Sustainability is an important way for businesses to connect with stakeholders and showcase their mission and core values. Yet middle-market companies have fallen behind larger corporations in their sustainability efforts because they often lack the experienced personnel and financial resources needed to make them happen. Companies in this segment also struggle to develop metrics integral to driving and maintaining sustainability performance.
Consumers today are increasingly interested in why a company does what it does, not just what it offers. Initiatives by a number of leading global brands reflect this growing trend: Cisco, an internet networking company, commits to limiting materials waste; electronics retailer Best Buy trains teens from underserved communities for tech-reliant jobs; and many companies enlist minority- or female-led teams to encourage diverse viewpoints.
The Best of Both Worlds
Middle-market businesses often face two seemingly conflicting choices: optimize profitability or do right by society. While most list sustainability as a strategic priority, few experience robust value creation. According to RSM’s Middle Market Business Index survey, over 90% of middle- market executives indicated their companies were engaged in some form of social responsibility— but only 38% had a formal plan in place.
Middle-market companies should not put off sustainability. As the marketplace increases the importance of sustainability, middle-market leaders should see this as a creative way to strengthen their businesses while simultaneously contributing to society. They can achieve value through sustainability by focusing on policies and procedures for initiatives in areas such as energy and materials efficiency, vendor selection practices, people engagement, community outreach, health and wellness, education, gender equality, and diversity and inclusion.
A New Frontier
Today, employees and suppliers require full access to a company’s sustainability strategy and prefer a level of transparency that was formerly offered only to boards and C-suite executives. Social media offers a front-row seat to the previously unseen inner dealings of business. Society is accustomed to greater levels of access and consumers want to align with the mission and values of an organization’s brand.
In the future, technological advances such as the internet of things—which sends and receives data through the interconnection of everyday devices—will help middle-market companies determine the impact of sustainability initiatives in real time. Middle-market companies need to develop sustainable solutions so that they can operate as part of a larger supply chain that demands such solutions, while also attracting new customers or employees who seek them out.
Middle-market companies are not in the spotlight as often as large companies when it comes to sustainability, but their future success depends on embracing sustainable thinking and actions.
Anthony DeCandido is a partner and financial services senior analyst at RSM US LLP.