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International trade is inevitably going to involve some carbon emissions, whether that’s in making products or their distribution. But companies of all sizes, including SMEs, are coming under increased pressure to reduce their carbon footprint and demonstrate wider environmental, social and governance (ESG) credentials to customers, regulators and other stakeholders.
At the same time, consumers are also becoming increasingly environmentally and socially aware and will expect the brands they buy from and deal with to have strong ESG credentials.
This guide from the Chartered Institute of Export & International Trade lays out some ways that SMEs can begin to take stock of their supply chain and get a sense of how to reduce the carbon footprint of any trade they conduct.
1. Start thinking green
From an environmental perspective, SMEs need to start thinking about how they can reduce their carbon footprint, now. A good starting point is to measure the emissions they create and the resources that are used in the manufacturing and distribution of items.
This can include transportation of goods, energy usage in production and packaging, and the activities of suppliers. Once identified, companies can calculate their carbon footprint using tools such as the Greenhouse Gas Protocol.
The Chartered Institute can provide guidance for members, helping them understand what their carbon footprint is.
2. Start thinking circular
Once a business knows its carbon footprint, it’s a case of setting clear reduction targets and working to achieve this. Many improvements can be made to the company’s own operations, such as by implementing energy-efficient lighting or other energy-saving measures, or just cutting down on unnecessary material or energy use.
Companies can also implement circular economy practices such as recycling, reusing or refurbishing products, and designing products for disassembly and reuse at the end of their lifecycle.
They can also provide education to customers on the environmental impact of products, encouraging them to recycle and reduce waste. Employees, meanwhile, can be encouraged to adopt sustainable practices, both at work and home, and offered incentives to do so.
3. Look to your supply chain
Businesses must also work with suppliers, which will require them to know their immediate partners and where they source their material from, including through any lower-tier suppliers.
This can include using renewable energy, optimising transport routes or reducing packaging waste. By working together, emissions can be reduced throughout the entire supply chain.
Teaming up with other organisations as part of wider initiatives can deliver bigger wins.
Collaboration with industry peers can lead to shared knowledge, resources and best practices, resulting in more effective sustainability efforts across the entire industry. Companies can join industry associations or participate in sustainability initiatives to drive industry-wide change.
4. Offset and shout about it
Once everything has been done from a business’s own operations and across that of its supply chain, offsetting can help to make up for those emissions which may be unavoidable.
Companies can offset their carbon emissions through a range of activities. This can include investing in renewable energy projects, planting trees or supporting projects that reduce emissions in developing countries.
Once all this has been done, it’s important for SMEs to communicate their efforts more widely and spotlight the impact they have had.
This includes sharing emissions reduction targets, highlighting achievements, and reporting on progress towards these targets. Talking about progress on social media or with customers can also enhance the company’s reputation more generally, potentially leading to new customers or sales.
5. Beyond the environment
Alongside the environmental considerations, businesses also need to ensure they – and their supply chains – operate in a socially and governmentally responsible manner.
A common example is that of clothing brands which can inadvertently end up selling products that have been manufactured using child or slave labour.
The key here is to know your suppliers inside out, all the way down to the original source. Customers will be increasingly vigilant around the provenance of goods in the future and reputations can be easily damaged in the event of improprieties.
Other factors to think about here are creating equal opportunities for women, and having an active and positive role in local communities.
While getting an accurate picture of an organisation’s ESG activities can seem challenging, the good news is that those businesses which can successfully do this will benefit in other ways than retaining customers and complying with legislation.
Brand management improves exponentially, and investors are also much more willing to look at financing organisations that can demonstrate their credentials.
Businesses can also differentiate themselves against their competitors and gain a more positive reputation among both customers and employees.
They can also benefit through increased revenue, cost savings from process improvements, and reduced risk.
