SME Sustainability and Leadership

Corporate sustainability is growing in importance, day by day. Businesses are regularly being called out for greenwashing, and consumers increasingly want to only associate themselves with companies that take sustainability seriously.

Leadership plays a crucial role in promoting sustainability, and the current generation of business leaders is under intense pressure to incorporate sustainable practices into everything they do. To ensure businesses around the globe are contributing to the social, environmental and economic issues impacting our planet, leaders need to make sure they have the right knowledge and skill set.

The impact of SMEs

Making small and medium-sized enterprises more sustainable is essential to achieving overall sustainable development goals. SMEs account for 61% of the employment, and over half of the turnover, in the UK private sector – truly putting the meaning behind ‘every little helps’ when working towards sustainability. There are also over 5.6 million SMEs in the UK, which accounts for 99.9% of the business population.

Many SMEs have embraced sustainability and made it integral to their brands and business models. For example, most B-Corps are smaller companies that leverage their high sustainability performance to gain a business advantage. However, other SMEs are feeling pressure from customers, employees and regulators, and they face significant challenges in finding the capacity to transition to more sustainable ways of working.

A good first step here is for businesses to use the UN’s Sustainable Development Goals (SDGs) Ambition Benchmarks to identify, prioritise and set sustainability goals. Leaders can then use these goals to regularly measure and report on their sustainability progress. These goals should also be integrated into core practices and processes, deepening implementation across operations, products and services, people management and corporate finance.

What does a sustainable business leader look like?

Driving businesses towards better corporate responsibility, environmental compliance and long-term financial, social and environmental sustainability requires strong leadership. It demands innovative, decisive and strategic action that also challenges the status quo. Strong, persuasive leadership is especially crucial, as issues like climate change, biodiversity loss and resource depletion continue to impact businesses and concern consumers.

To do the above, business leaders will also need to be adept at strategic and systems thinking, while being able to innovate and collaborate effectively. System thinking informs strategic thinking – in essence, business leaders should be asking: how do things work, where should I aim to go, and how do we piece things together to get there? System thinking is the ability to perceive things from different dimensions; you’ll question how your business can work differently, with the intention of driving purposeful change. And while a hallmark of the modern CEO is in-the-moment decisiveness, future, sustainable-led leaders will also need to make sure to align short-term business objectives with longer-term, strategic plans.

Advocating for sustainable change isn’t always as simple as it seems. There might be reluctance towards new initiatives or doubt about investment, and so effective communication strategies that embed collaboration are essential for leadership teams to be successful. Not only does such collaboration help us to come up with different solutions to ongoing problems, but effective communication strategies will also involve all stakeholders, including customers and employees, within sustainability plans. This will ensure a top-to-bottom plan, which covers all areas of your business.

This requires holistic leadership – an approach to leadership that incorporates not only what leaders need to do and how they will do it, but also the ‘who’ and ‘where’ of leadership itself. Autocratic leadership is dying – empowerment and development are the new norm.

Using holistic leadership 

Business leaders focused on sustainability will need to consider a wide range of cultures, livelihoods, backgrounds and experiences to make decisions that truly benefit everyone. Climate change is expected to have a significant impact on human health, agriculture, food security, water supply, transportation, energy and ecosystems, throughout this century and beyond, leading to increasing disruptions.

Getting comfortable with this approach may require upskilling. One of the UN’s Sustainable Development Goals states that education providers should “ensure inclusive and quality education for all and promote lifelong learning”, and that higher education institutions should help students develop the capabilities to be future generators of sustainable value for business and society – creating an inclusive and sustainable global economy. This means that if business leaders want to develop the skills to be a holistic leader, picking an education provider that consider the UN’s SDGs will be best.

Not only will businesses need to be able to make sustainable decisions to counteract the rapid decline of the planet, but they will also need to be aware of the changes in society that come with it. This, therefore, will require long-term holistic thinking.

Business leaders will need to have a comprehensive worldview that observes, understands and questions humanity’s place as part of a global ecosystem, while incorporating sustainability at the core of business decisions. Leaders will also be expected to be informed and base their strategies on sound moral and ethical principles.

Ethical leadership and risk management are necessary to navigate complex sustainability challenges. To understand ethical leadership, exercising the four V’s is essential. The four V’s stand for: Values, Vision, Voice and Virtue. Using this approach, leaders must begin by “identifying and integrating their core values, to carry out their vision in service to others and voice that vision in a convincing and authentic manner, all the while practising virtuous behaviour”.  This approach suggests that leaders should stand back from their decisions once they have been made, to determine whether what they are doing is in line with their values and morals, but also consistent with the vision in service to other people.

Not only is ethical leadership about showcasing integrity, but it’s also about the ability to promote integrity in the organisation. Essentially, it only works if those leading are seen as role models by their employees. Again, this leads to the importance of effective communication and collaboration within the business – with every stakeholder.

Sustainable leadership needs to go beyond the temporary gains in achievement scores to create long-lasting, meaningful improvements in learning processes. In short, business owners should not be afraid to build a culture of learning within their business and should take time to engage with other sustainability leaders to develop the knowledge they need. The way forward is by engaging, collaborating and making strategic, well-thought-out decisions.