Since the advent of the Industrial Revolution, the main factors that mattered for businesses were metrics like profitability, growth, and earnings per share. While these figures are certainly still important, there is another factor that will become increasingly important: sustainability.
Some businesses are inherently more sustainable than others. Thankfully, small businesses, by the very nature of their small-ness, are seldom the biggest environmental offenders.
Nevertheless, the green movement is here to stay, and small businesses are not immune. The sooner small business owners recognize this, the sooner they can ensure their businesses are sustainable – both environmentally and in terms of their very existence.
For a variety of reasons, not the least of which is the COVID-19 pandemic, many consumers are re-evaluating what is important. With a slumping economy and many economic indicators down, consumers are re-evaluating how they want to re-build.
That means that those factors that have been held sacred for so long, such as growth and GDP, may become less critical in the years ahead.
A recent episode of the TED Radio Hour analyzed this very idea. Increasingly, societies will demand that we work toward a “circular economy.”
In such an economy, instead of producing things until the cycle ends, like the burning of fossil fuels, the end of the cycle is also the beginning of a new one.
This is not to say that these purely economic indicators will become irrelevant. The primary goal of a for-profit business will continue to be just that: to generate a profit.
However, a growing number of consumers, especially younger consumers, are deciding profitability is no longer enough. These people will also look for businesses that minimize their impact on the planet.
How Are Small Businesses Vulnerable?
Small businesses tend to be less problematic in terms of sustainability than big businesses. In fact, many big businesses that are not very sustainable, such as the huge meat producers in the US, could be more sustainable on a smaller, localized scale.
But even the smallest of operations are not immune. A perfect example of this are independently-owned coffee shops. As more consumers look to cut back on single-use packaging (especially plastic), it may be more difficult for people to justify a daily visit.
And COVID-19 certainly hasn’t helped in that regard. Coffee shops that allowed customers to bring their own, reusable mugs have largely halted this initiative.
That said, there are ways coffee shops and other restaurants and cafes can potentially address this issue. For example, sticking to more recyclable or even compostable plastics can help keep our waterways clean. Some businesses are providing strawless lids unless otherwise requested.
Unfortunately, even compostable plastics are not a perfect solution. The issue here is that they can’t be composted at home; instead, they must be taken to an industrial facility. Plus, compostable plastics can’t be recycled like other plastics.
The takeaway here is that businesses have a lot to think about. There may come a time where large swaths of consumers choose to completely avoid businesses that don’t operate sustainably.
And businesses shouldn’t assume consumers will patronize them simply because they’ve been around a while.
Younger generations, such as Gen Z, will be the driving force of sustainability. As these people come into their prime, sustainable business practices may become a focal point.
So, What Can We Do About It?
Big businesses and small businesses alike should invest in sustainable business practices in the coming decades. Some surveyed show that a slight majority of consumers care about sustainable products, and consumption of sustainable products is on the rise.
Every business is different and thus will have different sustainability considerations. Whether it’s converting energy sources to renewable, cutting back on solid waste, or ceasing to dump harmful chemicals in our waterways, there is a lot to think about.
However, businesses who do so will likely save money in the long run, put themselves in line with future regulations, and, perhaps most importantly, curry favor with future customers and investors.
While building a sustainable business operation can be costly in the short run, it will pay off in the long run.
As more consumers and investors become conscious of sustainability, the financial sustainability of business will also depend on minimizing environmental impacts.
Bob Haegele is a personal finance writer, business owner, and entrepreneur. He has been writing about personal finance since 2017 and manages several websites, including Modest Money and The Frugal Fellow. He regularly contributes to popular websites such as The Ladders, The Good Men Project, and Talk Markets. He writes about topics such as making and saving money, business finance, and entrepreneurship. Follow him on Twitter @thefellowfrugal.