of a whiskey distillery that turns regenerative. to one that doesn't. Yeah, what is that long-term financial impact? And I think that's going to be a very interesting piece of work, which again, I'll definitely share with you.

I think that's it. There's so many ways to slice that carrot, and it's— we're starting to learn now about that because I wouldn't have even thought about what you just said, if I'm honest, Sarah. It's not, you know, but you've just come at it from a completely different angle. And so on that, business cases for SMEs to become more sustainable, what, what do you think they are?

So there's a very good chap called Bob Willard, and he is, or certainly was until recently, on the board for B Lab Global and Future Fit. And he's another accountant. There are a few of us. And he has done some brilliant work and a lot of research. And He has built up this business case, and I'm going to be using it for the for the whiskey company when I find them. And over five years, you can increase your profits for service business by 50% if you go down this route. If you don't, you're looking at a 16% decrease to profits. Now, in terms of what that might look like, that might be bit of a drop off on customer retention, brand reputation. You might have to recruit some more people in your team over time. It might be easier if you have that sustain— it should be easier if you can evidence your sustainability. So you— the average cost of recruiting an employee in the UK is £13,000. Now clearly it depends what function they're in, what sector, your location, etc. But if you take that as an average, £13,000, Right. It doesn't take a lot to think, right, well, we will very, very quickly get our— get a good ROI on that. Okay, so it's potential taxes, plastic taxes, it's the increased cost on the environment, it's the carbon price. The carbon price is a big thing that's coming down the line for people. So there's lots of different things that add up and actually over time are really going to positively or negatively financially impact a business depending on what they've done. It's just logical and mathematical when you look at it. You take a step back and you look at a business's P&L, what's going to happen to those lines over the next 5 to 10 years, and, and they're going to be transformative.

Andy, when organizations come to you and they're kind of questioning why or what they should do. What, what do you normally say is the business case?

Well, I think B Lab themselves did some research a couple of years ago, and they said that B Corps were trading at 28% plus better than above GDP. So they, they've done some research themselves. I wanted to dive a little bit more deeply into that, hence why we've commissioned this research study. But the general areas that people anecdotally report that they've improved on are, as Sarah alluded to, employee attraction and recruitment, and importantly, employee retention as well. They do also, going through the B Impact Assessment, spot a number of risk areas that they'd not really ever considered or thought about. So there's a question of, you know, if you've managed or spotted or mitigated a risk, You know, that's not money that you've necessarily spent, but it is potentially money that you've saved by coming across a, you know, a bit of a cropper subsequently. The other thing, you know, a lot of businesses that I deal with are relatively new startups, so a lot of them are reporting that they're finding it easier to get investment if they're going out for private equity or VC. They are finding it easier to attract that investment into their business because the investors see the B Corp process as being a degree of due diligence when they are looking at whether they invest or don't invest into a company. So that's been the main areas that people have anecdotally reported back. But with this research we're doing, we're looking to see if we can put some actual numbers around that, those anecdotes.

Yeah, our friend John Brown put something on LinkedIn. He said just because you're a B Corp doesn't mean that you're a good solid business, and it was all around there seemed to be a lot of organizations that actually haven't got their business model properly sorted yet and they become a purpose-driven business, you know. And I think what resonated with me on that post was I, I see it myself. I think some of the first B Corps, one of the reasons why they were B Corps quite early on was because they had solid business models. They were very good at what they did. And now we're getting this trail of companies and organizations that listen and what that 26%, you know, that you said, everyone knows about that and they go, oh, well, I don't really need to necessarily make sure my business model is really good. I'll just become a B Corp and then more businesses will come and use me. And I don't know, I know this isn't in our line of questioning, but I think it's really important to talk about.

It's really important. And in fact, Somebody from Innovate UK spoke to me about this, and they are actually quite worried about this. What they're seeing is newer businesses coming in and really looking to establish purpose-driven businesses, which is great. Okay, but what some people of these people, they don't want to align themselves with money because they think it doesn't fit with purpose. You know, they think, right, it's all about saving the planet, looking after people. And that's hugely important. So don't get the business model right, the financial model underneath correct. And they are worried. So you've got 2 different groups of people. You've got the profit growth over here and the purpose growth over here. But you need— you absolutely— we should not mistake financial planning actually for hard-nosed profit growth. They're 2 different things. You've got to have solid financial plans in place to protect your people as well and your suppliers. You've got to have that in place to be an ethical business. Actually, you need to have sound financial plans.

Yeah, I totally agree. And we encourage companies to keep an eye on the profit ball as well. We're certainly not encouraging them to not look at profit in total. favor of purpose. I think of the clients that I've helped, probably of the 300, 50 have been startup-y, you know, or year 1, and 250 have been more established. But all of the clients that I've worked with have generically been quite good clients in the first place. You know, they're purpose-wise.

Yeah.

I've not had to sort of convert them from devil incarnate into Angel Gabriel. They've all been good eggs in the first place. But what this has done is enabled them to focus on some areas that they're missing out on. But when you come back to pure customer service, decent product, repeat buy, referrals, those kinds of things, if you're missing out because your service is poor, or if the product that you're selling is poor, your business model is not going to survive no matter what level of purpose you might put around that. If you're promoting a poor service or a poor product, You're going to be found out, and you're going to be found out quite quickly. And I don't think just because you're a B Corp, A, stops you from being in that zone, as it does with any others. I think perhaps, Will, clients have got a higher expectation of a B Corp, that their service is by definition going to be exemplary and their product is going to be exemplary. So I think there's a slight challenge with, with that. But yeah, you've got to have good product and good service in order to then be purposeful.

And that's what worries me actually is, and it doesn't surprise me that Innovate UK have spoken to you, Sarah, about it because what we'll have and the knock-on effect is actually really quite bad is you've got people working in businesses and they'll have friends that work for said profit-driven business and then you've got I've got friends that work in said purpose-driven business that actually aren't doing an amazing job, but they are such a great place to work for. You know, they've got all the, um, stuff that's coming out, but their cash flow is literally going down, and they won't be around in a year and a half, 2 years. They potentially may get investments from high, you know, seed rounds, high net worth individuals that believe in what it is that they're doing. And but yeah, actually the amount of money they're spending to retain those people and make them all feel very good about themselves is not a business in itself. We all hear about people that give presents to people and that they're like the best people in the room because you always get a present off that person, but actually that doesn't mean that they're a nice person. It just means they're very good at giving presents. And that you could I look at that as a business and it worries me because actually businesses that are profit-driven and purpose-driven have to almost fight against those other businesses and they have to justify why they're not going to give all the perks because actually they're also thinking about the profit.

Yeah, it is a worry. We do need the finance community and it is coming, but we need the finance community step into this space. I think there's a little bit of fear that people don't— still don't quite understand, well, what, what, what is this? And they see it as a little pillar that sits outside of business, but actually it's something that needs to be integrated throughout. So I think once we get there, we will be okay. But for businesses now setting up, I mean, for Profit Impact, for my business, it's a real balancing act because I'm— I've got to stay financially sustainable. And I've got to find clients. It's really, really quite tight. And I've written in my impact report this— I've not released it yet, but I've put my financial strategy in Profit Impact's impact report. And my decision is that I am not going to be seeking investment until I see us move out of the early adopter phase. Because effectively what you're trying to do, what you will be doing by getting investment when you don't have enough customers You're actually paying for somebody to come in and pay for your team. And that you have to have a sustainable business model before you get that investment, because it's— I feel it's unethical, actually. And it will just put the founder team under real pressure to get returns for those investors. So yeah, it's a really important piece.

Look, going back to the advantages that small businesses have over larger Larger businesses, corporations, what are they when it comes down to sustainability, do you think?

I mean, what I've seen is that small businesses compared with large businesses is large businesses have generally got a lot of process and policy in place but are less able to maneuver and make changes within the business. Whereas smaller businesses are much more nimble in terms of their decision-making process, but they are generally devoid or certainly light of the processes and policies that put some, you know, solid foundations into the business. So it's 2 slightly different, and some are obviously in the middle. But when we're taking smaller clients through B Corp, it's more about you don't need to change your ethics or you're doing a lot of the good stuff anyway. Let's put some process and policy around there. Whereas the larger clients that I've worked with have got a lot of process and policy, but they might need to have a look at some of their decision-making that they're making to see can they move slightly, but they take longer to make those decisions and put those changes into the business. So there are 2 slightly different models, but they're kind of working together, working towards a common middle ground.

Yeah, I would agree completely with Andy there. We keep agreeing, Andy, but it's true. I mean, I guess we're living it, so we see it a lot, don't we? I mean, I think it's elephant versus cheetah. You know, if you're a large company, it's going to be really tricky to make change quickly.

Yeah.

So, I'm not saying you won't get there, but you'll be moving at an elephant's pace because you've got so many different teams and structures and processes to really change. And that's why we see greenwashing. It's not necessarily because the businesses want to kind of pretend they're doing something. It's actually, it's actually really hard when you're a big business, just the sheer complexity of it. Whereas if you're a smaller business, you're more like a cheetah, and you can move much quicker. I think with small businesses, and Andy is right, and when you look at the B Corp, the BIA, and certainly what's coming down the line with the standards, which at a fundamental level I agree with, with the enhanced standards. But for some businesses, it's going to be quite heavy in terms of what they need to do. So there is a little bit, little bit of risk. So I think, I think the advantages for small businesses, they can move quickly. The disadvantages, there's quite a lot to do if you want to do it well. So you might need to kind of prioritize what you're going to do.

Yeah, okay, brilliant. And on that, um, on that note, do you think— is there more guidance and financial help available for some business sectors than others in this space?

I've not seen that, uh, per se. Again, I can only judge on, on the 300 clients that I've helped, but of those, 25% have been kind of digital agencies, so marketing, PR, website building, that kind of sector. Another 25% have been food and beverage, so we've seen a lot in that sector. 10% have been recruiters. So that's been the slice of the 300 that I've seen, but I've not seen any particular marketplace support specifically for one sector over and above another sector.

No, again, I agree with Andy, and it's something we've talked about as a business, profit impacts. So we were going to support— originally the vision was to support the accountancy profession, but the truth is there's just not enough. There's not enough demand in individual sectors at the moment, so it's very hard to niche down to offer support from a B2B perspective. But I would— there are some grants available. There's quite a few grants. There's certainly a lot coming online for net zero. So for the SME spaces, there's a lot happening at the moment. So that is coming down. But I think the challenge at the moment is that it's very uncoordinated and very bitty. So you might look at your net zero over here, but you're not doing— you know, you're not doing— What I've seen so far on the net zero programmes funded by the government is, right, we'll fund you 10 hours, we'll do your net zero, and then you get to the end and And you're all right. Okay, this is what I need to do to get to net zero by 2050. Depending on the sector, for some businesses, it's going to mean investment. Yeah. And so the answer put to these companies, right, you can have a loan. Now, for many businesses that have come through COVID, they've got big loans in their books already. And so getting a loan for, you know, changing their capital print for environmental impacts. is, is hard, but I think we are getting there. I think that the government are starting to pull together more of a coordinated systemic approach, but I don't believe we're there yet.

Yeah, and you mentioned B2B businesses then, so do you think sustainability is more important if you're a B2B business or a B2C business?

So I think it's important to both. I think B2B long term, it's really important. So I'm working with a large advertising agency at the moment. Need a bit more finance and sustainability, to be honest, than I'd like, but that's what I'm doing at the moment to keep Profit Impact financially sustainable. Now they have got a very interesting client mix, and I'm looking at their client mix and there's some risky customers in there from sustainability perspective. And I'm looking at their numbers and I'm thinking, right now I know they're going for B Corp. Okay. What are they going to do? You know, what are they going to do? And the truth is B2B businesses over the long, long term are going to have to hive off some of their customers. They're going to lose some of their customer base. And that's going to be a direct hit to their profit. So the brand risk and the customers for B2B are big. over the long term. But B2C, I think it's short, it's a bit more immediate, I guess, is what I'm trying to say. So because they're more, you know, they're more the customers are buying now and consumers are more, they will move more quickly, won't they, than B2B customers. So it's quite risky. And B2C tends to be product-based. So there's a lot of risk in product-based businesses, B2C. B2C businesses because they're going to have to find a way of transitioning to circular economy. Yeah, it's going to be harder for them to pivot, I think, is where I— where what I believe for B2C, whereas B2B can pivot. All they'll need to do at top level is to get their environmental impact right, get their social side right, and that, that is, that is not too difficult, I don't believe. Their biggest challenge is their customer base, and they're going to have to really plan for that.

Andy, have you got any extra thoughts on that?

No, I don't see it particularly being harder or easier compared with B2B or B2C. I think they've both got different, slightly different challenges. One of the differences I do see is service-related versus product-related. I think service can change and make the changes more easily and more quickly. Than product-related businesses, but product-related businesses can make, you know, quite big differences with some small changes. If you're a service-related business, your bar is not set very high in the first place because you're not producing an awful lot of carbon footprint comparably, but when you're a manufacturer and you're making stuff, you do have a larger carbon impact. So Even though it's slightly more difficult, the upside is you can make more difference.

Yeah, okay. Small businesses, of which, um, we all sit in and for the most part probably work with as well, particularly, um, you guys, which is why we're talking about it. But this is supply chain, you know, a lot of those businesses will be in a supply chain. They're not the Marks& Spencer's with, you know, at the top of the tree, they are an organization that is working within it. So that advertising agency that you're talking about, Sarah, will be in the supply chain of all of their clients because they're delivering a service. So have you seen examples of smaller businesses joining forces to make a bigger sustainable impact within the supply chain?

I've got an example. So one of the, uh, one of the B Corps that we all know and love is Cotswold Fair. So they've got about 400 suppliers in their supply chain and they had 35-ish of which were B Corp. So what they wanted to do was put together a B Corp cohort model so that they could then work with their suppliers, which are generally smaller artisanal suppliers. So they've been able over the last year or two, been able to double the number of B Corps are in there. So I think that that ripple effect and that impact effect, you know, the Cotswold Fair have been able to use that within their supply chain, and that has then had an impact within their suppliers' suppliers. So if one was to, you know, ring-fence that total impact that's been captured or improved, I think the way that Cotswold Fair have done it has been a really healthy way of doing that. And there are a number of larger suppliers now that are using these frameworks, B Corp being one of them, to actually try and drive impact through their supply chain. I think that's a healthy thing to do.

Okay. Sarah, have you got anything else to add?

No, I haven't seen it, and I've, I've actually actively tried to make it happen through some of the programs we do. But it's not been easy. I do feel that supply chain isn't the be-all and end-all, but I do think it's a great opportunity to leverage some change. It's just not happening enough.

And what do you think are the easy sustainability wins for small businesses that don't require an expert or a lot of money?

For me, it would be just having a go at measuring it. I think a lot of companies think we're just small, it doesn't really matter, which brings us right the way back to where we were at the beginning, you know, can a small company make a difference? And I think, you know, you should just get on and try and measure it in the first place. If you and I were to run 100 meters, Will, you might well do a slightly better time than me potentially, but you know, we'd at least need to run 100 meters and set a standard for how long it takes us to run that 100 meters. And without that, it's difficult to measure, are we improving or are we going in the wrong direction? I think it's exactly the same for small businesses with their sustainability, carbon footprint, all of that sort of stuff. You need to just measure it, and once you've measured it, there might well be some indicators that come out that show you where the majority of your carbon sits, especially within your Scope 3 supply chain. And you can, you can then start having a dialogue and discussion with the company that is responsible for that. And so I just think it's going to give you some insights, that measurement is going to give you some insights that will help you dictate and determine where you want to put some initial effort into.

Great, and Sarah?

Yeah, it's a really interesting question. I fundamentally don't agree with quick wins with this, with trying to, you know, move us all along to a better place. I think we could do quick wins to make us feel better, and there's nothing wrong with that, and crikey, we all know We all need that, don't we? But I do think work out your starting point is the best thing to do. So work out where you're starting. Somebody said something to me a few months ago and it really resonated. You know, don't make a decision without a strategy. Get your strategy first and then do it. Otherwise, you just, you know, you're just doing something just to say you've done it. And, you know, you can maybe post something on LinkedIn that you've, you know, you've You measured your carbon or whatever, but get it right at the beginning.

Yeah, yeah, why you do it.

Yeah, that's my view.

Thank you both so much for coming along today. It's been an absolute pleasure listening to you and understanding more about how SMEs are making a difference.

Thank you, Will. I've enjoyed that.

Thank you, Will. Thank you for all you're doing and keep up the fantastic work.

And you, Andy. Keep doing all the good stuff.

And that's it for this episode of Sustainability Solved, the sustainable business podcast. Thank you so much to Sarah Whale and Andy Hawkins. I'm Will Richardson at the Green Element Group, an environmental consultancy with over 20 years of experience. For more information on Green Element and everything else we discussed today, please check the show notes. If you have any feedback or questions, you can get in contact with us @GreenElement on social media.