How a common framework can help your SME
When navigating the world of responsible business practices, terms like CSR, sustainability, social value, and ESG are often used interchangeably. Yet, while they are related, each concept has its own nuance.
For small and medium-sized enterprises (SMEs), understanding these terms and aligning them under a common framework can simplify the way you demonstrate responsibility to your customers, partners, and stakeholders.
This blog will break down each of these concepts and show how using one set of metrics could streamline the process and benefit your business.
What is Sustainability?
Sustainability focuses on long-term strategies to reduce a business’ negative environmental and social impacts. It’s about ensuring that today’s activities do not compromise future generations. This includes practices like reducing energy consumption, minimising waste, and also considering social equity and diversity and inclusion.
Example: An SME might implement renewable energy solutions, create a more sustainable supply chain, or design products with less environmental impact.
Sustainability Benefits SMEs By:
- Reducing operational costs (e.g., energy savings)
- Preparing for regulatory changes
- Increasing appeal to eco-conscious customers and investors
Sustainability goes beyond just ticking boxes. It pushes businesses to think about how their operations impact the environment, people, and profit, ensuring the longevity of the business.
What is Social Value?
Social Value refers to the broader impact that a business has on society, focusing on improving social, economic, and environmental wellbeing. It’s not just about doing good, but about creating measurable, positive outcomes for local communities. Public procurement contracts in the UK now often require companies to demonstrate how they deliver social value.
Example: An SME could work with local suppliers to boost the local economy, offer apprenticeships to young people, or support marginalised groups through inclusive hiring practices.
Social Value Benefits SMEs By:
- Winning public sector contracts that require social value commitments
- Strengthening community ties
- Creating measurable benefits that go beyond profit
However, SMEs may struggle with measuring their social value due to the lack of standardised metrics, which can make it hard to showcase their contributions effectively.
What is ESG (Environmental, Social, and Governance)?
ESG refers to a set of criteria often used by investors to evaluate a Businesses’ long-term performance and risk. ESG covers three pillars:
- Environmental: Impact on natural resources, climate change, waste, etc.
- Social: Employment practices, diversity, community impact, etc.
- Governance: Business ethics, transparency, board structure, etc.
While ESG is more commonly used by larger companies and investors, SMEs can also benefit from adopting these criteria to guide their operations. ESG gives businesses a structured way to measure and report their impact on society and the environment.
Example: An SME might adopt policies to reduce carbon emissions, improve employee welfare, or ensure transparency in their governance.
ESG Benefits SMEs By:
- Attracting responsible investors
- Improving operational efficiency
- Meeting regulatory expectations and future-proofing the business
ESG offers the advantage of having measurable, standardised metrics that make it easier for businesses to track their progress and communicate their efforts to stakeholders.
What is CSR (Corporate Social Responsibility)?
Corporate Social Responsibility (CSR) refers to the voluntary actions businesses take to positively impact society. It encompasses a wide range of activities, from charitable donations to employee volunteer programmes, but it often lacks a specific focus on measuring outcomes. Traditionally, CSR is seen as a way for companies to “give back” to their communities.
Example: A company might sponsor local events, support charities, or promote diversity within their workforce.
CSR Benefits SMEs By:
- Enhancing brand reputation
- Improving relationships with the local community
- Attracting socially-conscious customers and employees
However, CSR has its limitations. Because it’s voluntary, CSR initiatives are sometimes inconsistent or hard to measure. Many businesses have found that while CSR efforts can be well-intentioned, they may not always lead to significant, measurable impacts.
How are they similar?
CSR, sustainability, social value, and ESG all share the same goal: to encourage businesses to operate responsibly. They focus on the triple bottom line—people, planet, and profit. While they each approach this from slightly different angles, the core principles remain aligned: companies should have a positive impact on society, minimise environmental harm, and operate ethically.
Why a common framework could benefit your Business
One of the biggest challenges SMEs face is the confusion and overlap between these concepts. While large corporations often have dedicated teams to handle CSR, sustainability, and ESG reporting, SMEs might not have the same resources.
Here’s why a unified framework would help SMEs:
- Simplified Reporting: Instead of creating separate reports for CSR, sustainability, social value, and ESG, businesses could focus on one integrated set of metrics that reflect all of these areas.
- Increased Efficiency: By measuring progress under a single framework, SMEs can streamline their efforts, saving time and resources. This could lead to more effective outcomes as the focus would be on actual impacts, rather than just ticking boxes.
- Better Communication: A common framework makes it easier to communicate your business’s efforts to customers, partners, and investors. Whether you’re pitching for new contracts or seeking investment, having a clear and standardised report demonstrates professionalism and responsibility.
- Consistency Across Industries: With a common framework, businesses across industries can be evaluated on the same criteria, making it easier for customers, suppliers, and partners to compare and assess the sustainability and responsibility of different companies.
- Improved Decision-Making: With all relevant data under one roof, SMEs can make more informed decisions, seeing the bigger picture of how their operations impact society and the environment.
Moving Forward
As an SME, adopting a unified framework for CSR, sustainability, social value, and ESG could simplify your efforts to operate responsibly. Rather than treating these areas as separate entities, you can use a single set of metrics to track and report on your company’s social, environmental, and governance performance. Doing so not only reduces complexity but can also lead to stronger outcomes for your business, your community, and the planet.
One framework that could be interesting to use or easy to digest for your business could be the United Nations Sustainable Development Goals.
While CSR, sustainability, social value, and ESG may seem like distinct concepts, they all push businesses toward the same objective: acting responsibly. For SMEs, embracing a unified framework for these areas can unlock significant benefits, both operationally and reputationally. By doing so, you will position your business to meet the evolving demands of customers, investors, and regulators, while driving real change for people and the planet.
Get in touch if you need support building a framework for your business.