Environmental Sustainability: The Business Case for Small and Medium Sized Enterprises

NYU Wagner Capstone Presentation to the U.S. EPA

Environmental Sustainability:The Business Case for Small and Medium Size Enterprises (SMEs)

Rebecca Ackerman, Nerissa Clarke, David Glick, Josh Mandell

Why Focus on Small Businesses?

• 26.8 million small businesses in the US

• Represent 99.7% of all employers

• Employ 49.2% of private-sector workforce

• Little previous information

Research Questions

1. What factors motivate an SME to consider sustainable practices?

2. Where does an SME find information on sustainability?

3. What factors go into the decision-making process for a company?

Methodology

• Researched• Developed• Surveyed• Compiled• Presented

Survey: CompanyCharacteristics

Annual Revenue of Companies Interviewed

under $1 million

$1 - $10 million

$10 - $50 mil-lion

over $50 million

Number of Full-Time Employees

under 10

10 to 50

50 to 100

100 to 500

over 500

Spectrum 8 Theaters

“It’s the whole package that motivated us to adopt sustainability into our business. We wouldn’t have installed solar panels on our roof without the financial incentives from the government, but we see it as a good cost-saving tool. It is helps us to generate community goodwill and to differentiate ourselves from our competition.” --Keith PickardSpectrum 8 Theater

Motivators

What factors motivate a company to adopt greener business practices?

Motivators

Leaders

hip

Cost Sav

ings

PR/Engagem

ent/B

randing

Culture

GrowthRisk

Steward

ship

Quality

Regulat

ion

0

2

4

6

8

10

12

14NYU Capstone Reported Motivators

Motivators

Leadership• NYU Wagner Capstone Survey: 76% of respondents listed it as

#1 motivator.

Motivators

Cost Savings• #2 Motivator -- 53% identified as primary driver.

Motivators: Challenges

Costs

Risk/Competition

Lack of Information

Behavior ChangeCoordination Internally/Externally

Lack of Control

Product Quality

Time Constraints

0

1

2

3

4

5

6

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8

9

NYU Capstone Reported Challenges

Motivators: Challenges

Cost• Up-front and operational costs are prohibitive

• Cost is both a leading motivation (#2) and deterrent (#1) to adopting sustainable business practices

• Our Findings suggest:– Actual costs and ROI of programs may vary by industry/firm– Some industries/firms receive better information than

others– Our sample may not be representative of all SMEs

Motivators: Challenges

Risk• Companies perceive the costs to

outweigh the gains• 3 of 17 companies noted risk as a driver for

adopting greener business practices. • However, risk associated with competitive

price-cutting as the greatest obstacle (tied with costs) at 8 of 17.

Motivators: Challenges

Risk• Changing market conditions

is another risk that can stall companies from investing in green initiatives.

• Example: The film industry goes digital• New energy efficient film

equipment will result in large amounts of waste

Motivators: Challenges

Special Challenges for Start-ups• Start-ups face unique challenges in generating

revenue and minimizing cost, resulting in hypersensitivity to otherwise normal challenges.

• Focus on immediate growth

Information

Where do SME’s find information on environmental sustainability?

Information

Information Sources

Consulting firms

White Papers SurveysDirect service

Academia

ConferencesJournals

Lecture Events

Government Agencies

SBA

EPA

ChambersWord of Mouth

Employees

NeighborsCustomers

Business Networks

Trade Associations

Sustainability Specific

Organizations

Trade shows

Expert Guest Speakers

Internet Research

Company websites

Google Search

Facebook

TwitterIndustry wikis

Media

Newspapers

Blogs

Magazines

Newsletters

Information: Scope

• Different definitions of sustainability• Customization

Information: Metrics• No Measurement Capability• Difficulty Knowing Where Success Is

Companies Need:• Cost Benefit Analysis• Return on Investment• Customer Benefit

“The information on sustainability is not obvious right now. You need to be really motivated and willing to search it out.”

~Spectrum 8 Theater

Information: Quality

• Plenty of Information Available• Quality over Quantity

Information: Insights

• Communication of Ideas• Business Networks

• Availability of Metrics

Decision Making

How do SMEs make decisions regarding environmental sustainability?

Decision Making:Large Companies

New Idea Introduced

Decision ProcessFormal

HierarchicalMetrics-OrientedDiscussion among

Top Execs and Board of Directors

Decision Making Criteria Profit

Return on InvestmentMarket Share

Company StrategyIndustry Trends

SalesCost Reduction

RiskBrand Equity

RetentionRecruitmentReputation

ImplementationRoll-Out Strategy

Change Management

ProcessInternal

CommunicationEmployee Buy-in

Decision Making:SMEs

New Idea Introduced

Decision Process:Informal

Owner/Manager Driven

Input sought from various stakeholders

Decision Making Criteria:Upfront Cost

Cost Recovery PeriodCompany Values

Customer DemandRisk

Return on InvestmentCommunity Goodwill

Implementation:Quick

All hands on deck

Selling The Business Case for Sustainability

Persuasion Techniques:

1. Identify - Company objectives - Company values - Major business challenges

2. Identify Personal Interests of Key Decision-Makers

3. Research Relevant Sustainability Options - Strategic solutions to real business challenges

4. Anticipate Opposition - Costs, staff resources, intangible results, lack of relevancy

5. Prepare Information in a Way Your Audience Will Understand - Facts - Language - Presentation

6. Present a Realistic Implementation Strategy

7. Be Prepared to Take Ownership Over the Process

Decision Making: Challenges

Conflict between short and long term

Perceived Trade-Off between Social and Environmental Causes

“A part of the reason that Dalberg does not see environmental sustainability as a necessity is that

it is a socially oriented business already.  Employees think of the social impact they are having and therefore overlook or simply don’t think about the

more operational environmental impact.” ~Dalberg

Decision Making: Challenges

Decision Making: Challenges

Lack of Control

Research Insights

Facilitating change from various perspectives…

Research Insights

• System-Wide Change

• Organizational Change

Research Insights:System-Wide Change

Communication of Information• Informal community based networks• Trade Associations• Utility Companies

Develop Collaborative Solutions• Bulk Purchasing• Small Business Networks

Organize and Target Information by Industry

Bundle Environmental Initiatives Together• Frame sustainability agenda items as

a comprehensive package, not individual options

Baseline Measurement is the First Step• Set sustainability goals to encourage

progress• Then incentivize employees

Research Insights:Organizational Change

Conclusion

“While the city government provides some good ideas that we might never have thought about, maybe there could be

more help actually getting it done.”

~Blue Bottle Coffee

“If a student group or someone came in and did the analysis for free and did some follow up to assist with implementation, we

would go green.” ~Dalberg

Moving Forward

Green

Core?

Questions