Coming off from the recent UN Climate Change Conference and global competitiveness report, there is much talk around sustainability and innovation that is focused on long-term impact in line with environmental, social and governance (ESG) goals. Much attention has been placed on large multinational corporations and how they can contribute to a more sustainable global economy. They are held to higher sustainability standards – and rightly so – as they have access to a wider pool of resources to create substantial change.
However, small and medium-sized enterprises (SMEs) tend to be overlooked. This is in spite of the fact that they make up for more than 90% of all companies, and according to some estimates, provide up to 70% of employment and 70% of global GDP.
In a recent World Economic Forum (WEF) paper, I partnered WEF, the University of Cambridge and Entrepreneurs’ Organization in examining closely this overlooked segment of the economy, which has tremendous potential in creating long-lasting change.
In our conversations with over 300 founders and executives of SMEs across the globe, while it was clear that sustainability is the way forward, many did not view sustainability as their main challenge. This could possibly be due to SMEs thinking that they are too small to make an impact. The recent pandemic also caused many companies to revert to “survival mode” and invest less in sustainable strategies.
However, as the figures above show, SMEs collectively have a great impact on the global economy. And while they tend to be among the hardest hit by external shocks in the environment, they also tend to be among those which can benefit the most from an ever-changing market.
Their small size allows them to be nimbler in adapting their product offerings, they can pivot their business models more easily, and communicate internally more effectively. Furthermore, with digitalisation, companies can now scale faster with relatively low overhead costs.
We found that future-ready SMEs excel in achieving sustainable growth, societal impact, are resilient, and are agile in adapting to new situations. We also found that sustainability does not have to be an agenda outside of profit-making objectives. Companies can pursue sustainability and financial growth at the same time.
For example, Pulsifi, a Singaporean HR consulting company, helps increase gender diversity in hiring as it uses AI and objective data to make hiring recommendations, fulfilling one of UN’s sustainable development goals of gender equality.
The white paper puts forth several key learnings for future-ready SMEs. One is understanding the power of people as an asset to your company. Where SMEs may not be in the best position to attract talent using financial means, appealing to a higher vision and culture can attract talent too.
Another learning is that technology can be an accelerator. Embracing digital innovation can indeed help SMEs achieve greater heights, but at the core, they need to be clear about their vision and have the right people to execute it.
Ecosystems are very important for SMEs to be future-ready. Especially among smaller-sized companies, we found that networks can provide organisations with financial, social, and information resources to push them towards sustainable growth. As companies grow in size, they can innovate further and adapt accordingly to achieve future readiness.
The current market environment provides fertile soil for innovation among SMEs. I have faith that SMEs can leverage people, networks, and technology to take on the future.