Green business refers to the practice of conducting business operations in an environmentally responsible and sustainable manner. It involves adopting strategies and initiatives that minimize negative impacts on the environment, preserve resources, and promote sustainable development.
Green businesses actively seek to reduce their carbon footprint by implementing energy-efficient practices, utilizing renewable energy sources, and adopting eco-friendly technologies. They also prioritize waste reduction, recycling, and responsible disposal methods.
Furthermore, green businesses often emphasize social responsibility by promoting fair labour practices, supporting local communities, and contributing to social causes. By operating as green businesses, organizations aim to not only mitigate environmental harm but also create a positive impact on society and foster a sustainable future.
Given their weight on the global economic scenario, small and medium-sized businesses play a crucial role in the sustainable transition. Small and medium-sized enterprises (SMEs), in fact, bring a significant contribution to the global economy, contributing to job creation and economic growth. They account for 90% of businesses worldwide and more than 50% of global employment.
SMEs are often more flexible and adaptable than larger companies as the decision-making process, as well as the implementation of change, is often faster. They are also closer to their local communities and can have a significant impact on the environment in which they operate. This means that SMEs have a responsibility to implement sustainable practices that benefit both their business and the environment.
In the last few years, sustainability has become a key theme for SMEs as well, for several factors. Firstly, growing attention from consumers on sustainability issues has transformed the matter in a way to attract new customers and retain the existing customer base.
It should also be remembered that measuring, analysing, and monitoring ESG parameters helps companies gain visibility into strategic elements of the business, allowing them to detect risks and inefficiencies that, if not addressed, could compromise the company's competitiveness.
In addition, regulators have been strengthening companies' sustainability obligations in order to broaden the range of companies required to report on their ESG practices.
Sustainability for business encompasses a range of aspects that should be carefully considered in today's world. Firstly, companies need to assess their environmental impact and strive to reduce their carbon footprint. This involves implementing energy-efficient practices, adopting renewable energy sources, and minimizing waste generation.
Secondly, social responsibility is crucial, including fair labour practices, diversity and inclusion, and community engagement. Businesses must prioritize ethical sourcing, support local economies, and contribute to social causes.
Lastly, economic sustainability is vital for long-term success. Companies should focus on creating a sustainable business model that ensures profitability while also considering the long-term impact on resources and the economy.
SMEs need to take into consideration all these aspects when drawing their business sustainability strategies. Addressing these, businesses can not only contribute to a more sustainable future but also enhance their reputation and attract environmentally and socially conscious customers.
Sustainability also becomes an opportunity for SMEs to position themselves on the market with innovative products and services capable of attracting public or private investment. In fact, the European regulatory framework includes several instruments aimed at incentivising precisely those realities that make sustainability the core of their business model.
Among these is the European Taxonomy, a mechanism for classifying activities that can be considered sustainable based on their alignment with EU environmental objectives and compliance with certain social clauses.
This classification system was introduced in July 2020 precisely to support entities contributing to the achievement of the EU sustainability goals for 2030, to provide a common language for activities and products that can be defined as sustainable, and to promote greater transparency of the impacts of activities and products with respect to sustainability goals.
According to EU Regulation 2020/852, which introduced EU Taxonomy, an activity, a product, or service can be considered “sustainable”, if:
In addition, the regulation provides indication on the steps that an economic activity must take in order to make a substantial contribution or to do no significant harm to any of these objectives.
A classification created not only to promote greater transparency within the market, but also to redirect capital flows towards sustainable investments in order to achieve sustainable and inclusive growth. The same criteria are increasingly used to identify projects that can access to public funding, both at EU at a national level. Therefore, form businesses, including SMEs, sustainability opens up new opportunities on the market.
Sustainability in business is reflected through various practices that prioritize environmental responsibility, social impact, and economic viability. Some common examples of sustainability practices include reducing greenhouse gas emissions, implementing energy-efficient technologies, and utilizing renewable energy sources.
Companies also focus on responsibly sourcing materials, promoting ethical labour practices, and ensuring fair wages for workers. Embracing circular economy principles, such as recycling and reusing materials, is another significant practice.
Additionally, businesses are increasingly adopting eco-friendly packaging solutions, implementing waste reduction measures, and supporting local communities through philanthropic initiatives. By incorporating these sustainability practices, businesses can contribute to a greener planet, enhance their reputation, and cultivate long-term success.
These practises have been boosted by increasingly stringent obligations and regulations for companies that are also affecting SMEs. The approval of the Corporate Sustainability Reporting Directive has extended the obligation to report on sustainability practices to SMEs listed on the European market as well. Therefore, even for SMEs, it is important to adopt green procurement strategies.
Green procurement refers to the acquisition of products with a reduced environmental impact, which provides the same or improved function and performance but are less harmful to human health and the environment. It involves the use of materials with a low environmental impact and that are more sustainable, as well as the implementation of practices that promote sustainability and the choice of the less impacting option of sourcing and production.
Find out more about Green Procurement
As we have mentioned, changes in the European regulatory scenario have extended several obligations to SMEs. Specifically, the Corporate Sustainability Reporting Directive extends the obligation to report on non-financial matters to listed SMEs starting from 2027.
The CSRD aims to provide a common framework for sustainability reporting while allowing some flexibility to accommodate different business contexts (companies’ size and industry). According to the directive, companies that follow under the scope of the legislation have to include certain information in their sustainability reports:
Reframing procurement strategies from a sustainable perspective has become especially important considering the weight that supply chains have on the sustainability of business processes. It is not enough, in fact, to implement sustainability practices within corporate boundaries, as a large part of emissions (more than 90%) is generated along the supply chain.
This means that to meet sustainability criteria, companies must also assess the sustainability of their suppliers, upstream and downstream in the supply chain. This is important because many SMEs are themselves part of the supply chains of large companies. Participation in these ecosystems is often vital for SMEs to gain access to market opportunities and projects they could not access on their own.
Looking at the sustainability of one's supply chain, as well as internally, therefore becomes a strategic element for competitiveness.
Explore the importance of chain sustainability for SMEs further
It is not only a matter of opportunities and competitiveness: SMEs must also comply with regulatory obligations that indirectly affect them. The Corporate Sustainability Due Diligence Directive (CSDDD), for example, was not directly aimed to SMEs but in some cases can extend to them.
It is a legislation that was introduced by the Commission in February 2022 to encourage businesses to adopt sustainable and responsible corporate behaviour by considering human rights and environmental factors in their operations and governance.
The directive requires companies, including subsidiaries and value chains, to identify, prevent, mitigate, and account for negative impacts on human rights and the environment. Additionally, it introduces directors' responsibilities to oversee due diligence implementation and integrate it into the corporate strategy.
It applies to large EU limited liability companies and certain high-impact sectors, as well as non-EU companies operating in the EU. While small and medium-sized enterprises (SMEs) are not directly obligated, they may be indirectly affected if they are part of the supply chain of a company subject to the directive.
To comply, companies must integrate due diligence into their policies, address potential impacts, establish a complaints procedure, monitor the effectiveness of measures, and communicate their efforts publicly.
Sustainability has thus entered the upstream and downstream processes of the supply chain and is progressively covering more and more relevant aspects also for SMEs. Another aspect covered by the European framework concerns emissions that are generated within the market, also because of imports goods or raw materials.
This aspect is regulated by the Carbon Border Adjustment Mechanism, a tool introduced by the European Union to address the relocation of carbon emissions and is a key component of the EU's "Fit for 55%" agenda. Its main objective is to align the carbon price of domestic products with imported goods, ensuring that the EU's climate policies are not undermined by production shifting to countries with lower environmental standards or by the substitution of EU products with higher carbon intensity imports.
It entered into force from October 1, 2023, and for the moment it applies only to imports of cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. EU importers of these goods will be required to report the volume of their imports and the greenhouse gas emissions embedded in their production, without any financial adjustment during this phase. The first report must be produced by January 31st, 2024.
Starting from 2026, importers will be required to purchase and surrender the corresponding number of "C.B.A.M certificates" for the greenhouse gas emissions embedded in the CBAM-covered imported goods.
ESG performance assessment considers a number of very heterogeneous factors (related to environmental, social and corporate governance dimensions) that are already very difficult to analyse internally.
When this assessment has to be done at the supply chain level, the challenge becomes even more complicated. However, it is important for the SMEs to ensure that this analysis is conducted not only before a company is included in its supply chain, but also to continually monitor any changes in supplier performance concerning ESG indicators.
In fact, these criteria consider, among other things, the stability of the business's economic model and thus can provide important insights into, for example, a company's risk of supply disruption; or, the analysis might show that a supplier is more exposed to environmental risks, or that there are sources closer to where the company operates.
Although this heterogeneity of factors can complicate the analytical phase, it also implies that the benefits associated with good sustainability practices ripple through different areas of the business: from increased financial stability to improved brand reputation, to access to funding opportunities and projects reserved only for companies that show good ESG performance.
Cut costs and inefficiencies
Apart from a better sourcing strategy, the visibility that the company needs to have on its practices and processes - which is necessary to monitor ESG performances - makes detective inefficiencies easier. Abnormal energy consumption, for example, could indicate the malfunction of a machine or system, or non-sustainable habits adopted within the company, such as leaving lights or HVAC systems on even when the office is empty. By promptly detecting these inefficiencies, companies can take action to promote more sustainable behaviours, both for the environment and for their own budgets.
Consolidate and expand your market presence
Sustainability is becoming an increasingly important factor in consumers' market choices. Market surveys show that the percentage of consumers choosing a product or brand with this criterion is increasing, with more and more consumers saying they are willing to pay more for sustainable products.
Sustainability also involves a commitment to society, so companies often choose to support projects in the national or local area, or abroad. These projects, in addition to having positive impacts on the environment, are also a way for the company to make itself known to potential consumers or partners. Sustainability thus also becomes a factor that helps companies respond to demand needs, with opportunities to make their brands known to new market segments as well.
Elevate your business competitiveness by attracting the best talents
In recent years company culture has become a key factor that workers take into consideration when choosing whether to take on a new job or to stay with their current employer.
As the difficulty to find the right profiles increases, especially in some industries, corporate culture and values will play an increasingly important role in a company's ability to attract the best talent for a position and, therefore, on its competitiveness.
Sustainability is a commitment that cuts across all areas of business and therefore requires a change in corporate culture, as well as the involvement of the entire workforce.
Changes that are often easier to implement in SMEs precisely because of their inclination toward innovation and a more flexible and less complex corporate structure. Often, however, even with these assumptions, companies that want to implement a sustainable business transformation find it difficult to identify the KPIs to be measured, as well as to assess current performance and define the areas of the business that need to be acted upon.
When it comes to implementing business sustainability strategies, it's important to start with a comprehensive and well-planned approach. The first step is to assess the current environmental impact of the business. This involves conducting an audit to identify areas of improvement and areas where sustainability measures can be implemented.
Next, SMEs should set clear goals and objectives that align with the company's values and desired outcomes. These goals should be specific, measurable, achievable, relevant, and time-bound (SMART). Once the goals are established, it's crucial to engage and educate employees about the importance of sustainability and their role in achieving the set objectives. This can be done through training programs, workshops, and regular communication.
Additionally, businesses should consider adopting green practices such as reducing energy consumption, implementing recycling programs, and using sustainable materials. Collaborating with suppliers who share the same sustainability values is also essential.
Finally, it is crucial to regularly monitor and evaluate the progress made towards achieving sustainability goals and make adjustments as necessary. By starting with a clear plan, involving employees, and implementing sustainable practices, businesses can create a solid foundation for their sustainability journey.
The importance of ESG standards
Standards play a strategic role in sustainable transformation, as they provide companies with guidance on which KPIs to monitor, as well as provide all relevant stakeholders (companies, regulators, credit institutions and banks, citizens, etc.) with common metrics with which to compare companies' performances.
In assessing and monitoring such performance, ESG standards play a crucial role. These standards refer to a set of operational standards of an organization's environmental, social and governance activities.
Go into greater depth about the role of ESG standards
ESG indicators relate to standards developed by internationally recognized bodies or
organizations, such as the Global Reporting Initiative (GRI), an international non-profit
body established for the purpose of setting sustainable performance reporting standards for
companies and organizations of any size, belonging to any sector and country in the world.
GRI standards provide a set of general criteria which apply to all companies that have the obligation or choose to publish a sustainability report, as well as specific criteria that vary depending on the industries and sectors.
Discover the importance of GRI standards in sustainability reporting
Synesgy supports SMEs that want to transform their business in a sustainable way, with an ESG solution that accompanies them along this path: from the collection of the necessary data and analysis to the certification of sustainability performance and the evaluation of efficiency strategies.
A standardized and certified approach
Central to the framework built by Synesgy are self-assessment questionnaires developed according to internationally recognized standards - such as UNGC, GRI, UN 17 SDGs, EBA LOM, and EU Taxonomy for Sustainable Activities -, and based on a two-tier approach:
The questionnaires also take into consideration the regulatory requirements imposed by the country where the company operates to provide a more precise analysis.
Certified and trusted data
Synesgy’s framework can count on certified and trusted data: the questionnaires are, in fact, certified by the CRIF Rating Agency (CRA), which is recognized at the European level.
Additionally, the framework involves both automatic and manual checks to guarantee the quality of data: the platform has an Alert system which reports any detected data inaccuracy to the Synesgy team. After careful evaluation, the team may decide to request additional information.
This ensures that the information inserted in the questionnaire is correct and up-to-date and therefore that the result reflects the real situation of the company.
Unlock the benefits of a sustainable business certification
Synesgy allows for an easy visualization of the overall score, as well the score obtained in the 5 macro sections of the questionnaire (Business, Environment, Social, Governance, and Sector). From the platform, SMEs can easily download the Synesgy certification, which has a 12-month validity. A sustainable business certification is a valuable tool that not only validates a company's sustainability efforts but also opens doors to new opportunities and stakeholders.
Firstly, it serves as a credible endorsement of the company's commitment to sustainability, enhancing its reputation and brand image. The certification demonstrates to customers, investors, and stakeholders that the business operates with environmental consciousness and ethical practices.
Additionally, it helps companies differentiate themselves from competitors, attracting environmentally conscious consumers and investors who prioritize sustainability. Moreover, a sustainable business certification provides a framework for ongoing improvement, guiding companies to implement best practices and measure their progress towards sustainability goals.
Make your business more sustainable with Synesgy
From the platform, along with the certificate, companies can also download a report, which provides the complete analysis of the individual Environmental, Social, Governance and related sections of the industry sector to which the organization belongs that contribute to compose the ESG score and relative ranking.
In addition to the report, each company is provided with an Action Plan, a list of recommended to-do actions to be undertaken in order to improve the result in the future.
With this combination of technology and expertise, Synesgy helps SMEs to tackle the sustainable transition, turning challenges into opportunities.