An overwhelming degree of Scope 3 footprint occurs deep into the supply chain where many companies, not just the mums and dads, run fewer recognised operational standards and are struggling to make ends meet, leaving them to ask, “what’s in it for me?”
To become sustainable, you must first buddy up to your SMEs.
As we all know and might be fatigued of hearing, our supply chains are responsible for far greater social and environmental costs than our own operations, accounting for more than 80 per cent of greenhouse-gas emissions and more than 90 per cent of the impact on air, land, water, biodiversity, and geological resources1 Considering their level of impact, it is clear that if we have any hope of meeting the collective goal of limiting global warming to 1.5° Celsius, then we must do so collectively.
The term SME refers to a broad spectrum of companies. Although the exact definition varies by country, they range from single-proprietor businesses to those with hundreds of employees. If we look to the European Union’s definition, an SME is an enterprise with fewer than 250 employees and a turnover of less than €50 million or a balance sheet total of less than €43 million. They account for 99% of all businesses in the EU2, 90% of all businesses globally, 50% of employment, and more than 40% of the global GDP.3
They’re also the ones hurting.
The View From Here; The State of SMEs
Between February 2020 and April 2021, 70 to 80 per cent of SMEs across 32 countries lost between 30 and 50 per cent of their revenues.4 A 2021 survey by the BDC showed that 28- 29% of SMEs reported struggling to stay profitable due to COVID-19. Another 10-14% reported struggling to stay profitable due to factors other than COVID-19.5
SMEs are less likely to take climate action or make public net-zero pledges. They’re also typically less digitised than their beefier counterparts—which comes as no surprise seeing as pre-cloud digital solutions were more often than not designed with large businesses in mind. And as they’re more constrained by resources, they run fewer recognised operational standards.
Boston Consultant Group (BCG) has estimated that SMEs need an estimated $25-50T investment to deliver net-zero supply chains. But throwing money at a problem is rarely the only answer. Putting those funds to good use represents a significant challenge in terms of market access and risk appetite, as well as the education, incentives, technology, and other resources. Usher in: collaborative engagement, breaking down barriers to promote innovation and growth, delivering much-needed incentives.
What’s in it for Me? Driving Action for Impact
Talk is cheap. More than commitments, the world needs credible action. Although business leaders may well understand the urgency for more sustainable supply chains—shown in the almost 1200 companies that have put in place science-based targets in line with net zero6 — creating real, tangible change is going to take much more than a set it and forget it approach.
While organisations have been quick to address their own emissions, when it comes to that of their business partners, an often blunt approach means they essentially stall, as simply imposing compliance has been shown to be by and large ineffective. SMEs, tight on resources and fighting for profitability, ask — what’s in it for me? And rightfully so. By demonstrating the wider benefits sustainability can bring for all — such as innovation, growth and longevity — we are able to bring more suppliers into the fold, ready for meaningful engagement.
In order to find more sustainable ways, we’re going to need to innovate and iterate our way there. Suppeco’s digital collaborative SRM platform empowers all parties to unlock innovation, foster experimentation and enable execution.
Ecosystems consist of a diverse set of actors and contributors. To step toward climate action, they must act collectively, influenced, but also side-by-side their mighty supply chain leaders. Taking a consortium-based approach — powered by a digital ecosystem that links the value chain from downstream to raw materials — allows organisations to take a more holistic view of their decarbonisation and sustainability efforts. Meaningful collaborative engagement across your ecosystem makes for a win / win, driving the very innovation and mutual growth SMEs are looking for. All while providing:
- Access to data.
- Increased service longevity.
- Increased trust.
- Better visibility.
- Access to innovation.
- Shared R&D.
- Reduced risk.
- Reduce costs.
As is our mission, Suppeco enables businesses to create lasting & trusted, sustainable relationships built to innovate and grow.
With a continuous, real-time data flow, Suppeco allows you to aggregate dynamic data, presenting a current and accurate picture of progress, creating transparency across your ecosystem and fostering mutual trust.
Paying it Forward
Suppeco believes in paying it forward, which for us means taking responsibility – responsibility not only for what we do but also for ensuring that we are able to provide positive encouragement to others so that they may do the same.
By taking this mindset with your SMEs and providing support through expert advice, helping to guide transformation efforts and fostering introductions to new and critical partners, you can help them build their capabilities. Moreover, helping them to help you safeguards their long term viability so you can enjoy a long term mutually successful— and, of course, sustainable—partnership.
Seeking a platform that will help you strengthen relationships, capture and share data, and follow through on the actions that turn ideas into reality?
Arrange a demo to find out how Suppeco can help you drive real, sustainable value.
Laura Garcia is a supply chain and procurement writer and subject matter expert with over 20 of industry experience. Laura is a regular contributor on Suppeco articles and features.
Endnotes
1 Starting at the source: Sustainability in supply chains, McKinsey & Company
2 Internal Market, Industry, Entrepreneurship and SMEs
3 Ecosystems for Ecosystems, BCG
4 Beyond financials: Helping small and medium-size enterprises thrive, McKinsey & Company
5 SMEs current state, needs and challenges” 2021 Survey Report, BDC
6 For a livable climate: Net-zero commitments must be backed by credible action, The United Nations