|Author Name:||Katrin Scholz-Barth|
|Date:||Aug 25 2021|
|Category:||Entrepreneurship, Innovation, Leadership, Management, Strategy|
Think: Awake a different mindset for new business models and operation.
Act: Innovate inspired by nature.
Lead: Dare to create the future.
How SMEs can unleash their Secret Power of the Underdog and lead the Sustainable Business Transformation
According to the World Trade Organization startups and small medium enterprises (SMEs) account for about 90% of all businesses worldwide and provide employment for more than 50% of the workforce, significantly contributing to the global supply chain and to the global economy.
These are impressive statistics considering that SMEs receive considerably fewer resources than big companies. The constraint of accessing capital forces SMEs to explore different strategies to outcompete bigger businesses that operate on outdated thinking and are no longer fit for our challenging times.
SMEs dominate the services industry, including agriculture, food, restaurants, general retail, health, beauty, fitness, and in-home-care, which coincidentally also carry a high carbon footprint that contribute to global warming and climate change. For instance, food, agriculture, and land use account for about a quarter (24%) of the global carbon emissions.
In these key industries, startups and SMEs have the potential to lead the strategic transformation to sustainable businesses. Size, agility, and flexibility are the hidden strengths of an underdog which can help SMEs take advantage of the asymmetric resource distribution to differentiate and respond to new market demands like climate change and COVID.
One tool for SMEs to build differentiation into strategic purpose is to register as a B-Corp, a third-party verified certification that the company operates in ways that benefits all.
Climate Report - “Code Red for Humanity”
The Intergovernmental Panel on Climate Change (IPCC) 6th Assessment Report on The Physical Science Basis, released on August 9, 2021, placed the core responsibility of global warming, and the subsequent global climate change, unequivocally on human activities – business activities and the use of fossil fuels.
Millennial entrepreneurs and SMEs build their businesses around missed opportunities that deliver on urgently needed services, for instance in hospitality, transportation, and finance.
They have an audacity to trust their own instincts, operate with an increasing level of technology sophistication, and exhibit a willingness and capacity for connecting the dots, taking content and ideas from seemingly unrelated fields to do things differently. Whether it is wild optimism or simply accepting responsibility, SMEs can influence change management and accelerate a strategic transition to sustainable businesses to respond to new consumer demands and behavior change in climate conscious ways.
Take for instance Allbirds, a shoe company that uses sugarcane waste products to manufacture carbon negative shoe soles, or COPIA, a food logistics company that applies data-driven redistribution of surplus food to reduce food waste, or Grove, a company that reimagines household goods to fight against further deforestation.
These businesses exhibit a new business attitude and mindset and interpret disadvantage and resource limitations as an opportunity. And it makes perfect financial and business sense.
Strategic Transition to Sustainable Capitalism
SMEs and startups have an advantage to strategically transition into sustainable companies and force others to follow suit building sustainable supply chains, not in spite of resources limitations but because of it.
Entrepreneurs and executives alike now have a chance to proof their worth by demonstrating how they respond to the “Climate Code Red” alert. Admittedly, adopting to climate change, reducing carbon emissions, and recovering from a global pandemic is a tall order. It is becoming an exercise in business survival and change management. This requires careful re-examining of business practices to find out what constitutes a true competitive strategy that will survive the test of these challenging times.
Being intentional and proactive about embracing strategic change takes vision, courage, and radical responsibility to ensure the wellbeing of ‘thyself’, of others, and our planetary’s wellbeing, which our survival depends on. Only then come business and profits because their survival depends on fit and healthy people, functional ecosystems, and a health-giving planet.
Changing the Rules of the Game
“Code Red for Humanity” requires systemic change! Every business, every investor, and every person everywhere must decarbonize faster. And SMEs are in a perfect position to lead with radical responsibility, reduce emissions in the dominating industries and steer business in a new direction toward peace, prosperity and equity.
SMEs can challenge conventional business-as-usual that is destroying value and the planet. SMEs disrupt existing industries and markets by doing things differently, providing new products and value-added services.
Punching above their Weight.
Here are five surprising advantages of how startups and SMEs can accelerate sustainable business transformation, linking adversity and innovation:
- Purpose: SMEs are often value-lead organizations with a purpose-driven small leadership team that walks their talk and leads by example.
- Strategic Vision: SMEs disrupt business-as-usual and challenge value-destroying business practices. By embracing sustainability as core business enables SMEs to proactively drive carbon emissions reductions.
- Innovation: SMEs have a speed advantage that makes them more agile, quicker to react, to pivot and try out counterintuitive concepts to explore new ideas, and to get up faster after failure.
- Change Management: SMEs also have a size advantage, giving them a unique position to experiment and take different risks to be more proactive instead of rendering powerless.
- Brand Activism in the Supply Chain: SMEs increasingly use brand activism to drive the transition to sustainability businesses.
The larger part of the 4,000 certified beneficiary or B-corporations are SMEs, companies that commit to serving all stakeholders and often includes a net-zero-goal. Given that 80-90% of a typical company’s greenhouse gas emissions (GHG) footprint lies in their supply chains means SME’s unique perspectives can help accelerate the transition to sustainability business.
Doing things differently, whether it is adopting new technology like the internet, Artificial intelligence (AI), machine learning, or big data, is also what’s needed now in response to climate change and the economic recovery after the COVID pandemic.
Transitioning to a sustainable business from a strategic perspective and differentiation are the underestimated superpowers of SMEs. The prompt and swift adoption and implementation of an Environmental Social Governance (ESG) framework, built into core business, to design-in resilience and designs-out risks of all kinds, is an attitude and smart practice, not a reflection on resources.
Limitations force imagination and creativity. That’s the definition of innovation and SMEs with fewer resources are emboldened to try new things, think out of the box, experiment and pivot and move further faster, willing to own the outcome.
So, here it is – the call to challenge conventional business-as-usual. It is needed more than ever to translate business activities into climate action. Buckle up! It’s going to be a fun and exciting ride for everyone, with SMEs in a power position of being the surprising change agents for climate action.
Jun 17 2021
We live in a world of business ambitions, especially here in the Middle East, where innovation and entrepreneurship are widely aspired to.
Emily McCutcheon- Rotman School of Management
Aug 30 2020
Your organization will change. It’s a fact. In a highly competitive global business environment, being able to adapt quickly to new conditions is a key predictor of success.