As we look towards the year ahead in the sustainability space, we see several key trends shaping the 2024 agenda, both being challenges and opportunities for UK SMEs. They are coming at different rates and not hitting every sector – yet – but we have listed a few to watch out for.
1. Circular Economy
The concept of the circular economy involves rethinking the ‘traditional’ linear production and consumption models to create a closed-loop system where resources are reused, recycled, and regenerated. By embracing circularity, businesses can not only reduce waste but also unlock new revenue streams and drive innovation, and in some cases, recycled inputs can cost less than virgin materials. Great examples include, UK-based SMEs like Toast Ale are pioneering circular business models by upcycling surplus bread into craft beer, thereby reducing food waste and contributing to a more sustainable food system. Another amazing story is Elvis & Kresse, using reclaimed Firehoses to make luxury consumer products.
2. Climate Resilience
With the adverse impacts of climate change in front of us, businesses must consider resilience strategies to adapt and thrive in this changing environment. UK SMEs operating in sectors vulnerable to climate risks, such as agriculture and tourism, or event anyone who transports temperature-sensitive products, are proactively investing in climate-resilient infrastructure and diversifying their revenue streams. Best practice for businesses would be to understand a climate risk assessment for their whole value chain to understand the threats to their business model.
3. Supply Chain Transparency
Consumer demand for transparency and accountability in supply chains is driving businesses to adopt technologies that give them greater traceability and visibility. By enhancing supply chain transparency, SMEs can build trust with customers, especially in the B2B environment but increase for consumers, as they care where their products have come from. There are several tools available, but something like Veriso, offers support to map, record, and improve your supply chain, wherever they are in the world.
4. Sustainable Finance
The integration of environmental, social, and governance (ESG) criteria into investment decisions is reshaping the financial landscape. UK SMEs looking to access funding for sustainable initiatives can explore options such as green bonds, impact investing, and ESG-focused financing. UK-based renewable energy developer Good Energy successfully raised capital through green bonds to finance the development of renewable energy projects, demonstrating the growing appetite for sustainable finance solutions among investors.
5. Decarbonisation
The transition to a low-carbon economy is gaining momentum globally, driven by regulatory requirements and market forces. Businesses across various sectors, from manufacturing to transportation, are adopting measures to reduce their carbon footprint.
It is no longer a ‘tick-box’ exercise. Customers want to know what your reduction plans are and your targets to achieve Net Zero. By way of example, if you are part of the NHS Supply Chain, you are increasingly being asked to publish your plans to be on a framework with them.
6. Biodiversity
Protecting and restoring biodiversity is essential for maintaining healthy ecosystems and securing the long-term viability of businesses. UK SMEs operating in industries with significant environmental footprints, such as agriculture and forestry, are implementing biodiversity conservation strategies as part of their sustainability efforts. This isn’t new for them, but there is increasing pressure on local councils, and large organisations to understand and mitigate their impacts on biodiversity.
7. Social Equity
Promoting social equity and inclusivity is integral to sustainable business practices. Employees are increasingly asking their employers what they are doing and can demonstrate on their commitment to social responsibility. This usually comes in the form of prioritising fair labour practices, diversity and inclusion initiatives, and community engagement efforts. An example of this is the UK-based ethical fashion brand Birdsong, which partners with women’s organisations and artisans to create sustainable and inclusive fashion collections, empowering marginalised communities and promoting social equity within the fashion industry.
8.Digitalisation for Sustainability
Digital technologies such as artificial intelligence (AI), Internet of Things (IoT), and big data analytics offer significant opportunities for driving sustainability innovation and efficiency gains. All businesses in sectors ranging from energy management to waste reduction are leveraging digitalisation to optimise their operations and reduce environmental impact. For instance, UK-based energy management company Open Energi uses AI-powered software to optimise energy consumption and reduce costs for businesses, contributing to a more sustainable and resilient energy infrastructure.
9. Collaboration
Recognising the interconnected nature of sustainability challenges, businesses are increasingly collaborating with stakeholders across sectors to drive collective action and create shared value. Businesses can leverage partnerships with government agencies, NGOs, academic institutions, and local communities to address complex sustainability issues holistically. For example, UK-based food waste charity The Felix Project collaborates with supermarkets, restaurants, and volunteers to redistribute surplus food to those in need, tackling both food waste and food insecurity in local communities through collective action. Magic Breakfast is a similar charity partnering with large food manufacturers and education bodies to bring breakfasts to children to support their learning.
Embracing these key trends presents an opportunity to not only mitigate risks but also unlock new sources of value and competitive advantage.
By aligning their business strategies with sustainability principles and leveraging innovative solutions and partnerships, SMEs can position themselves for long-term success in a rapidly changing (and warming) world.