Barriers to Entry: Investment into Sustainability vs other projects

This post is the fifth in a series of blogs addressing the barriers to entry for sustainability projects experienced by SMEs, the support that exists to implement and monitor projects and the benefits and returns typically seen when projects are completed.

Barrier to entry: Using available capital to invest in sustainability initiatives vs. other projects

SMEs often have limited resources and must ensure that any investment made increases the organization's ability to function more efficiently. This is paramount to deciding where time or money should be invested in any SME. While the business case for sustainability projects is well illustrated, deciding whether to invest in projects that improve sustainability versus using spare resources to support growth, expand staff or purchase infrastructure can be a difficult decision.

The gauge of any effective investment can be measured in three ways: impact on profitability, organizational productivity, and project ROI. Regarding profitability, expert Bob Willard outlines that investments into sustainability initiatives, focusing on issues like improving resource use efficiency, have lead to an average profit improvement of 51-81% over a five year period, while avoiding a potential 16-36% erosion of profits resulting from taking no action at all.

Recent research has concluded that voluntary investment into sustainable practices, especially environmental management systems, lead to an average 16% increase in productivity amongst employees, since the introduction of new management systems requires training and develops greater connections across departments. When calculating the ROI of investments, sustainability projects have been found to have shorter than average payback periods and lower associated risk, which has been expanded upon in previous blogs in this series.

Ultimately, the distinction between investing capital into sustainability vs other projects is not entirely explicit. Incorporating environmental management practices results in productivity increases and improved efficiency in the form of staff training, higher degrees of collaboration and more engaged employees. Additionally, using capital to grow staff and support growth can equally incorporate sustainable practices by focusing on investing in growing staff to increase output, or by defining a corporate culture built on collaboration to better share ideas and develop innovative solutions.

Next blog in this series:

Lack of demand from clients and customers (coming soon)

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