How can SMEs effectively measure sustainability?

The impact of business operations on people and planet is becoming an increasingly vital concern. But focusing on this journey towards sustainable, responsible operations can prove advantageous in many ways. Companies should aim for a strong strategy that involves setting sustainability-linked targets and effectively measuring progress.

Measuring the sustainability performance of a business involves assessing the impact of three key areas: environmental, social and governance. These are commonly known as ESG factors and they are playing an increasingly important role in the overall assessment of a business – for both consumers and investors.

There are a number of frameworks, indicators and tools which can prove useful when measuring an SME’s sustainable development progress, staff and any directors associated with your SME.

The simplest approach to measuring emissions is to use a carbon calculator or carbon assessment tool. Many versions of this software exist, from free online options to more sophisticated applications, allowing you to track your SME’s activities from an energy usage perspective.

This checklist offers a good starting point for any SME looking to begin measuring their sustainability:

• Benchmark your workplace emissions. For example, you could assess your typical monthly energy usage, decide what can and can’t be recorded, and record this benchmark when setting sustainability targets.
• Start to assess any carbon emissions and consumption relating to your supply chain. Contact suppliers for accurate metrics, and then consider switching suppliers or distribution methods if measurements are high. Download the HSBC UK Guide to Net Zero to learn more.
• Measure your waste production. What percentage of your waste is recycled?
• Gather employee feedback. Ask for appraisals on your inclusion practices, and overall wellbeing of your staff.

It’s important to remember that trying to measure and record everything entirely accurately is not always possible, however, getting an overall sense of your SME’s carbon footprint is an important first step.

The next stage in effectively measuring sustainability is agreeing on business-wide Key Performance Indicators (KPIs). These are a simple way to measure your SME’s sustainability performance. They involve deciding upon sustainability targets and monitoring your progress towards them.

Typical sustainability KPIs include:

• Greenhouse gas emissions
• Workplace diversity
• Energy consumption
• Renewable energy usage
• Supply chain miles
• Waste reduction
• Community investment and volunteering

Measuring and reporting on progress in these key areas is a great way to assess a business’ overall sustainability performance.

Environmental sustainability involves the conservation of natural resources and protection of the planet. When considering this from a business perspective, environmental sustainability concerns the relationship between a business, its product or service, and the planet.

To measure this effectively it is important to take a step back and look at the wider picture. Environmental sustainability includes, among other areas, your business’ greenhouse gas emissions, energy efficiency, water usage and recycling approach.

The best starting point when measuring sustainability is to focus on your direct emissions (known as Scope 1 and 2 emissions). These are caused directly by the activities and operations of your SME, through owned or controlled sources – things such as the heating in your office, or company vehicles.

Once regular assessment of your Scope 1 and 2 emissions has been established, it might be time to progress to measuring emissions caused indirectly by your business.

Indirect emissions are often referred to as Scope 3 emissions, these include your overall supply chain and product lifecycle. They address questions such as, how far a is product travelling from manufacturer to distributor? How much energy is used in the manufacturing process? What emissions are you responsible for, but causing indirectly? Scope 3 are often harder to measure but they can be highly significant to your overall emissions profile.

When a business considers social sustainability, they should think about the impact the business has on people: customers, external stakeholders, employees and local communities.

Increasingly, SMEs are taking a more proactive role in managing their social responsibility, and commitment to social justice. Considering the rights of your employees, and all workers along your supply chain, is a significant part of social sustainability.

Setting ambitious social sustainability goals can prove rewarding for SMEs. By nurturing healthy, fair and positive relationships, businesses may notice an increase in employee morale and productivity; gain access to new markets that include ethically minded consumers; and attract or retain beneficial business partnerships.

Governance involves the policies, laws, processes, and regulations which control or direct a company. Sustainable governance “is central to building trust and maintaining a social license to operate.”¹

Essentially, it involves establishing policies which encourage sustainable business practice and adhering to external sustainability regulations set by the government.

There are a number of areas an SME can look to assess and improve upon when it comes to sustainability governance, including any diversity, equality and inclusion policies, environmental policy, and rules on hybrid, flexible or remote working.

Make use of online templates and resources, designed to help SMEs create tailored company-wide sustainability policies.

Measuring your SME’s sustainable development is beneficial from both a business perspective, and when considering ESG factors. Investing into a shared sustainable future has become something of a business no-brainer. While kickstarting your journey can feel daunting, even taking small steps can make real change.