Sustainability is a priority for businesses in every sector and of every size. Yet new research from Fujitsu reveals that, amid evolving customer expectations and increasingly complicated geopolitics, start-ups and other small businesses, for all their positive aspirations, are finding it difficult to implement sustainable practices. It’s larger companies that are leading the way.
Based on a survey of 1,000 leaders across 15 countries, Fujitsu’s Closing the sustainability gap report examines progress on Sustainability Transformation – the ways in which organizations are using digital innovation to drive positive, lasting change for the environment, economies and society. It suggests that many fledgling firms – those with revenues of $2 million to $750 million, which have been operating for 3‒10 years – are often committed to the concept of sustainability, but struggle to fulfil that commitment in practice.
Both start-ups and larger firms recognise the common drivers of sustainability. Changing consumer expectations are key, as sustainability values have come to the fore during the pandemic, and as inflation bites into consumers’ budgets. As a recent Deloitte report reveals, over the past year people are taking the more sustainable option in everyday decisions with increasing frequency. Sustainability is also now a crucial factor in maintaining brand reputation. This is a highly significant shift, emphasises Melissa Blaustein, Founder and CEO of Allied for Startups: “Companies of all sizes are focusing on being more sustainable because consumers, especially the next generation of consumers, are demanding it.”
Rising expectations are also affecting businesses within the supply-chain economy. As Fujitsu’s research reveals, developing sustainable supply chains is one of business’s top sustainability goals – and large businesses expect their suppliers to buy into this and raise their games, too.
Critically for fledgling businesses, investors are also increasingly channeling finance towards companies that put sustainability first. As many as 70% of investors say they would actively avoid investing in companies seen to have a negative environmental impact.
The challenge for start-ups
Yet, despite these common drivers of change, our survey found that just under half (49%) of start-ups say sustainability is their top priority for the next five years, ten points fewer than the percentage of larger organisations (59%). In addition, 80% of larger organisations believe being more sustainable is the right thing to do and ultimately good for business, compared to just 63% of start-ups.
What explains this gap? Friederike Andres, policy advisor at the Federation of Small Businesses (FSB), believes most small businesses are keen to improve their sustainability practices but struggle with bandwidth. “The issue with smaller firms is capacity. With all the issues they’re facing, do they have the time and resources to commit to sustainability?”
Fujitsu’s research suggests not. The start-ups surveyed are struggling to overcome the barriers to smaller businesses becoming more sustainable. Many lack the necessary finances (47%), in-house skills (45%), and knowledge of how technology can help them (41%). In contrast, only about one-quarter of larger organisations struggle with those issues.
Andres suggests that finance is a particular pain-point: “The perceptions of low return on investment is a major barrier to smaller companies’ making investments in sustainability,” she says. Against a backdrop of rising costs, small businesses may be held back both by a lack of capital and poor access to financing. Many are still paying off debts accumulated during the pandemic, says Andres, which makes them less inclined to become further indebted by seeking financing for sustainability investments.
The research also reveals that small businesses are more likely to be doing just the bare minimum on sustainability – 41%, compared to 30% of larger organisations. This could reflect the fact that recent sustainability regulation has targeted larger firms, prompting them to accelerate their Sustainability Transformations. “Most small business don’t even know how to calculate their carbon footprints,” points out Andres. “Bigger businesses have been regulated for 15 to 20 years. They have now got staff devoted to managing energy use, for instance. It explains the discrepancy.”
Supercharging start-ups’ Sustainability Transformations
The challenges for start-ups are clear, but there are ways that fledgling firms can learn from larger firms to accelerate their Sustainability Transformations. There are three critical areas to consider.
Make a plan – and commit to change
While most large businesses have drawn up detailed roadmaps for reaching a more sustainable future, many fledgling businesses falter even at this preliminary stage. To build momentum, start-ups need a blueprint that can evolve as the company builds the knowledge, skills and technology base required. “It doesn’t have to cover everything that has to be done between now and 2030. This is a journey,” confirms Friederike Andres. “Start thinking about the processes, start thinking about the easy steps you can take, and then work your way through the list.”
Ask for help
The survey reveals that small businesses lack in-house sustainability expertise and skills. However, the upside of this is that external resources could help supercharge Sustainability Transformation. “There are a lot of education campaigns and programs that help you get up to speed,” enthuses Melissa Blaustein. Moreover, support is often available to help companies in applying for public funding and grants, while an ever-growing number of free resources, such as the Zero Carbon Business Portal, are available to businesses.
Friederike Andres also highlights the potential value of collaboration between companies. “We know of examples where small business have come together and helped each other measure their carbon footprints,” she says. Small businesses could consider collaborating with larger firms, such as businesses they supply, to tackle shared sustainability challenges using shared resources.
Use technology to drive Sustainable Transformation
Digital innovation is the foundation of Sustainability Transformation. Consequently, investment in the right technology can have a huge impact on the speed and efficacy of that transformation. Network and emerging technologies such as AI can help fledgling businesses achieve huge efficiencies, supporting growth on or exceeding the trajectory they had envisaged while improving their environmental, economic and societal sustainability. This could be one area where start-ups have an opportunity to catch up quickly with larger firms. As Melissa Blaustein points out: “Start-ups are agile and are trying to scale from day one, so they have that technological advantage in many ways.”
As Fujitsu’s research shows, many start-ups are struggling to overcome the barriers to delivering Sustainability Transformation. But digital innovation can make Sustainability Transformation less onerous for smaller businesses, helping to drive positive, lasting change for our environment, economies and society. Once start-ups have used their “technological advantage” to level the playing field a little, they can play a critical role in building a sustainable world without neglecting their need to grow.