Monday, November 21, 2011

How “sustainable” should be the strategy of a startup or a small company?

Sustainability has been going around as a buzz word these days but what is the meaning of sustainability? Sustainability in a business context is the long term success of a company from more than just economic perspective. In old economy, companies were considered to sustain in long run if their financials were strong, while the modern market asks companies to be sustainable according to social, cultural and environmental measures as well. But is it beneficial for a start up or a small business to revisit their strategy thinking about these measures? The following article evaluates costs and benefits for a start up or small business to incorporate sustainability in their strategy from different perspectives.


Internal and External Business Processes

Today, large corporations are finding it difficult to make their internal operations more society and environment friendly. If small companies incorporate sustainability in their strategy at an early stage, then their operations would also inherit good practices earlier and at a lower cost. For example, having efficient buildings, optimally utilized facilities and machinery, use of recycled materials, sustainable supply chain will continue to save cost even when the company grows larger.


Consumers and Employees

Spreading consumer awareness about using sustainable products and services, providing clean and healthy environments for employees and similar sustainable initiatives does not cost a lot. But doing so by putting consumers and employees at the centre of strategy helps a small firm differentiate their products or services in the market, improving their work environment, creating a better brand value and in turn generating greater revenue.


Government and External Factors

Modern governments in developed as well as developing nations have started encouraging businesses to go sustainable by providing various monetary benefits. For example, cheap raw materials for producing renewable energy, lower taxes for “green” products or services. Governments are also increasing costs for the companies which are not sustainable, for example, carbon taxes. Having sustainability in strategy or core values helps developing environmental and social partnerships with NGOs and setting standards which can lead to early mover advantage in marketing. For example, a small firm can reduce waste production and set a standard for waste production in its market. In such a case, its competitors would have to comply with such standards to avoid customer dissatisfaction.


Innovation

The key advantage of involving sustainability goals and constraints in your strategy is that it brings out innovation. One of the examples of sustainability driven innovation is Zipcar car sharing. Making car rentals convenient for the community and reducing carbon emissions by optimal use of cars were the drivers behind the car sharing model of Zipcar. Today, Zipcar is a $200M company. Need to reduce water and energy usage has driven technology innovations and better quality of products.

After all, economics says that goal behind any business is to make profit. The article provides sufficient arguments to conclude that incorporating sustainability in a small company’s strategy will not just satisfy the desire of giving back to society or maintaining ethical integrity but can possibly reduce costs, increase revenues and bring innovation.

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