Focuses on eco-friendliness, environmental responsibility, and social commitment - these are the key elements to consider
In the next 50 years, the world could witness a prosperous, peaceful, and healthy global community, driven by united optimism, courage, and determination, innovative advancements, and cooperation across various scientific disciplines and generations. Amidst this grand vision, German Small and Medium-sized Enterprises (SMEs) are playing a pivotal role in shaping a sustainable future.
A significant portion of employees (40%) now prioritize sustainability as a decisive criterion when choosing an employer, and a growing number of SMEs are responding to this demand. Sustainable companies not only achieve higher operating margins than their less sustainable counterparts, according to a study by Landesbank Baden-Württemberg (LBBW), but they also contribute to a more resilient and competitive economy.
The Sparkassen-Finanzgruppe, a leading financial services provider, supports this transition by offering customized solutions for a more sustainable way of doing business. This includes advice on sustainability-integrated financial planning, green financings, and ESG derivatives. The group has already helped more than half of its clients take concrete measures, such as investing in CO2-efficient production technologies.
Sustainability should be integrated into corporate governance, affecting all functional areas of a company. This holistic approach ensures that ESG aspects are profitably and efficiently embedded across the organization. German SMEs primarily achieve this integration through strategic frameworks like the VSME Standard (Voluntary Sustainability Reporting Standard for SMEs).
The integration of sustainability follows a tiered approach, starting with quick wins through cost savings and supply chain improvements driven by ESG programs. Medium-term efforts involve conducting life cycle assessments and building compliance strategies that increase operational efficiency. Long-term initiatives leverage data-driven sustainability initiatives to enable new revenue streams and maintain competitive advantages, especially against stricter future regulations.
The benefits SMEs reap from this integration are multifold: improved profitability and EBITDA from efficiency gains and cost reduction, competitive advantages when aligning with impending EU sustainability reporting regulations, enhanced brand reputation and social responsibility, regulatory and planning certainty, and access to new data-driven business models and innovations.
Customers increasingly expect companies to engage with sustainable issues and adapt their offerings accordingly. One such example is W. Neudorff GmbH KG from Emmerthal, Lower Saxony, which produces environmentally friendly plant protection, pest control, and animal care products and has been climate-neutral at all locations since 2021.
Two-thirds of business customer advisors at Sparkassen report that their clients see the shift towards a more sustainable economy as an opportunity. Companies should define a company-specific sustainability contribution, or "Purpose", to contribute value to solving global challenges based on societal acceptance. This purpose-driven approach not only benefits the environment but also strengthens employer branding and stakeholder trust.
The transformation to greater sustainability is likely to be the largest investment program of this decade. Companies can act more environmentally conscious and climate-friendly in many areas, such as boosting energy efficiency, mobility, packaging, sustainable waste management, and conserving resources. The German SME sector is currently facing the challenge of transforming the economy into a sustainable one, but with the right support and mindset, it is well-positioned to lead the way towards a prosperous and sustainable future.
References:
[1] KfW (2021). Sustainability in SMEs: Opportunities and Challenges. Retrieved from https://www.kfw.de/en/topics/sustainability/sustainability-in-smes/
[2] Sparkassen-Finanzgruppe (2021). Sustainability. Retrieved from https://www.sparkassen-finanzgruppe.de/en/sustainability/
[3] European Commission (2021). Corporate Sustainability Reporting Directive (CSRD). Retrieved from https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting-directive-csrd_en
[4] VSME (2021). Voluntary Sustainability Reporting Standard for SMEs. Retrieved from https://www.vsme-standard.de/
[5] Bundesministerium für Wirtschaft und Klimaschutz (2021). Sustainability in the Economy. Retrieved from https://www.bmwk.de/themen/nachhaltigkeit/nachhaltigkeit-in-der-wirtschaft/
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