In the government’s efforts to promote the growth of micro, small, and medium-sized enterprises, MSMEs, Zambia has seen growth in the sector across the country. Nowhere is this more true than in the beverages (non-alcoholic & alcoholic) and plastic & packaging subsectors. These efforts have been bolstered through the implementation of various initiatives in providing access to financial loans and grants to eligible SMEs. Not only that, but private financial institutions and other investors have also utilized the opportunity to add value to the growth of SMEs in the country.
Environmental Social and Governance (ESG), Equator Principals (EP), United Nations Global Compact (UNGC), ISO, Global Reporting Initiative (GPR), Sustainability Accounting Standards Board (SASB), and others are among the frameworks that are widely known and proven effective for assessing an organization’s business practices and performances on various sustainability and ethical issues. These are aimed at business organizations that contribute significantly to adverse effects on the environment and society, predominantly larger enterprises. As a result, many SMEs have found it difficult to incorporate them into their businesses in reporting on their sustainability issues and performance.
Environmental Performance indicators are quantitative measures, which reflect the environmental harm associated with organizations or firms. They are used to assess and quantify the environmental costs of a company or business’s processes. These indicators, provide valuable information for enabling informed decisions, target setting, and tracking progress toward sustainability goals. They are essential tools for businesses, financial institutions, and other stakeholders in understanding their environmental footprint and identification of areas needing improvement. SMEs can use environmental performance indicators in their operations to report and publish in readiness to reach the broader context of environmental and ethical sustainability frameworks due to their simplicity and target orientation.
Reporting is as simple as using the three basic environmental performance indicators: Absolute, Operational, and Relative. Absolute environmental indicators depict a business’s consumption of resources such as raw materials and energy, this includes raw material used per product manufactured during an operation or manufacturing process, the benefits of which would allow for the identification of energy efficiency opportunities. Operation performance indicators provide insights into how a company’s day-to-day activities and processes impact the environment. These include supplies into an organization or business processes, that cater to the operational needs of the firm. By tracking these, business organizations can identify areas for improvement, set targets, and implement strategies to enhance their environmental sustainability.
Relative environmental indicators, on the other hand, are used to compare and evaluate environmental performance by relating certain environmental impacts or aspects to a relevant reference point. These indicators also help provide context and allow for comparisons that can reveal trends, patterns, and areas for improvement. In summary, as SMEs strive to become large corporations, they must take pride in reporting and publishing their environmental performance within their organizations.
These considerations have become more important with new approaches in investment frameworks, wherein investors are making investment decisions on the basis of performance in environmental sustainability and ethical-related matters; all of which is encompassed in Environmental, Social, and Governance (ESG). This enables them to avoid businesses that pose a higher financial risk and lower future opportunities due to ineffective practices and participation.
SMEs are regarded as the engine of economic growth whose output constitutes a significant fraction of the Gross Domestic Product (GDP) of the country. Therefore, SME businesses must take the initiative and begin reporting and publishing their environmental performance and progress towards the Sustainable Development Goals.
Adoption of these environmental performance indicators through reporting and publishing frameworks amongst SMEs puts businesses at an advantage. Specifically, proprietors can more easily mitigate risks, increase the potential to outperform competitor businesses, as well as generate more revenue.
In conclusion, for SME business owners out there, I urge you to identify key environmental performance indicators that align with your business operations and incorporate them as you grow. These must be continuously monitored and tracked to determine progress in environmental performance and be reflective of the most significant environmental aspects of your SME’s activities.
Look out for Part II where practical steps will be given for SMEs on how they can operationalize the measures.
The Author is an Environmental Engineer and Intern at the Zambia Association of Manufacturers
