When considering environmental issues with regard to SMEs, it is important to understand the special features of these types of organizations. SMEs cannot simply be seen as “smaller large companies.” The specific characteristics of SMEs mean that the approaches they require for becoming environmentally responsible are different from those of larger organizations. This blog entry is dedicated to providing an overview of the characteristics of SMEs which contribute to the difficulties they typically experience in getting started on their sustainability journey.
Management and Organizational Structure
SMEs are often privately owned businesses that are managed by their owner/entrepreneur. In larger organizations, the “power base” tends to be more evenly distributed amongst the managers of various departments, whereas in SMEs the owner generally controls most strategic decisions. The background, character, values, beliefs, and education of an SME’s owner will thus have a significant impact on the strategic direction of the firm.
Another characteristic of SMEs that makes them different from larger companies is their general organizational structure. In SMEs, job descriptions are often not well defined. There can be a significant overlap in responsibilities, with staff members taking on a number of different roles. The accountability of individuals is therefore often less clearly set out than in larger firms, and initiatives sometimes tend to “fizzle out.”
SMEs often have fewer, less structured procedures in place for strategic development. In addition, their communication and information flows are usually less formalized. This means that staff members sometimes fail to follow up on details regarding strategic initiatives, allowing such efforts to “fall through the cracks.”
Focus on Local Markets
Historically, SMEs have mainly served their local markets, as opposed to having significant international exports — although with increasing globalization, there is a trend toward more exports. SMEs are often less exposed to international pressures and trends when compared with larger multinational corporations, since local markets may not be representative of market expectations overseas in terms of legislation and public perception.
Day-to-Day Orientation
Another important characteristic of SMEs is their general focus on day-to-day activities. Because their financial and staff resources tend to be restricted, SMEs often concentrate on short-term problem solving and “making ends meet,” as opposed to taking a longer-term strategic approach.
Barriers to Adopting Sustainability in SMEs
It is the combination of these SME characteristics that makes it difficult for SMEs to start on their sustainability journeys. In addition to this, the process of moving towards sustainability is often specific to each individual industry and company.
My next blog post will discuss the specific barriers that SMEs tend to face in adopting environmental and sustainability practices on the basis of the characteristics outlined here.