Sustainability: Is It a Good Choice for Small Companies?

The search for competitive advantage is an ongoing quest for companies in the United States. As new technologies continue to develop at a lightning fast rate, and efficiencies are gained in all areas of production, one relatively new endeavor is becoming increasingly important: companies around the world are looking for ways to become more "sustainable."

In recent years, sustainability has become a popular topic as business leaders face hardships with the poor economy in the United States. In fact, sustainability strategies have been growing in popularity over the past several decades. Young and Tilley (2006) describe in a recent article that the 1980’s and 1990’s were decades of eco-awareness following the pollution aware decades of the 1960’s and 1970’s. Now, as companies face increasing problems in trying to achieve profitability, managers are looking for ways to decrease costs while still maintaining quality products and services. Managers are looking for ways to survive. However, mere survival skills will not give a company much hope for the future. This is where the concept of sustainability becomes important.

It is important that sustainability concepts are able to produce visible results for the companies that implement them. Without visible results, it is likely that companies will choose not to pursue these strategies. However, researchers have been able to identify ways to ensure success through sustainability. It has been found that a competitive advantage can be accomplished through a “balance between economic progress, social responsibility, and environmental protection” (Epstein, 2008). With this formula for competitive advantage, more companies will be willing to implement sustainability concepts.

With the growing popularity of sustainability, it is not surprising that the trend is also growing in popularity among entrepreneurs. According to Gibbs (2009) in his recent article, sustainability entrepreneurs are a new breed of entrepreneur that work to combine the social, economic, and environmental aspects of sustainability. These business owners are leading the trend towards successful sustainability. Using the three valuable components of the formula for competitive advantage that were defined by Gibbs (2009), these entrepreneurs are starting their companies from the ground up in a way that produces an immediate advantage in their respective industries.

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Sustainability entrepreneurs have an alternative approach to doing business that also assists them in building their advantage. In common practice, the primary strategy of businesses is to do whatever it takes to earn a profit. While profit is key to the success of any business, it is not the primary concern of the sustainability entrepreneur. Instead, these business owners focus on environmental health and social concerns (Gibbs, 2009). These owners are more likely than the traditional entrepreneurs to focus on reducing their companies’ carbon footprint and keeping their employees happy.

It is common knowledge that employee happiness is essential to the long-term viability of a company. However, it is difficult to imagine a company finding long-term success using a strategy that places social concerns above all else. A recent article by Gundlach and Zivnuska (2010) addresses the topic of sustainability entrepreneurs from the standpoint of the differences in business education required for sustainability entrepreneurs versus traditional entrepreneurs. In the article, the authors point out that curriculum must be changed to suit the drive and passion of these social entrepreneurs who often will not accept the traditional concepts (Gundlach and Zivnuska, 2010).

Sustainability entrepreneurs, by definition, show a concern for society, the economy, and the environment. However, another group of entrepreneurs is known for their ability to combine an environmental focus with their for-profit business. These entrepreneurs have been named ecopreneurs (Gibbs, 2009). Ecopreneurs, by definition, are entrepreneurs who combine their business activities with an environmental awareness in order to “shift the basis of economic development towards a more environmentally friendly basis” (Gibbs, 2009). These ecopreneurs are at the forefront of leading the way towards “going green.”

Sustainability is a good choice for companies, the environment, and society. These strategies have numerous benefits for everyone. However, sustainability strategies may not be feasible for a number of companies. Small and medium sized companies face a number of challenges at start-up and throughout the life of the company. These challenges include barriers to entry, high operating costs, and small customer base. All of the challenges affect a company’s ability to spend money. With tight budgets, it can be difficult to convince managers to pursue an often costly move towards an environmental focus or social concern strategy.

Several researchers have focused on small and medium sized business, in recent years, in an effort to understand these businesses and how they approach environmental concerns or strategies. Cordano, Marshall, and Silverman (2010) looked at one particular industry for their research to try to uncover how these businesses choose to use sustainability principles. One industry they chose to focus on is the wine industry in the United States. This industry is composed of primarily small and medium sized businesses and has recently started promoting a movement towards a voluntary adoption of environmental practices (Cordano; Marshall and Silverman, 2010). This study could provide valuable information on how these companies approach environmental issues. Since the study looks at managers’ acceptance of a voluntary program, it will give a great picture of how companies are choosing to implement environmental practices and whether or not the financial burden of implementing them is a concern.

After conducting their research among small and medium sized businesses in the U.S wine industry, Cordano, Marshall, and Silverman (2010) we able to conclude that this particular group and size of businesses did show favorable acceptance of environmental practices. Furthermore, the group of researchers was able to indentify some aspects of the data they gathered that could be applicable to other industries. The first of their findings that could have widespread applications across different industries is the fact that they found that the environmental plan needs to be appropriate for the size of business (Cordano; Marshall; and Silverman, 2010). In other words, the plan needs to be modest and affordable. While grand-scale plans for solving environmental concerns are appealing, they lack financial feasibility for most small and medium sized companies.

The other important part of Cordano, Marshall, and Silverman’s (2010) research findings is that they suggest that the environmental plans be voluntarily adopted and implemented by an industry’s trade association. The researchers discussed the fact that companies that are small or medium sized often use informal networks of their peers to gather information or to identify trends (Cordano; Marshall; and Silverman, 2010). This discovery is key to understanding how these businesses identify trends that they may want to associate with, such as implementing favorable environmental practices.

The study by Cordano, Marshall, and Silverman (2010) noted that environmental plans for small businesses need to be scaled to be financial feasible. This is an important note that has been made by other researchers as well and is key to the acceptance of an environmental plan by these companies. In a study by Tilley (1999), she noted that small companies often feel pressured to implement favorable environmental practices. While they might agree that the practices are good for the environment, they may not be financially good for their company. She further noted that environmental plans that are composed for large companies cannot be simply scaled down (Tilley, 1999). There are too many factors that apply to larger companies but not small companies. Instead, the plan needs to be developed specifically for small companies so that it can be realistically implemented by companies with structures unique to small companies.

Tilley (1999) was also able to identify a number of other critical factors that play a part in small businesses being able to implement environmental plans. The first question she looked to resolve was why there is a gap between the attitude small business managers have about environmental practices and the actions they take towards implementing environmental practices (Tilley, 1999). Through her research, Tilley (1999) was able to identify several factors that affect small business managers and their choice to implement environmental plans.

Tilley’s (1999) study also looked at other important factors in small business managers’ decision to implement environmental practices. The second factor she investigated is how the gap between small business attitude and small business action can be narrowed or if it can be narrowed (Tilley, 1999). In order to narrow this gap, companies need to look to several identifiable driving forces to environmental practices. Tilley (1999) discovered that a majority of small business only implement minor improvements to their environmental practices.

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In additional the list of driving forces to environmental practices, Tilley (1999) noted some approaches that can be taken by small companies or the people involved to increase a company’s involvement in environmental practices. The first approach is a “non-interventionalist” approach which Tilley (1999) called the “business as usual – laissez faire approach.” The other three approaches require intervention and include “weaken the resistant forces,” “strengthen the driving forces,” and a combination of weakening the resistant forces and strengthening the driving forces (Tilley, 1999).

The third important topic Tilley (1999) investigated in her study of small business and their use of environmental practices is whether or not small businesses can be convinced to pursue environmentally friendly practices. While it is important that methods exist that can be used to help small companies use environmentally favorable practices, these methods are useless if these companies cannot be convinced to use the methods. The suggestions Tilley (1999) identified are categorized into three perspectives. The first perspective is the ethical perspective. This perspective is rooted in the idea that small company managers can be influenced by their ethical and moral beliefs to pursue favorable environmental practices (Tilley, 1999). The second perspective is the economic perspective (Tilley, 1999). This perspective is at the heart of the original debate about small companies using environmental practices. This perspective assumes that the decision to use environmental practices is affected greatly by the economic conditions faced by the company. If the costs of implementing the environmental system can be justified, then the company will move forward (Tilley, 1999). The last perspective suggested by Tilley (1999) is the management perspective. This viewpoint delves into the topic of changing management’s thought process. Essentially, management must change their way of thinking so that it is aligned with environmental values (Tilley, 1999).Continued on Next Page »