How Mid-Market Businesses Can Gain Competitive Advantage Through Sustainability?

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Mid-Market Businesses

Sustainability is all the rage in the modern business world. Over 90% of company CEOs admit that this singular factor is crucial to their organization’s success. A joint study conducted by McKinsey & Company and NielsenIQ found that 78% of US consumers consider an eco-conscious lifestyle to be important.

They are even willing to pay more for products that meet Environmental, Social, and Governance (ESG) goals. With consumers backing up their beliefs with their wallets, brands must become sustainable if they wish to stay relevant.

This includes those in the middle market. However, the challenges are far from easy to overcome. Some of these include high costs, uncertain decision-making processes, strict regulatory requirements, and the lack of proper metrics to track progress.

Despite such challenges, mid-market companies can use their ESG commitments to secure greater investments and growth opportunities. So, how can the middle market overcome a sustainability program’s financial outlay to drive growth?

In this article, we will discuss how mid-sized businesses can overcome sustainability challenges to gain a competitive edge.

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Contents

Incorporating Sustainability Into The Business Model

Incorporating Sustainability Into The Business Model

Sustainability objectives can never be achieved in isolation from the rest of the business goals. Mid-market companies need to incorporate ESG into every function within the organization. This includes the supplier departments, customer front, talent management, and downstream/upstream operations.

Organizational leaders must establish concrete and transparent reporting mechanisms, policies, and processes to demonstrate their commitment to sustainability. Business leaders may have little knowledge and expertise needed to execute sustainability goals.

This is where the importance of ongoing entrepreneurial education comes in. In this case, business leaders will benefit from the study of business administration. Given their busy schedule, they can pursue an online business doctorate program that equips them to address the sustainability challenges of today.

These would predominantly include areas like social fairness, revenue growth, and environmental management. According to Marymount University, leaders will be able to grasp the role of innovation and data-driven insights in driving ESG commitment. 

As a result, they can figure out ways for responsible practices and protocols across all levels of the organization. Let’s take an example – introducing ‘green’ strategies may begin with developing a sustainable product. 

However, to back it up, an organization must walk the extra mile (whenever possible). This includes buying sustainable office supplies, encouraging remote work, giving back to the community, improving energy efficiency, etc.

The aim is to ensure that the ESG vision easily merges with all the other organizational goals.

Having Access To Funds And Projects

Having Access To Funds And Projects

One major hurdle for companies in the mid-market is the capital needed to carry out ESG objectives. Showcasing strong environmental practices and ESG commitment will undoubtedly attract investor attention. Alternatively, there are other ways to overcome financial constraints.

Since sustainability is becoming such an important aspect of business, ESG lending considerations are on the horizon. In other words, lenders and insurers are coming up with new products to support the net-zero transition. Help is available in the form of green products like sustainability-linked loans to fund eco-friendly projects.

Even insurers are allowing businesses to navigate the risky landscape with products focused on green property building, commercial fleets, and renewable energy. Furthermore, other financial instruments like green bonds are available to fund current and upcoming environmental projects.

Securing adequate financing will enable mid-market companies to move forward with their sustainability goals. Not only that, but such a move will further become appealing in the eyes of investors and stakeholders. Naturally, the company’s network will improve as it becomes a part of the global mission.

Measuring ESG Performance

Measuring ESG Performance

Just like any other business goal, progress on sustainability will only be managed well when it is monitored and measured. This is why it is important to create a proper sustainability framework. Timely and thorough reporting helps in identifying risks unique to the organization.

Once identified, leaders can take steps to mitigate such risks through corporate agility and resilience. To streamline ESG performance measurement, mid-market businesses can start with internal surveys and external sources.

This includes monitoring social initiatives and carbon emissions to evaluate the current ESG performance. Insights into customer sentiments are also useful and can be gathered through polls, surveys, trends, and online behavior. External sources for such information include analysis of news media, government reports, and research papers.

The best part is that there are several effective ESG frameworks already available to navigate this process. These include the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). Once a framework is chosen, relevant data must be gathered and organized in a standardized format.

Then, companies must choose qualitative and quantitative ESG metrics relevant to their operations. Some examples include –

  • Environmental Metrics – water usage, greenhouse emissions, and energy usage
  • Social Metrics – community engagement, DEI (Diversity, Equity, Inclusivity), labor practices
  • Governance Metrics – ethics and compliance, board diversity, and executive compensation

With ESG reporting, the middle market stands a better chance of attracting investor attention, reducing risks, and increasing cost savings.

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Final Thoughts

As vital as it may be, corporate ESG integration is facing some serious challenges due to geopolitical issues and fragile supply chains. However, they have not deterred stakeholders from demanding corporate loyalty towards sustainability.

Now is the time for the middle market to join the worldwide trend and gain a competitive edge. It is only possible when the focus shifts from generating profits to contributing towards the generation-defining challenge of climate change.

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