3 CR&S issues for SMEs to address in 2018: U.K

As this new year begins, businesses across the U.K are re-engaging with their respective Sustainability challenges.  Manoeuvring a business in this climate is becoming particularly difficult when considering recent technological advances, international trends and political uncertainty.  Recognising how to achieve a competitive advantage, could be the difference between sinking and swimming in the years to come.

Businesses’ survival depends on their ability to adapt to the changing conditions of their business environments; however, recent research indicates that U.K SMEs’ international trade activity is starting to slow down.  It is vital for SMEs to plan and prepare for how to sustain their businesses and maintain a strong triple bottom line.  This article aims to detail some of the main Sustainability issues which should not be overlooked in 2018.  Whilst CR&S issues will vary from industry to industry, and business to business, major events are occurring which will impact on how all products and services are developed and consumed, in the U.K.

 

Supply-Chain Sustainability.

  • Market Analysis.

Arguably the most valuable asset of any organisation is the strength of its supply-chain management capabilities.  Being able to develop a product or service which can be commercialised is central to competitiveness in markets.  As with any successful organisation, realising the value of these products and/or services will depend heavily on efficient supply-chain networks.  Many businesses with customers and suppliers within the European Union have crucial decisions to make about how to ensure the sustainability of the organisation, after the E.U supply-chain network is fractured; this means that U.K businesses need to have contingency strategies, which can be implemented with as little disruption as possible.  Necessarily, it is vital to begin undertaking research which assesses factors in the macro environment which will impact the organisation, and also the viability of alternative suppliers and/ or alternative commercial markets.  The PESTEL analysis tool will be useful for those who need to consider factors in their external environment which may affect the organisation.  Porter’s 5 Forces model (Market Based View) will also be useful in this endeavour, when assessing how competitive your organisation can be under the circumstances of the external environment.

  • Engage with potential suppliers

When engaging with potential suppliers, be clear about what your expectations are for the terms of any future relationship.  Hold discussions about what your challenges and ambitions are, and how you would like the supplier to contribute towards facing these challenges.  A comprehensive Ethical Procurement Policy is a vital document which can guide these discussions and is the first step in aligning your organisation with relevant legislation , and protecting it against potential developments in regulation.  This will become especially important this year and the next few years, as global business trends incorporate environmentally conscious practices.  With China’s recent intention to ban recycled waste imports and the U.K’s commitment to programs such as the Paris Climate Accord, there is likely to be less tolerance for plastic waste and non-recyclable waste in UK society.  Are you able to reduce unnecessary waste from your suppliers or to your customers?  If so, establishing this as a term in your policies sends a clear message about how you intend to do business, whilst driving down operating expenditure and improving the prospective productivity of your business.  In the context of the U.K leaving the European Union, these endeavours will prepare your business for the potential changes to the regulations of trade in markets of interest.

 

Productivity.

“Productivity isn’t everything, but, in the long run, it is almost everything” – Paul Krugman.

According to PWC, the growth of U.K’s economy is set to slow in 2018, to 1.4%.  This reflects a reduction in consumer spending, due in part to the relatively weak British Pound.  Factors in the macro-environment are having a significant impact on U.K industries and markets, which is changing consumer demographics and behaviours.  A reduction in migration to the U.K is expected to impact some sectors more significantly than others; food-manufacturing, hotels and restaurants, warehousing and construction are expected to be effected most negatively, which is also likely to impact growth of the economy.  SMEs account for approximately 51% of turnover in the U.K private sector, and therefore have a large role to play in building a sustainable economy.

Whilst sometimes considered as an additional aspect of Operations practices, improving productivity is a strategic consideration which is crucial for remaining sustainable.  In facing the prospects of slowed growth and higher interest rates, unproductive businesses may face the threat of becoming inefficient and insolvent.  There are several ways to manage the issue of productivity, but for anything to be managed properly, it needs to be measured accurately.

 

The method used for analysing organisational productivity will depend greatly upon the structure of the organisation; there is no single method for measuring productivity, simply because of the variety of different ways which businesses produce the variety of different products/ services in the market.  Without completely labouring the reader with the entire range of different methods, a non-exhaustive description can be found here.  It is important to take a holistic, multi-disciplinary approach when measuring productivity and consider all significant factors -this will ensure that no stone is left unturned in your analysis.  Whichever method is preferred, a bespoke productivity measurement index should be developed which will identify and quantify the impact of the significant factors, unique to the organisational model.  At this stage, do not make the mistake of simply finding out whether your organisation is productive or not.  This knowledge has very limited value.  Rather, aim to find out WHY your organisation is or is not productive – this will enable informed decisions to be made in the steps towards sustainability.  Whilst several factors may be identified specifically for your organisation, here are a couple of recommendations, for consideration.

Energy Security.

In the last few years, the U.K government has made efforts to reconfigure the energy industry within the country.  As Climate Change initiatives continue to gather momentum in influencing the political agenda, traditional sources of energy are also beginning to lose their economic viability.  In the automotive industry, manufacturers are committing to producing more environmentally friendly vehicles for their customers, with the greater availability of electric-powered cars; in addition to this, the government has also made a pledge to tackle air pollution by banning all cars fuelled by petrol and diesel, by 2040.  It is not just the automotive industry that is impacted either – Retail, Construction and the Energy industries will experience major changes, as well.  Although alternative energy sources and the transition to low-carbon supporting policies has been supported by the business community, there is also concern about maintaining energy security in the U.K post leaving the European Union.  Current energy trading practice under the European Union’s internal energy market allows EU and UK businesses to freely trade energy without tariffs.  Considering the multiple pending changes to the Internal Energy Market, it could mean that energy imports increase in price, which would then, in turn, be passed on to consumers, both domestic and corporate.

In this phase of uncertainty, a certain amount of turbulence should be expected in both domestic and foreign energy markets.  The best way to prepare for whatever the final arrangements develop in to, is to understand and manage the organisation’s energy use, as meticulously as possible.  There are a number of ways that this can be done, including energy audits, using alternative energy sources, utilising efficient technology, and reducing the energy required for your business to run.  If don’t correctly, all of these methods can actually help the organisation achieve its triple bottom line commitments.  It is advisable to commission an energy audit in the first instance before any changes are made, so that it is understood how much energy is used and in which capacity it is used.  Although these audits can be costly, finding the right auditing service is a good investment for continuous improvement, maximising energy efficiency and lowering energy costs, for both now and in the future.

 

With the information in this article, it is intended that SME employees with some scope of the CS&R agenda, will have some level of insight and understanding of the issues which may impact their business in the few years to come.  This article does not cover a wide range of issues and there are many more aspects which should be considered for the successful sustenance of an organisation.  In addition to this, the priority of CS&R issues will likely develop and change in the coming year with the current uncertainty in the wider political environment.  Nonetheless, with the information offered here, there is an opportunity to read deeper into the issues which impact a range of different organisations.

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