Financial solutions to unleash the growth of MSMEs in the textile industry
Why Sustainability Is Imperative for SMEs?

Corporates and large companies are trying to embed sustainability into their business models and setting overarching targets to achieve. But what about SMEs? How the backbone of the most economies are doing when it comes to integrate sustainability into their businesses? 

SMEs represent 90% of all businesses worldwide and contribute up to 45% of total employment. In Europe, they account for 99% of all enterprises, employ around 100 million people and account for more than half of Europe’s GDP. Individually they might not have a big impact but their cumulative impact for the better or the worse can’t be ignored. While they have a huge potential to bring our collective sustainability journey to the next level it doesn’t seem that SMEs are aware of the value they can add to their businesses and the difference they can make for the planet and society by passing to sustainable business models! 

Europe is the front runner when it comes to transition to green economy. This aim is consistently supported by new legislations and frameworks. Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy are two of the most effective and bounding tools of the European Commission (EC) asking large companies and SMEs to increase transparency and comparability of their ESG data. SMEs are a special and complex category when it comes to CSRD. As they vary in size and revenues there are specific criteria to separate who need to disclose under mandatory regime and who can disclose voluntarily. If a SME is listed on regulated European markets and having 2 of the following 3 conditions they fall into mandatory reporting regime;

  • a balance sheet total of EUR 5 million or above, 
  • a net turnover of EUR 10 million or above, 
  • an average of 50 or more employees during the financial year. 

Essentially, these specific criteria leave behind a considerable number of SMEs on voluntary track. However, it’s imperative for SMEs to account and act on their environmental and social impact regardless of which category they fall into in terms of legislation. There are several convincing reasons why SMEs would benefit starting their sustainability strategy and reporting today. 

First of all, identifying ESG value drivers for their businesses will give them chance to grab opportunities and, to avoid or be prepared for the risks they may face in the future. There are several factors to consider under digital, ecological and sociological transition concepts. Identified material value drivers may have an impact on profitability, growth, reputation, competitive positioning etc. Overall, developing an ESG strategy and disclosing sustainability reports would benefit SMEs in terms of finding financing through banks and investors, satisfying requirements from value chain partners, and aligning with expectations of customers and employees.

Let’s elaborate a little more on each concept:

  • ESG ratings are becoming the new global criteria to allocate funds and loans to businesses, and SMEs being the most in need to financial capitals are on a tiny ice. Enterprises not doing fine in each of the ESG pillars are not favored when it comes to future investments. Therefore, if a small business’s target is to grow it needs to be competitive in its field and needs to put on ESG glasses. 
  • SMEs that are providing service or goods to large businesses are part of those companies’ value chain. As larger businesses increasingly favour working with certified and transparent suppliers, in order not to lose clients and partners SMEs need to perform better in sustainability context and be ready to supply necessary information to clients.
  • We are becoming more and more aware and sustainability literate in our societies. Consumers now prefer products that are sustainably sourced, CO2 neutral, and produced in line with human rights and animal welfare. In addition, SMEs are in advantage when it comes to attract new talents if they proactively implement sustainability and become more competitive in their sector.
  • Lastly, potential climate change impacts shouldn’t be underestimated! Climate change can bring several risks to businesses regardless of their size. These risks can be physical risks such as water scarcity, extreme weather events that damage infrastructures and disrupt supply chains or, transition risks that arise from policy changes, new technologies that are born from the resource-constraint world dynamics. 

Small and medium businesses don’t need to wait till they are impacted by a sustainability incident. There are still numerous SMEs that are ‘reactive’ rather than ‘proactive’ concerning above mentioned matters! SMEs that adopt a proactive approach in transitioning into sustainable business models, which include green innovation, will increase their profits in the long run through optimising operations, increasing efficiencies and reducing risks that cause financial loss. In the same time, communications of positive impact will bring competitive advantage and attract new clients and employees. In this frame, the biggest challenge of SMEs is ‘know-how’ when it comes to integrate sustainability into their business models. Collection of data, impact assessment and development of sector specific strategy require subject matter expertise which lacks in their traditional business-as-usual approach.

What are the solutions?

Depending on the size and complexity of their supply chain, SMEs have different options to embark on their sustainability journey. They can create a sustainability team or employ a sustainability manager as a start. Another very effective strategy is to work with independent sustainability consultants. Getting external consultation from expert consultants provide them with necessary knowledge, training and creation of a vision on material topics for the specific sectors. This type of collaboration is not only proven to be a cost-effective solution for SMEs to build up a vision and implement progressive change in their business, but also leads to consolidation of a relationship that lasts long in time, and is deepened with confidentiality and mutual trust for both parties.

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We are swimming in plastic wastes in our oceans? How did it happen? What we can do about it?

It’s almost a century now that plastics entered in our lives. They’ve been used in various industries, gave us ease and convenience to produce many end products which were used in sectors such as medicine, transport, consumer goods. Plastics are very comfortable to use but where they go after we are done with them? Production numbers reach to millions of tons of plastic products per year with an exponential increase since 1950s. 

Disposable plastic products are the most in demand. Single use plastics make up 40 percent of all, many of these products hold rather a short life once purchased. In a timescale of minutes to hours they turn into trash. We have various types of plastics around us, some of them are made more durable, stronger or flexible by integrating additives in their production. But these additives also render them be more and more persistent once they become litter that we need to deal with. Recycle rates and numbers of waste produced are not reliable and most of the time not attainable because of transboundary trade in plastic waste that is happening around the world. Did you know that plastic waste that is recorded as recycled by developed countries mostly exported to emerging economies?

The convenience of lower processing costs and less environmental impact in the statistics of the country of origin are not sustainable solutions for our earth as plastic waste doesn’t recognize a national border any more. On the other side of the coin, how adequately plastic wastes can be processed by importing countries as they typically lack proper legislation, methods and tools to deal with it. Accumulated and abandoned plastic wastes, then, can easily be spread in the environment by wind, rain and flows. Their ultimate destination is our oceans. Once they reach the coast they can be carried away through the currents into to the oceans.  The next step is the formation of microplastics as plastics will degrade into much smaller pieces through sunlight, wind and waves. It’s a scientific fact but also not so difficult to imagine their effects on ecosystem. It is not possible to hide the consequences as the ugly truth of plastics will find the way to propel itself in the nature.

In a world of plastics -of all kinds- we do not have luxury anymore to produce, purchase and discard plastics in a reckless manner. We can’t find easy ways to wash our hands off the plastic waste that is produced in our countries. The urge for innovative materials is at the door. We have to be serious and effective about recycling while individually we should put effort to change our purchasing habits.

Net-Zero, Climate Change and Sustainability

In today’s world, one of the biggest challenges seem to be enlightening our society about core ideals and meaning behind the term ‘sustainability’. We, humans, tend to adopt some concepts in isolation to such a degree that we may miss the bigger picture. This is valid especially for a concept like sustainability which should be better seen holistically, and integrated in each possible sector through a coordinated approach.

Recently, efforts of industries to tackle their carbon emissions without a doubt take attention. Net-zero challenge drives businesses to neutralize their carbon imprint on environment. This is a milestone for environment in the sense of widespread application of renewable energy technologies whose research and development initiatives go back a lengthy way. It took long time to arrive this point, and finally see that these technologies are being actually adopted by many industries and local governments, not a prototype anymore but a means of energy supply in use.

Coming back to the holistic approach mentioned in the beginning: as much as neutralizing our carbon imprint is fundamental, it is not enough; in other words, it won’t tackle the climate change and unsustainable use of natural resources alone.  Net-zero efforts should be incorporated in the master sustainability plans. There are many dimensions of sustainability issues: water consumption and contamination, extraction of ingredients, land cover changes and biodiversity lost, generation of different types of waste streams and their management are just a few of them. Sustainability is the concept through which we try to maintain our resources that we rely on and use today so that next generations can do the same.

Net-zero is one of the many targets that fall within the goals to achieve true sustainability. Our problem is not about ‘not knowing how’ to achieve these goals. In fact, we have very well documented targets and guidelines thanks to the international organizations’ initiatives and principles. Our problem stems from not implementing those goals or being extremely slow and ineffective in our actions towards them. Anyone remembers Millennium Development Goals? Yes, when we entered the new millennia, under the leadership of United Nations eight international development goals were established and the target was to achieve those goals in 15 years. Very sadly, success rate remained very low. And now, we are in the race to achieve new set of goals for sustainable development, aka SDGs. New goals include the previous ones and even go beyond and extend them to new realms of sustainability.

Let’s come back to the problem. Why we are so slow? Are we not genuine enough on our commitment? Do we see them as obligations instead of our real vision for the future? What is needed to be decisive and quick in motion?

Being decisive and effective require us to get out of our comfort zone and change. In order to make a big impact we have to concentrate on producing new and innovative solutions, and leave behind what is old and unsustainable although cheap and easy. Future lies on innovation. New materials, new manufacturing, new patterns. A hundred years ago, a prominent breakthrough was the invention of plastics. Today, we are dealing with the side effects of century-long use of then-innovative material. Have we become too comfortable over time? Insisting on using what is comfortable on daily basis over what would be better for everyone and everything on earth for the longer term. Now, please keep in mind the example of plastics and extend the concept to all other materials we use throughout our lives, including dwellings, infrastructure, all kinds of goods from essential to luxury.

As you may think as well, achieving sustainability will require changing certain habits and patterns that we long got used to both on collective and individual sense. Let’s face it! It’s a two-way street. Responsible production and responsible consumption. 

Front runners of this race are the ones in power, the ones who govern, lead and have the authority to make laws on national and international levels. Innovation is the key to green and circular economies. However, this ideal might take very long time to achieve if not supported by solid and decisive policies. At this point, the greatest responsibility falls to national and international decision makers and policy builders. A vibrant and systematic partnership with private sector is a must and this goal is already included in SDGs. There is a need to create competitive new markets that focus on reuse and recycle, and encourage actors in industry and business to break new grounds, innovate eco-friendly and efficient materials and ingredients that would eventually shape the scope of the new economy. This also would be a win-win situation for all. Genuine sustainability strategies would help businesses hold competitive advantage on their side and increase value of their products, in the same time, it would fasten the process of transitioning to a circular and even more robust economy globally. 

Change is possible, change is calling! Who will respond to it and when?

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ECO-ETHICS, GREENWASHING AND SUSTAINABILITY

In the time of a transition to sustainable living, awareness for our actions and respect for the planet that we live in, our comprehension and judgement of some very important concepts are vital. 

Lately, we started hearing more often some terms in social and digital campaigns, websites, commercials. In the speed of light, majority of brands became eco-ethical and sustainable. It is astonishing how quickly it’s been solved the issue of becoming more environmentally friendly, socially sound and economically appealing. If it was so easy why we haven’t done it before? It might be a dangerous game for companies to assert themselves already accomplished and mislead consumers — although only taken small and insignificant steps, sometimes no steps.

So, how a conscious consumer can differentiate between a solid action and a greenwash?

First, we need to understand the logic behind the term sustainability, so that we can easily figure out if a brand or company being honest and knowing what they are doing. Companies which are meaning to revolutionize their business in line with sustainability not often but always have a genuine sustainability mission. They know what they are doing, why they are doing it and, able to discuss, scientifically prove, how they are doing it. Those missions are well studied, carefully designed and are started to be incorporated in their business models. Genuine missions require well planned and systematic investments and innovations, and mostly follow a bottom up approach.

Let’s pass to greenwashing. Do you want to diagnose a brand or company that is greenwashing? Pay attention to these: you often read very fancy and trendy words on how they are sustainable but no specific details how they are doing it. They don’t have any well-structured, long term plans or a roadmap on how to achieve set-goals? Any major investments? Any innovations that they break-through in their market? Or instead you hear repeatedly how they define themselves using trendy adjectives, however, acting in a tiny, narrow arena of a single aspect which is not coordinated with the holistic philosophy of sustainability? 

Companies that put real effort in sustainable production systems holistically integrate their business plans into all compartments of sustainability. Bad news for some: sustainability cannot be achieved with single targets! You cannot render a product sustainable by acting on a single point of it! Sustainable development has three pillars, so actions should focus on all three compartments. Can you imagine the dynamics lie behind a product? Products have a history, and the history involves environment, society and economy… from material sourcing to disposal of a product we use natural resources, energy, and labor. Therefore, if a product is sustainable it has less impact and more benefit for environment, for society and for economy.

Seems that, nowadays, being a conscious consumer is harder than ever, in the same time, if achieved, it makes of a bigger impact. Brands/companies that are committed and visionary enough to make a breakthrough in their market and pioneer in each compartment of sustainability deserve appreciation by consumers.