How smart sustainability communication is bringing SMEs out of the shadows.
When it comes to sustainability communications, it seems like small and medium-sized enterprises (SMEs) have been operating on the dark side of the moon. From a global perspective, even though many of these companies engage as good corporate citizens in their local communities, the light usually falls on the “sustainability champions” of the world, most of them multinational corporations. Just to put this in perspective: In 2015 a mere 10 percent (581) of all sustainability reports from the Global Reporting Initiative (GRI) Sustainability Disclosure Database were from SMEs, even though companies of up to 250 employees constitute about 90 percent of the world’s businesses.
And yet, for the vast majority of SMEs — most of them small, family businesses rooted in local communities — running a low profile in terms of sustainability isn’t a problem at all. They are neither subject to the same disclosure regulations and scrutiny from financial investors, nor do they feel exposed to reputational risk and potential havoc as much as their listed peers. At the end of the day, SMEs don’t see the value in using their limited resources to promote themselves as a good corporate citizen to a wider audience. In a world of tight profit margins and fierce competition, they prefer to keep their sustainability efforts focused on their immediate stakeholders, primarily their employees and the local community, to foster their license to operate. Activities are typically centered around aspects such as health and security, energy saving, or social sponsorship, and communicated unsystematically and on a personal ad-hoc basis.
However, while most SMEs pursue a rather tactical, low-profile approach to sustainability, there are remarkable exceptions. Some SMEs have aligned their business with their intrinsic values by embedding sustainability in their long-term business strategy. These companies intend to make a positive impact on society while gaining a competitive edge through a superior level of transparency, reliability and compliance. Reasons for adopting a strategic approach to sustainability may vary from company to company. But experience shows that doing so improves profitability, generates greater loyalty and commitment from employees, and fosters the relationship with customers and suppliers.
By creating a relation of trust, these SMEs eventually become a partner of choice for stakeholders that share the same ethical stance. This particularly accounts for contracting authorities and large corporate customers who are bound to strict disclosure laws and expect similar standard levels from their suppliers in order to take the right procurement decisions. To make this strategy work for SMEs, maintaining a high profile is critical.
But how can they tackle this challenge in the face of limited resources?
Let’s take a closer look at a SME that has been successful with this approach. Dibella is a German-Dutch textile group with 39 employees and an annual turnover of €30m. Since 1986, the company supplies institutional bed and table linens, towels and bathing gowns to textile service providers that then rent them out to hotels and hospitals. It currently sources its cotton from seven countries. Confronted with dramatic events such as Fukushima and the financial crises, Dibella CEO Ralf Hellmann decided that the time had come for a change: “There was a desire to initiate a development for new growth that would be based on our inherent values, while making a positive impact to the environment and society.”
Reclaiming the ethical principles from the heart of its business, Dibella set out to primarily source organic, fair-trade cotton. At the same time, it raised the bar for its own environmental and social standards, pushing for a high level of transparency within its organization and supply chain.
To this end, the company first put some effort into setting up and certifying a sustainability management system according to ISO 9001 quality and ISO 14001:2015 environmental management standards. Inside the organization, the shift from a transactional to a transformational business approach and the ambitious goal to take on a leading role in the industry were being proclaimed a strategic decision and given top priority. In order to get everyone on board and to nip any skepticism in the bud, Hellmann spent “a lot of time” talking to his staff and existing customers personally: “People were asking how to shoulder this daunting project with existing resources.”
As it turned out, investing in collaboration with external partners was the critical success factor. Dibella realized that, for a push-start, it needed the backing of external experts to help with the certification of its sustainability management system and the preparation of its first sustainability report — both highly critical and time-consuming tasks. For efficiency reasons, the company leveraged standard reporting tools and frameworks such as GRI’s G4 and 360Report, a GRI-certified online solution for building non-financial reports. To spread its sustainability narrative more effectively, the company uses its corporate website and social media platforms such as Facebook, Twitter and LinkedIn as cost-efficient options.
But making a buzz as a small company in the online world has its limitations. In talking to customers and peers within its industry, Dibella soon earned the sympathy of like-minded companies, which were happy to convene around a shared purpose and collectively promote a sustainable business approach within their supply chains. This resulted in the foundation of MaxTex, an international industry coalition of 18 companies with a joint annual turnover of €3bn. The collaboration enabled Dibella to increase its reach into the stakeholder community, the number and impact of joint CSR projects, but also its recognition across industry borders, which gained the company a number of prizes and industry awards over recent years.
Inside the company, the collaborative approach had a significant effect on its corporate culture, as employees enjoyed the satisfaction from participating in social and environmental projects, which provided them orientation, purpose and pride in their daily work. Low rates of staff turnover and sick leave were only one indicator of these positive dynamics. Less measurable is the positive impact from employees who, as brand ambassadors, recommend Dibella inside their community.
“The last skeptics were brought around when the CEOs of some large customers personally expressed their sympathy with our ethical stance, individuals that our salespeople never had a chance to speak to before,” Hellmann said. “Pursuing an integral approach to sustainability clearly helped differentiate Dibella from competitors and enabled us to grow our own business.”
Since 2012, sales figures have been growing continuously, with a 23 percent increase in 2015 alone.
The Dibella case shows that SMEs that embed sustainability into their business model can reach a high level of visibility, competitive edge and thus profitability. To overcome the hurdle of limited resources and run a successful communications strategy, efficiency and collaboration are paramount. From that perspective, employees are an invaluable resource: Once they identify themselves with their company’s sustainability goals and purpose, employees will promote them through their own words and actions within their own communities. To unlock these dynamics in SMEs, business managers should be in the driver’s seat to provide direction and build capacity through personal dialogue (1-1 conversations, staff meetings), written correspondence (emails, memos, newsletters), training, and incentives such as volunteering programs or reward schemes. Compared to large organizations, a top-down/bottom-up approach for SMEs to “bring out the best in people” is much easier to implement due to lean management, short reporting lines and their closeness to communities.
In addition to internal resources, alliances with like-minded partners outside the company will unlock synergy effects that will give an SME a wider reach, greater visibility and more credibility than pursuing a sustainability communications strategy on its own. Reaching out beyond its local city limits will help the company attract potential new customers and qualified employees.
Engaging with external consultants enables SMEs to tackle more complex tasks like strategic planning, certification or non-financial reporting.
By establishing a voluntary CSR report based on frameworks such as GRI or the UN Global Compact, managers will obtain critical insights for strategic decision-making and a solid basis for an integrated communications strategy. Following widely used reporting guidelines such as G4 not only increases reports’ credibility, it also makes it easier for stakeholders to compare KPIs between industry peers. By applying online automation tools such as Thinkstep, 360Report, Greenstone or Pure Sustainability, companies manage to collect, validate and ultimately convert non-financial data into standard CSR reports in half of the time.
Communicating the key messages and results of a sustainability report to stakeholders in an authentic, coherent and consistent manner is as important as the sustainability report itself. Social media platforms provide cost-efficient communication channels to establish an on-going dialogue. In principle, storytelling techniques and third-party testimonies win over corporate statements, in terms of credibility and impact.
However, to stay clear from the “greenwashing trap,” the sustainability narrative needs to be fully backed by the company’s business practice in the long term. As for any organization, a trust-based communications strategy will only work if the company goes all the way, putting sustainability in the center of everything that it does.
This article was first published on October 30 2017 in Sustainable Brands Magazine.