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What privately-owned companies can learn from PLCs on sustainability

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PLCs have to answer to shareholders – and to the wider business community – on both stock performance and sustainability, and more and more often the two are inextricably intertwined.

On the one hand, being a publicly-listed company can impact the sustainability journey. Shareholders demand short-term returns and that can negatively impact long-term investment – which is where ‘green’ projects often sit.

But on the other hand, PLCs face a lot of scrutiny on their sustainability as well as their financial results. Their issues and challenges are front and centre when it comes to investment, supply chain management and other operational factors. They need a clear model for both products and materials to highlight where and how they’re trying to be more sustainable.

As Trevor Yong, business development director at sustainability consultancy Aura explains, it puts their efforts in the spotlight, which is why so many now have a Chief Sustainability Officer (CSO) on the board to drive their initiatives.

That’s quite different from private companies. Privately-owned businesses – including most SMEs – aren’t as answerable to the public in terms of their reporting and stock prices. However, they are just as accountable to consumers and customers, who are more informed than ever on sustainability issues and increasingly likely to vote with their wallets.

It isn’t just about creating a better reputation – a quarter of consumers currently make purchase decisions based on a brand’s environmental credentials, and that figure is only going to go up with each passing year.

A private affair

In fact, sustainability in private businesses, particularly SMEs, usually comes from within. It’s often the case that the owner-founder or CEO has a desire to make a product that’s green and the ethos of the business is built around that. Many SME brands, like TALA or Allbirds, have become successful largely because they’re more environmentally-friendly than their larger competitors.

And if the CEO isn’t focused on sustainability, the employees will often drive it instead. One might even pitch the need for a CSO to the leadership team (and I’ve seen cases where that person even takes on that role themselves). Employees are the voice of the customer and even privately-owned businesses have to answer to them.

Yet all too often, private businesses are followers rather than leaders when it comes to sustainability. They do enough to be legal and compliant, but without the looming risk of public scrutiny they may be reluctant to go above and beyond. They don’t have to justify their actions.

They end up ‘greenhushing’ – not talking about their efforts and outcomes if they think it will make them look bad – even though unlike PLCs they have the capacity to think long-term and make investment decisions based on what ten or twenty years from now will look like.

Learning as they go

For private businesses to establish a sustainability programme, they often replicate what’s been done elsewhere or make it up as they go along. Hence the importance of benchmarking where they are on their journey – whether that means talking to independent experts or to other business owners. Some companies will actually be further along than they think they are, while others may be feeling smug when in fact they’re still only at the start of their sustainability journey.

CEOs may not want to talk to potential competitors, but the value of sharing knowledge and talking with peers cannot be underestimated.

Creating internal accountability and processes

In addition, just because a private business doesn’t have to share its environmental targets with the world doesn’t mean that it shouldn’t have any. In a world of end-of-life labelling and Scope 3 emissions reporting, every company needs to understand where it sits and how it can prove its success against real, tangible external benchmarks.

The first step for any private company to meet its targets, even internal ones, is to take sustainability just as seriously as any PLC. That doesn’t always mean putting everything in the hands of a CSO – although having one can be incredibly valuable – but instead ensuring that it is on the agenda at every monthly board meeting.

Those companies need to be aware of what they’re legally responsible for, where there are opportunities to do better and how sustainability impacts what they deliver to their clients and customers.

One key factor is to think about sustainability at the start of the process rather than as a tick-box exercise at the end – and to cover off all the angles. For example, the product might be made from sustainable materials, but how about its packaging? Is it recyclable and labelled as such? And if it isn’t recyclable, have you said so on the labelling so that consumers don’t assume it is and contaminate actual recycling streams by ‘wishcycling’ it?

Given that it can take up to two years or more to change packaging after the fact, brands that don’t make their boxes, bottles and cartons as sustainable as possible from day one are shooting themselves in the foot.

Embrace the change

Even without PLC-level public scrutiny, sustainability has to be part of the company culture to succeed. It can also come from collaboration: SMEs are often followers rather than leaders in this space as they don’t have the scale of PLCs – and they therefore need to share knowledge, or create coalitions or partnerships, to achieve the same results.

Owners and CEOs already know that success comes from being ahead of the curve, and sustainability is right now one of the biggest curves facing businesses. The earlier it’s built into the business, the more likely it is to work.

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