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.

This is precisely why we started ecoPortal - ecoPortal was developed as a tool to help organisations to implement an effective sustainability strategy. It is based on the ecoWheel framework which I created during my PhD to help companies develop and implement a shared vision for sustainability. ecoPortal gives a single view of all that is going on in an organisation in terms of managing sustainability, health & safety, quality and overall business risks. It provides companies with the tools to measure and mitigate those risks. The principle behind ecoPortal is to effectively communicate and engage internal (staff) and external (e.g. auditors, customers, regulatory bodies, consultants etc.) stakeholders in the organisation’s sustainability initiatives.

The system was originally built with SMEs in mind. However we have found that larger organisations like Autex and Unitec experience the same benefits. We have built up a network of ecoPortal advisors in New Zealand and around the world who are using the system to help their clients develop effective sustainability strategies.

My colleague Logan Wait was interviewed a few days ago by Pure Advantage. Logan spoke about the need for staff within organisations to engage and collaborate on sustainability issues. I fundamentally agree with these comments – so often we find that sustainability and environmental management is the responsibility of one person within the organisation. Sustainable business crosses many disciplines and requires staff to break out of their traditional silos and work together to solve the inefficiencies and create sustainable value for their companies.

Those of you who have implemented an EMS or have experience with health & safety (OHSAS 18001) or quality (ISO 9001) management systems will most likely know what I am talking about. In many companies, the ‘EMS” consists of a folder on the shelf of the person responsible for the environment. A few weeks out from a third party external audit, people are scrambling around the company trying to pull together evidence that their ‘system’ is working.

I have found many paper-based sustainability risk management systems to be ineffective in terms of communication and staff engagement. Many traditional ‘folder on the shelf’ systems are only good for ‘getting the tick from auditors’. However, to engage staff and make real environmental improvements the focus needs to be on effective collaboration and culture development rather than bureaucracy.

This focus on meeting the requirements of an EMS standard rather than making real environmental improvements is obviously not the intention of having a system. While there are business benefits of being able to tell your customers that your EMS is independently certified to ISO 14001 – organisations are often not reaping the real benefits such as cost reductions, improved stakeholder relationships, healthier and safer workplace etc. In addition to this many companies who have health & safety, quality and environmental management systems – operate these systems independently from one another – this can create inefficiency and confusion amongst staff. The three standards for these systems are based on the system principles and requirements so that they can be integrated into one overall business risk management system.

By having a traditional ‘folder on the shelf’ system – companies are creating a range of difficulties for themselves. In terms of document control, it is difficult to update your procedure manual every time a minor change is made and also ensuring that everyone in the company has access to the same versions. In addition to this – most SME’s in particular don’t usually have all these bureaucratic processes in place. It is therefore difficult for such a system to become part of their day-to-day operations.

This month I am presenting at a seminar hosted by International Certifications and ecoPortal aimed at providing companies with practical advice on how to implement an effective EMS. I will talk about the typical barriers that companies face in implementing an EMS and give examples of the tools and insights (such as the baseline assessment, ecoWheel framework and ecoPortal) that I have developed to help overcome these obstacles.

Feel free to share and discuss any experiences you have had with the barriers to implementing an effective EMS. I intend to delve deeper into the specific barriers that companies typically face in a post coming soon.

The two week event provided a great platform for engagement and networking with other sustainability professionals from around the world. The trip to the rain forest was a really exciting and eye-opening experience. Around 50% of the Brunei land area is still covered by rain forest. Brunei is currently looking to diversify it’s economy from it’s reliance on oil and natural gas. Environmentalists worry that logging may increase once the offshore oil and gas reserves start to wane. My road trip to Malaysia highlighted the stark contrast between the two countries – as soon as we crossed the border there were no trees to be seen. This highlights the intrinsic complexity of some of the challenges of global sustainability.

During the two week event, the participants highlighted several important improvement opportunities for our hosts. For example, while it was 40 degrees Celsius outside – in the buildings the air conditioning was set by default to around 20 degrees.. This meant that many of the participants  were left feeling cold, having not expected to need jumpers in a tropical country. On the last day of the event, I was given the opportunity to facilitate the development of a sustainability strategy for the University of Brunei Darussalam (UBD).

Developing a sustainability strategy for the University of Brunei (UBD)

We used the tools of my baseline assessment approach to understand the interests of interested stakeholders, the existing strengths and weakness, opportunities and threats, and the specific sustainability issues that were relevant to the university. The programme elements of the UBD-IBM sustainability strategy were established as: research, teaching, community, awareness, waste management, energy management, transport and stakeholder management. An ecoWheel was developed to communicate the existing performance of the university, and the road map to achieve the vision in each programme area.

One of the exciting results of the GSSS is that UBD will now have a committee made up of management, staff and students to progress the university on its path to more sustainable practices. We are beginning to see a trend in the uptake of formal sustainability programmes in universities around the world. In New Zealand, all the main universities have already established a presence in this area. One of the key challenges with universities is in the engagement of the staff and students from various faculties and departments. Unitec has begun using the ecoPortal as a tool to facilitate the collaboration and involvement of its 23,000 students and 1150 staff.

I am writing this blog entry from the lovely Brunei on the island of Borneo. I am participating in the 2011 Global Sustainability Summer School (GSSS) organised by IBM and The University of Brunei Darussalam (UBD). The GSSS brings together fifteen international researchers, students and professionals and fifteen local Bruneian participants for a 2 week series of sustainability lectures and activities. The GSSS is an element of Brunei’s 2035 vision to diversify for a post-oil and gas economy.

The participants in the programme come from various sustainability-related fields such as: clean energy, climate change science, green building, systems thinking and complexity, sustainable fishing, corporate social responsibility etc. This strong interdisciplinary focus has been enriching and it has been interesting to be one of the two participants in the programme coming from a ‘business sustainability’ background. Our current global environmental problems are entrenched in such complex ecological and social systems that they demand a concentrated and holistic approach.

I work with clients to develop multifaceted sustainability strategies which don’t just focus on ‘carbon’. There are many other elements that should be integrated into the strategy – even if we consider only the environmental aspects of sustainability. Organisations themselves are complex systems operating in even more complex economic and social systems. To solve the challenges companies will inevitably meet on their sustainability journey all functions of the business need to be involved.

In engaging in the discussions and activities at the GSSS thus far, I have already gained a revitalised understanding as to why it is so important that we continue to work to reduce the impact of our industrial activities. Over the last 4 days I have thoroughly enjoyed listening to presentations from eminent speakers around complex systems thinking, climate modelling and clean energy. I am excited about the programme over the next 10 days which includes debates around technology and innovation and a weekend field visit to the pristine rain forest in Kuala Belalong!

1. Leveraging our ‘clean and green’ reputation in global markets
2. Smarter use of innovation and technology
3. SME transition to lower carbon economy

There has been criticism from senior business leaders on the watered down stance of the Green Growth Discussion Document. I think it is a step in the right direction and it is good to see that the Government seems to be beginning to listen to warnings and criticism regarding the 100% pure and clean & green branding of New Zealand. We certainly have a lot of catching up to do.

I am particularly interested in the third discussion document issue ‘SME transition to lower carbon economy’. The comments raised in the discussion document in terms of the growing requirements on NZ SMEs to adopt environmental management practices is something that we have known for some time. The discussion document also touches on the difficulties that New Zealand SMEs face in transitioning towards the ‘lower carbon economy’.

A few of the vast range of certification programmes and schemes

One of the key problems that SMEs face is the question about what environmental programme or certification scheme is the right one for them. There are a whole range of different sustainability and environmental labels, membership programmes and certification schemes in New Zealand alone. Owners and Managers in SMEs are focused on delivering their products and services and keeping their business alive from one day to the next. They are not sustainability experts. It is no wonder that companies are confused.

The choice of the ‘right’ environmental certification scheme will be specific to each individual organisation. It depends on many factors such as:

• What industry is the company operating in?
• What resources are available to the company?
• What are competitors doing?
• What are the demands on the company from external stakeholders (such as Government, customers, local community)?
• What are the existing capabilities and systems of the organisation?

For example, it is unlikely that a small rural cafe will need to implement a comprehensive Environmental Management System (EMS) and get it certified to ISO 14001 standard. A more appropriate starting point might be to get started with the free envirostep tool and later progress on to Eco-Warranty certification. On the other hand, a small manufacturing company supplying goods to a Government department or overseas customer may well need a more in-depth system in place. Other companies operating in specific markets may need to gain product certifications such as Environmental Choice or CarbonZero.

An EMS is a good starting point from which other initiatives can be developed. Typically I would suggest that companies starting out on the sustainability journey undergo a ‘baseline assessment’ for their company. The baseline assessment would include:

• A stakeholder analysis to understand the expectations of customers and the market and to engage external partners to pool resources and knowledge.
• A Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis to identify for example existing capabilities of the organisation and impending legislative trends.

It is a good idea to build this knowledge foundation to ensure that the organisation’s approach to sustainability and environmental management are in line with the available resources and market requirements of the business. This basis can easily be developed internally by SMEs, however for those companies with more resources at their disposal there are of course external experts that can provide support.

On another note: I am excited to attend the Global Sustainability Summer School in Brunei this month. The theme of the event is Technology for Sustainability and I intend to write some blog entries to report on my experiences.

Mehdi Shahbazpour and I during the Managing Change for Sustainability Lecture

Last week I gave a presentation to 3rd year University of Auckland students for a Engineering Management paper.  My lecture was entitled Managing change for Sustainability – Environmental Management Systems and the Role of the Engineer.

I encouraged the students to consider how sustainability related to their particular engineering discipline and about their potential role in the future of sustainability in New Zealand. Every university graduate, no matter what their discipline, should have at least a basic understanding of the concepts of sustainability and environmental management.

In the final year of my bachelor of mechanical engineering degree, I got involved in an industry based project at a Ready to Assemble furniture manufacturing company. The goal of the project was to investigate alternatives to the polystyrene based packaging method.  While from a functional and financial perspective it was not possible to replace the material with an environmentally friendlier alternative, we managed to reduce the the thickness of the material – resulting in substantial cost savings for the company.

It was during this project that I developed my passion for sustainability. I realised that substantial environmental improvements could be achieved by companies without the need for major investments. I asked myself ‘why are more New Zealand companies not implementing sustainability improvements when it actually isn’t rocket science’?

This was one of the underlying questions that I had in my head when I began my PhD research. I quickly realised that most New Zealand companies are performing really poorly in comparison to companies in other parts of the developed world. Sadly in the five years since then, New Zealand companies still see environmental improvement as a low priority. So we clearly still have a lot of work to do..

Through action research, surveys and a review of the existing literature I established the barriers SMEs face in progressing to various stages of environmental sustainability maturity. Most New Zealand companies tend to have a defensive or reactive approach to environmental improvement. They have other priorities and don’t yet experience significant drivers to improve their performance.

Arguably the most significant factor in the uptake of a sustainability strategy in an SME is the influence of the owner/manager. Without the buy-in of the owner of the company, sustainability initiatives will not be successful.

Typically SMEs who have a defensive approach to sustainability can be characterised by a lack of awareness and doubt over the benefits of sustainability. By identifying opportunities and focusing on ‘low hanging fruit’, SMEs can begin to see the benefits of environmental improvement initiatives. In doing so a platform can be developed to engage the company in a more systematic and repeatable approach. You can read more about this in my paper ‘Overcoming Barriers to Implementing Environmentally Benign Manufacturing Practices‘.

I went to the launch of the Eco Smart Business programme at the Auckland town hall a few weeks ago. This programme is another council funded sustainability initiative following on from Envirosmart which was run in conjunction with the Landcare Research Enviro-Mark programme several years ago. Eco Smart uses the Eco Warranty standard to guide companies towards ISO 14001. Although the programme doesn’t actually lead to ISO 14001 certification I am a big advocate of initiatives that raise awareness and help companies get started down this track.

For some time now I have been quite concerned about the limited uptake of ISO 14001 in New Zealand. The JAS-ANZ register lists 251 companies certified to ISO 14001 in New Zealand. Internationally there has been a massive uptake of the standard – in Germany around 5,850 companies are certified and in China over 55,000. At a recent sustainability workshop in Auckland I spoke to Phil O’Reilly CEO of BusinessNZ – he shared my concerns. The overseas market is changing and corporate customers are asking suppliers to have an EMS in place.

BusinessNZ has previously worked with the Ministry of Economic Development in introducing a simple web tool to help companies get started with environmental management. The envirostep tool is a great launch pad to get small companies thinking about their environmental issues. They can implement more comprehensive systems like ecoPortal once they have got the basics.

I believe that it is vital that New Zealand companies are educated on the benefits of having an EMS, and in particular a credible, certified system based on the ISO 14001 standard. In implementing such a system it is possible to keep up with the changing consumer and legislative trends – one day its carbon, the next its waste management or greening the supply chain. An EMS provides the overall framework to implement an effective environmental sustainability strategy.

For example they have a fantastic public transport system – A few years ago I traveled around with some friends and experienced the extensive train network. The network allows you to travel to virtually any small village in the country. While it can be relatively expensive if you buy individual tickets, I bought a 3 month Eurail pass which allowed me to jump into any train, any time, for 1300NZ$. The flexibility and freedom of the train system negated the need for a  car. I was already impressed by their systems when I was a child – every town in Germany seems to have a collection centre where people bring their recyclables. It is the responsibility of the consumer to sort out which ‘bin’ the various items go in – e.g. white glass, green glass, aluminium etc.. In Auckland we have one recycling bin – and it all goes in there. Does our system actually work?

Children playing in the rubbish left by the fishermen

In my latest trip, I was amazed by the system they now have in supermarkets to manage the collection and re-use of bottles. Consumers bring empty bottles back to the supermarket and insert them into a machine and in return they receive back ‘Pfand’ – money for being responsible. You can read more about this here. Are there any reasons why New Zealand can’t invest in this type of infrastructure? Perhaps there is an opportunity to get a group of stakeholders together and apply for some waste minimisation funding (WMF)

Another part of my trip was to Thailand and Bali. Both these destinations are incredibly beautiful and we had a wonderful time. However, it was sad to see the very limited infrastructure and low level of environmental awareness of the people in these places. I was walking along the beach in the northern part of Bali and met a fishing family who invited us to dinner – they would share their upcoming catch. We observed the fishermen pull in their nets and watched with sadness that their catch turned out to be a few very small fish and a net full of assorted plastic waste. I asked the fisherman what they did with the rubbish and he responded that they left it on the beach for the waves to carry it back out to sea.. They simply don’t have the infrastructure to deal with the packaging of imported products.

Together we still have a whole lot of work to do – think global act local.