Small and medium-sized enterprises (SMEs) may mistakenly assume that sustainability only pertains to larger corporations and that the associated administrative and financial costs outweigh any potential benefits for small businesses.
Both accountants within the business (accountants in business) and those providing services to the business (accountants in practice) may also express reluctance in promoting sustainability to SMEs.Nonetheless, SMEs that incorporate sustainability into their core business strategy can reap benefits such as reduced costs, lowered risk, and the opening up of new opportunities.
Furthermore, accountants typically working within small- to medium-sized practices (SMPs) can play a vital role in facilitating this process for SMEs.
The Need for a Small Business Sustainability Plan
Small and medium-sized enterprises (SMEs) play a critical role in maintaining the stability and prosperity of the global economy, as they make up over 95% of all businesses and contribute significantly to private sector gross domestic product (GDP), wealth creation, employment, and social and environmental impacts. However, there is growing concern over the finite nature of natural resources and the pressing need to protect the environment.
Consequently, SMEs are facing mounting pressure to evaluate and mitigate their environmental impact, particularly as they are an essential part of the supply chain and are subject to increasing demands for sustainability management from customers and suppliers. This is especially pertinent for SMEs that seek to secure government or large business contracts.
According to the Association of Chartered Certified Accountants (ACCA) report titled “Embedding Sustainability in SMEs,” there is promising evidence that sustainability initiatives, such as reducing carbon footprint, can enhance an SME’s financial performance. Businesses of all types and sizes, including for-profits and not-for-profits, public or private, across diverse industrial sectors, can benefit significantly from adopting sustainable business practices.
A good small business sustainability plan can help you identify where the savings can be made. Although integrating sustainability into the core business strategy and reporting on it may entail some upfront costs, the subsequent cost savings, reduced risk, positive brand reputation, and ability to satisfy consumer, investor, and supplier demand for environmentally responsible products and services more than compensate for it. Hence, the initial cost should be viewed as an investment.
Opportunities for SMPs
Accountants employed by SMEs can provide valuable assistance to their organizations at every stage, starting from evaluating the costs and benefits of behavioral changes intended to reduce waste, to investing in new equipment and renewable sources of energy, to developing an all-encompassing environmental management system (EMS). Unfortunately, several SMEs lack the internal capacity to undertake these tasks, requiring external support.
Consequently, SMEs often turn to their trusted accountants, thereby creating new revenue prospects for SMPs (small& medium-sized practices). However, it is essential for SMEs to understand that their accountants can offer such guidance and support.
As SMEs are keen to reap the financial benefits of embracing sustainable practices, SMPs could initiate their efforts by offering to assist their clients in implementing the plan-do-check-act method to monitor and continually enhance their processes and products.
This advisory service could involve identifying potential areas for business development and efficiencies, highlighting cash flow risks that may arise from social, economic, and environmental changes, and helping clients take full advantage of cost reductions while minimizing cost increases and maximizing revenue by developing business strategies that address sustainability issues pertinent to their specific circumstances.
Moreover, SMPs may encourage their SME clients to undertake an agreed-upon procedures engagement based on International Standard on Related Services (ISRS) 4400, affirming the presence of an EMS within the business.
Steps to Keep in Mind
According to the ACCA report, SMPs must undertake the following measures to ensure they possess the necessary expertise to provide sustainability services:
- Forge partnerships: SMPs should establish partnerships with local environmental sustainability experts to access credible local knowledge.
- Gain experience: SMP practitioners must examine the environmental sustainability of their own business and use the insights gained from this experience to hold relevant conversations with clients based on real-life experience.
- Seek information: Practitioners should familiarize themselves with information sources they can recommend to others or use to broaden their knowledge.
- Formalize commitment: Where appropriate, practitioners should formalize their commitment to offering environmental sustainability advice via marketing and awareness-raising activities in newsletters, documentation, and their website.
Utilizing the sustainability services and integrating small business sustainability plans can enhance the value of the services SMPs provide and help their clients/employers improve their business operations and reduce their carbon footprint. By applying the same principles to their own practices, accountants can also enhance the way they run their own businesses.